In Case You Missed It, the FCC Actually Got Something Really Right on 700MHz

Written by by Jesse Kopelman

[qi:81] Lost amid all the speculation about Google’s (GOOG) involvement in the forthcoming 700 MHz auction and whether or not the search giant would manage to impose its will on an incumbent-loving Federal Communications Commission was a decision by the agency that may prove to be the most significant one it’s made over the past 10 years.

The FCC on July 31 issued a statement in which it noted that the 700 MHz C Block spectrum winner would be required to have open-device access on their network. This Carterfone for wireless was one of the things Google had asked for and was, depending on your viewpoint, either a small victory for the company or a meaningless token meant to impress the unwashed masses but do nothing to change the status quo.

Far more interesting, however, was the FCC’s revelation that the 700 MHz public safety band was being rechannelized to support broadband and that the 700 MHz D Block license would be devoted to a national public/private partnership to deliver both public safety and commercial broadband.

This decision to enable a public/private wireless broadband partnership is extremely important because it represents the best hope yet for both a modern public safety wireless network and offers a realistic solution to the digital divide.

On Aug.10, the FCC issued a 312-page report in which it laid out rules governing wireless licenses in the 700 MHz spectrum. In short, the winner of the D Block will have to enter into a deal with the Department of Homeland Security to determine how both the D Block and the broadband portion of the public safety spectrum will be administered. The winner gets the only franchise (with one exciting exception) to build and maintain networks using the combined spectrum. The D Block and broadband public safety spectrum are adjacent 10 MHz (5 X 5 MHz) bands that can be operated as a single 20 MHz (10 X 10 MHz) allocation. This spectrum has some very important build-out criteria. While public safety users are only primary in half of it, they must be able to preempt commercial users (at the decree of Homeland Security) over both bands. The D Block itself must be 75 percent (by covered population) built-out in four years, 95 percent in seven years, and 99.3 percent in 10 years. Most commercial licenses, by comparison, only have to be 25 percent or 33 percent built-out in five years.

The exciting exception to the D Block winners franchise is that local public safety agencies can preemptively build-out their networks if they don’t like where they sit in the license winner’s schedule (I have personally dealt with several municipalities that would have loved to do this with the 2.6 GHz spectrum owned by Sprint (FON) and Clearwire).

So, what’s the big deal? Well, the idea that’s been floating around for years (long before 9/11) — that of building out a dedicated national first responder network — is never going to happen. It’s just so inefficient. Ten billion dollars in capital costs, plus relying on some yet-to-be-created arm of the bureaucracy for operations and maintenance, would be a hard pill to swallow come appropriations time. The multiuse network idea being presented here, on the other hand, is a huge win all around. Not only is there now a tenfold increase in potential user base through which to recoup costs, but thanks to the need for ubiquitous public safety coverage, there will finally be a wireless network with better than laughable coverage in rural areas.

In the meantime, access to a reasonable amount of spectrum-building penetrating 700 MHz frequencies, national network economies of scale, and public safety anchor tenants all combine to form a business case that might actually support low-cost Internet access and bridge the digital divide. And even if nobody actually builds their own network, at least a little more leverage gets put back on the side of the customer — where it belongs.

Of course, all my excitement might be for nothing. There are some serious hurdles to overcome here. Even though the FCC is pricing the minimum bid for D Block at a mere $1.33 billion (about a third of what they consider market value for access to 20 MHz of spectrum), it will cost at least another $5 billion to get that 75 percent build-out in four years. Spending $6 billion over the course of four years is not for dilettantes, and if the incumbents get a hold of this spectrum it might be more in their interest to try and break even on the public safety stuff rather than risk the profit margins of their existing broadband networks (at least they will have prevented the formation of new competition, and that is certainly worth $1.33 billion to the likes of AT&T (T) and Verizon (VZ)).

Perhaps the bigger hurdle is having to negotiate all of the technology and deployment decisions with the Department of Homeland Security. By the time everything is agreed to, budgets and deadlines will be blown and the network itself runs a good risk of being obsolete before it is ever deployed. The license winner will have to be well-versed in dealing with government contracts, and that, sadly, once again points to an incumbent or, worse yet, Halliburton Wireless (Dick Cheney will need a new job by the time this network launches).

Whether the FCC’s move results in a progressive, multiuse network or just another half-measure by some incumbent, I applaud the agency for making a decision that at least carries some rational expectation of positive results. This idea of trading upfront cash for stringent build-out requirements with an eye to the public good is huge break from the past 15 or so years of spectrum policy. It is also a change wholly for the better. Going forward, this is exactly what we need from the FCC.