FCC May Examine ‘D’ Block Auction Fiasco

BOULDER, Colo. — FCC commissioner Jonathan Adelstein said Sunday that he and the agency will “definitely look into the allegations” of rumored shadowy deals that may have led to the collapse of Frontline Wireless and the apparent failure of the “D” Block segment to attract a minimum reserve bid in the ongoing 700 MHz spectrum auction.

First reported by Harold WFeld on the WetMachine blog, the rumor that machinations by Morgan O’Brien of Cyren Call fame may have helped to scuttle the plans of Frontline Wireless — perhaps the most likely bidder on the mixed-use D Block bandwidth — is something Adelstein is taking seriously, following what he called the “great disappointment” of the apparent failure of any winning bid for the D Block spectrum.

Adelstein’s pledge to look more deeply into the matter came during a question-and-answer period following his participation in panel discussions here at the Silicon Flatirons conference, one of the nation’s top telecom policy gatherings.

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8 Things to Know About the 700MHz Auction

The 700MHz auction kicks off today, and like kids waiting for Santa Claus, the technology and business publications are tense with anticipation. But FCC chairman Kevin Martin is keeping a lid on this auction, rather than post periodic updates as was done in the AWS auction in 2006.

While you wait to learn who gets the goods who gets a lump of coal, here’s a quick list of everything you need to know about the upcoming auction and why it matters. Check out all the links, because the bidding doesn’t conclude until March 24 and down payments aren’t due until April 11. You’ve got time.

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Wireless Auctions Aren’t for Wimps

Frontline Wireless’ decision to bow out of the 700 MHz auction proves that in the Wild West of spectrum speculation, only the bold need apply. Frontline dropped out of the auction after finding it difficult to raise enough money to cover a $128 million up-front payment on the spectrum.
Backers of Frontline included former FCC chairman Reed Hundt; some of Silicon Valley’s most elite investors, such as John Doerr of Kleiner Perkins; and angel investor K. Ram Shriram. These are smart guys who presumably knew what they were getting into, but the reasoned approach to high-risk investing, as practiced by VCs, is nothing like the wildcatter mentality needed by spectrum investors.
The proceeds from this auction are expected to range between $10 billion and $30 billion, and the cost of building out a network using that spectrum might reach $10 billion. If Frontline couldn’t meet a $128 million payment, it’s best they got out early. Read More about Wireless Auctions Aren’t for Wimps

Frontline Out of 700 MHz Auction

Frontline Wireless is apparently out of the 700 MHz auction, according to reports from RCR Wireless and the New York Times, as well as an email note from our telecom analyst pals at Stifel, Nicolaus. According to the reports, the startup, which counted former FCC chairman Reed Hundt and VC John Doerr among its backers, apparently couldn’t raise enough money for the deposit required to participate in the upcoming auction.
The quick take: Good news for incumbents Verizon and AT&T, who no longer have to bid against Frontline for spectrum. Some might say Frontline’s fate was sealed this summer when the FCC issued rules for the auction that didn’t quite mesh with Frontline’s plans. Others, like the Stifel, Nicolaus gang (whose research is primarily targeted at large investors), note that it is neither easy nor cheap to build new national networks, and of course, there is no guarantee of profitability.
Because of “quiet period” rules governing entities participating in the auction, Hundt said he could not talk about the matter when contacted via email.
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