Spectrum upswing

During the industry's recent economic crisis, you couldn't sell radio spectrum if you packaged it with baseball cards. Even with the removal of the spectrum cap, no one seemed interested. Carriers had been burned by spectrum auctions in the past, and 3G seemed like such a far-off dream that no one was in a hurry to horde the spectrum that technology migration would require.

However, harkening back to the days before that crisis--when spectrum auctions seemed a source of constant speculation, controversy and revenue for the federal government--spectrum acquisition and ownership is again becoming a very sensitive issue.

Advancing mobile data adoption, and the need to fill coverage gaps in the face of portability-driven competition, are doing their part to create a new market for spectrum. However, Nextel Communications and Verizon Wireless are doing much more.

You can argue that Nextel kicked off the new era by asking for spectrum as part of a plan to relieve interference between Nextel and private radio networks in the 800 Mhz band. Nextel is contributing $850 million or so to the effort. Or, you could argue that Verizon, miffed at the possibility Nextel will get spectrum without going through the traditional auction process, made spectrum a hot-button issue once again by pledging to bid $5 billion at auction for the frequencies Nextel is after if the FCC rules not to give them to Nextel.

The discrepancy between the financial figures is pretty startling, and it reminds anyone who participated in previous federal spectrum auctions of the headaches they had trying to figure out what spectrum was really worth.

Some people like to say that spectrum is only worth what you are willing to pay for it, which is why spectrum auctions work. But there might be a better way to put it: Spectrum is only worth what your competition is willing to pay to keep you away from it. This makes all future auctions no less dangerous than the series of auctions during the last decade that soured our opinions on the value of spectrum in the first place.

E-mail me at doshea@primediabusiness.com