Electronic Design

$200 MILLION PER MEGAHERTZ

The FCC’s spectrum auction is expected to rake in $10 to 15 Billion

If you are a wireless wonk like me, you have been following the story of how the FCC has been deciding upon the rules for its upcoming spectrum auction. Thanks to some horrendous lobbying by cell phone carriers, Google, and a host of others, FCC Chairman Kevin Martin and the other four commissioners have decided on how the spectrum should be sold and used. If you have not been following this whole process, you should take a look at what is going on. Even if you are just a cell phone subscriber or other wireless consumer the outcome of the auction and the use of the spectrum will affect you and everyone else in the US for years to come. Here is a summary, in which I have tried to be fair and balanced, given the big political divide this auction has created.


What Spectrum is Available?

In the 698- to 806-MHz range there is 62 MHz of prime spectrum that was formerly assigned to UHF broadcast TV. Commonly known as the 700-MHz spectrum, this area of the electromagnetic spectrum was divided into 6-MHz bands and assigned to TV channels 52 to 69. In 2005 the FCC passed the Digital Transition and Public Safety Act which demands that all analog TV broadcasting in the spectrum come to an end by February 17, 2009. Most TV stations are still in the process of switching over to more efficient modes of transmissions like digital and HD TV, which will open this spectrum for other wireless services.


The new spectrum is already sliced and diced, but essentially it is carved into three major segments: a 30 MHz chunk for small and rural carriers, a 10 MHz piece for joint public safety-private partnership, and the remaining 22 MHz would be allocated to an open-access broadband network.


Potential Uses

Some possible applications of the spectrum are new cell phone service and wireless broadband access. The entrenched carriers like AT&T, Sprint Nextel, T-Mobile, and Verizon would love to have this spectrum to expand cell phone services and roll out increased 3G (and eventually 4G) broadband wireless access to the Internet. However, some non-wireless carriers like Google see this as an opportunity to grab some spectrum to offer open or possibly free cellular and broadband connectivity in turn for software sales and ad content. Also, the public safety community is looking for a swath of spectrum for a new network of national communications that will provide full interoperability and compatibility between police, fire, and other public service providers. This will allow first responders to emergencies to talk to one another, something that cannot be done now because of the many different systems in use with different frequency assignments and radio technologies. Even potential providers of WiMAX services see the 700 MHz sale an opportunity to build broadband wireless systems to compete with cable TV and DSL. While the current WiMAX standards only address the 2- to 6-MHz spectrum, a 700-MHz profile is only a short time away from development and ratification.


What's the Big Deal With 700 MHz?

Why is the 700 MHz spectrum so coveted? For several reasons. First, it is the first big piece of spectrum that has become available in years. For the most part, the key parts of the usable spectrum are already licensed and used. Like land, they are not making any more spectrum, giving it all the more value.

Second, that part of the spectrum is highly desirable because of its electromagnetic characteristics. As you may recall the basic laws of physics say that the lower the frequency the greater the range and penetration capability of the radio waves. This makes 700-MHz signals far more robust than the current cellular signals in the 800- to 950-MHz and 1.7- to 2.1-GHz bands as well as WLAN and WMAN signals allocated to the 2.5- and 5.8-GHz bands. In any case, this is a sweet spot that makes for excellent signal reliability. And it is easy for CMOS chip companies to work in with the potential for some super ICs to serve this segment—big bucks for everyone, so to speak.


Competition and Controversy

The big issue is how to make the auction fair. With spectrum expected to sell for $200 million/MHz, only the big and rich can afford it. Then, on top of that, they must build the infrastructure to offer any services. Currently only the major cell phone operators are in that position. AT&T and Verizon are number one and number two respectively, and they can afford it. And nothing would please them more than to keep it that way. Then they can perpetuate what many believe is a monopoly. All the cell phone operators have a closed system that will only use the phones that they sell. In case you did not know it, it is not the handset manufacturers who actually decide what features to provide. The cell carriers dictate that so as to protect their turf. That means you cannot go out and buy a phone on the open market and expect it to automatically work. If you could and did, you would still have to sign up for a 2-year contract and have the carrier activate the phone.


Lots of people hate this closed system because they say that it is not competitive and that it stifles innovation and technological advances. In some ways that is true but in others it is not. The carriers argue that it is still a dog eat dog competitive market between the GSM/EDGE/WCDMA carriers (AT&T and T-Mobile) and the cdma2000/EV-DO carriers (Sprint Nextel and Verizon). So to be fair, it is neither an open system nor entirely non-competitive.


What others would like to see is an open system that lets any user buy any device and use it as she or he wishes. Services would be very low cost and maybe even free. That openness is not likely to happen no matter what simply because all wireless technologies are based on strict standards to ensure interoperability. But a common standard could make that happen.


One big proponent of this open approach is Google. They petitioned the FCC to make a big part of the 700-MHz spectrum strictly open. This would possibly permit Google with its huge cash reserves to buy the spectrum and become the next big wireless carrier. It could then sell its search engine and services to everyone. Services could possible be free if you don't mind the endless ads that are sure to show up when you turn on your phone or boot up your wireless laptop.


The FCC has said that it would allow the buyer of the 22-MHz spectrum to adopt this open approach, letting subscribers use any handset or compatible device. In addition, the FCC guidelines do not include the provision that a part of that spectrum had to be wholesaled out to others.


Google is expected to bid up to $4.6 billion for that spectrum. But it will be a dogfight nonetheless and the big dogs at AT&T and Verizon as well as others will no doubt put up a good fight to get that space. Even if they get it, that spectrum will have to be open. Overall there are 1099 licenses up for sale, most of them for small spectrum chunks that small and specialized carriers can use on a local basis. You can go to the FCC's website at www.fcc.gov to find a spectrum chart and more details if you are interested in the gory details.


Stay tuned. The auction starts January 16, 2008. But just remember, you can probably predict who will win the biggest segment. The golden rule still holds: Those who have the gold make the rules.

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