Revamping the D Block

As we were putting this issue together, the 700 MHz auction came to an end, generating strong revenues except in the D-block, which was envisioned as a shared public safety and commercial network. We’re going to be hearing a lot about the failure of the D block auction in upcoming weeks—and if the primary goal was to raise money for government coffers, it was indeed a failure. But if the goal was to ensure the construction of a national public safety network, it was more of a near miss.

The idea was that a single national licensee would win the 10 MHz of spectrum in the D-block and would build an extra-reliable network that could also use an additional 12 MHz of spectrum already allocated to public safety. The public safety community would get something it doesn’t have and badly needs—a national communications network. Commercial interests would pay for network construction and public safety traffic would have priority.

The plan started to fall apart when Frontline, a key champion, was unable to raise sufficient funding. Detractors point out that ultimately there was only one D-block bidder, Qualcomm—and that, at $472 million, Qualcomm’s bid was only a little over a third of the $1.3 billion the FCC had set as the reserve price.

But Qualcomm’s bid was only a fraction of what the company would have had to spend (and presumably was prepared to spend) on construction costs, which Frontline estimated at $10 billion. The shortfall of $828 million between what Qualcomm bid and the FCC wanted actually represents only about 10% of the total investment required. Rather than a failure, I’d call that an idea that didn’t quite work.

Qualcomm may have been in a unique position, perhaps viewing the move as a way to get its fourth-generation UMB technology deployed, but the point is the company considered the plan commercially viable.

How can the shared spectrum idea be tweaked so it will work? I’ve heard at least three ideas that have merit.

Industry consultant Andrew Seybold believes the investment required to build a shared commercial/ public safety network may be more than a single licensee can bear. He recommends scrapping the auction concept, instead giving tax credits to incumbent wireless operators for building out a shared network in their existing territories.

Mark Lloyd, a Georgetown University professor and advisor to the Center for American Progress, proposes a different auction alternative. He suggests that the government receive a percentage of the commercial operator’s profits. He adds that the Department of Defense might be the most appropriate administrator of the program and that the public safety community ought to be more involved in whatever plan is devised.

Berge Ayvazian, chief strategy officer for The Yankee Group, isn’t giving up on the auction idea. He suggests auctioning off something less than 10 MHz of the D-block to commercial interests which would not share their network with public safety. Instead, a separate public safety network would be built using the proceeds from that auction and some of the extra $8.7 billion above the reserve level that was generated by the A-, B-, C- and E-block auctions. It would use the remainder of the D-block spectrum and the 12 MHz previously allocated to public safety.

With so many interesting ideas percolating, I’m optimistic. The D-block auction came close to bringing us a national public safety communications network and funding it primarily through commercial interests. Let’s not abandon that goal just because we didn’t reach it on the first try.

E-mail me at JoanEngebretson@cs.com.