The new rules, which determine how to divvy up licenses and actually auction them off for the coveted 700MHz wireless band of spectrum, will likely shape the competitive communications market for decades to come, experts say.
The 700MHz band of spectrum, which, is considered the last piece of prime real estate left in wireless spectrum. And mobile operators, as well as companies in other industries such as cable and satellite TV, are expected to bid on licenses. The auction is likely to generate between $10 billion and $15 billion in revenue for the government.
Since Congress decided in 1997 to re-auction the 700MHz spectrum used to transmit analog TV signals, communication policy makers have viewed this sliver of the airwaves as a panacea to all the nation's broadband-access problems.
The reason is simple. By nature, on the 700MHz frequency band, signals travel about four times farther than those on bands used by the wireless and electronics industries today. Reusing that spectrum could mean easier and cheaper deployment of broadband networks, which should translate into more affordable and widespread high-speed Internet access for consumers.
For years, policy makers have argued that new regulation in the broadband market is unnecessary because new entrants could use the 700MHz spectrum licenses to cost-effectively build broadband services that will compete directly against the cable and phone company broadband duopoly.
Others see the spectrum as a perfect way to, because operators serving rural areas with this spectrum would cover more ground with fewer towers. And finally, the 700MHz spectrum could be used by new carriers that want to build 4G wireless networks, using technology such as WiMax, that will leapfrog 3G wireless services of today.
Giving new entrants a fair shot
With so much hope riding on this one sliver of spectrum, getting the rules of the auction right is essential.
"This auction is incredibly important," said Harold Feld, senior vice president of Media Access Project, a nonprofit law firm representing a coalition of public interest groups before the FCC. "Pretty much everyone agrees this is the last big piece of spectrum to be auctioned off for the foreseeable future. And if you don't get the rules right, the existing players could control the auction and then nothing in our wireless broadband future will change. But if they do get them right, there is great potential for some dynamic innovation."
Congress has set a deadline of February 2009 to make the switch from analog to digital TV, freeing up the 700MHz band of spectrum. The FCC hasn't set an auction date yet, but under the Digital Television and Public Safety Act of 2005, it's required to start auctioning the remaining unsold spectrum by January 28, 2008.
The auction will consist of 60MHz of spectrum in the 700MHz band. The government has also set aside about 24MHz of the analog.
As the deadline to begin the auction approaches, consumer advocates have come out of the woodwork to ensure that new entrants get a fair shake in the auction.
"The rules are important because they determine the winners of the auction," said Jeannine Kenney, senior policy analyst at Consumers Union.
Joe Farren, a spokesman for CTIA, an industry trade group representing the cell phone industry, agrees the spectrum auction rules are important. But he believes that no special parameters need to be implemented to protect new entrants.
"The overall suggestion that the wireless market is not competitive is unsupported," he said.
Farren added that wireless is also proving to be a strong competitor to traditional wire-line broadband services like cable modem and DSL service.
"A February report from the FCC said that 59 percent of new high-speed access lines came from wireless," he said. "That statistic suggests that wireless is growing faster than cable or DSL combined. So there is already an alternative."