The Wireless Spectrum Wars – Verizon and AT&T Strut Their Stuff

The government airwaves auction saw heavy duty action today, with two of the largest cell phone companies in the United States, Verizon Wireless and AT&T, making their presence felt during the bidding process.

A report containing the results of an analysis carried out by the Associated Press of data from the Federal Communications Commission threw up impressive numbers involving the two cell phone giants. The report indicated the two companies together made up about $16 billion of the $19.6 billion that was bid during the auction, with Verizon accounting for $9.4 billion and AT&T for the remaining $6.6 billion.

While the numbers seem impressive on their own, in the larger picture the results could actually be cause for worry. They seem to indicate that no other new competitor seemed to come to the auction in a big way. One major no-show in the winners’ list was search engine leviathan Google Inc., ensuring that it would not be part of the wireless business for now. Google had earlier launched a bid for C block licenses, but could not win as it could not come up with the appropriate amount.

After Verizon and AT&T, the next big bidder was Qualcomm Inc., with a bid of $1.03 billion. Of the $1.03 billion it bid, Qualcomm agreed to set aside $472 million towards developing an emergency communications network. With the bid much below the minimum FCC requirement of $1.3 billion, Qualcomm’s winning total stood at $558 million.

Speaking after the auction results were out, Verizon officials said the company was happy with its performance in the auctions. And they had every reason to be happy: the company had picked up so many C-block licenses that they could now cover all states except Alaska.

The president and CEO of the wireless division of AT&T said the company could now be assured of ‘quality spectrum available for new services covering 95 percent of the U.S. population.’

One company that picked up a substantial number of licenses was Frontier Wireless LLC, owned by EchoStar Corp., a direct broadcast satellite television outfit. While the Frontier bid of $712 million was nowhere close to the numbers Verizon and AT&T put out, it was still enough to make a nation-wide impact.

The availability of the wireless spectrum has been mainly due to the switch to digital broadcasting, an event that has been happening all across the United States. The companies working in the wireless spectrum expect to provide customers with a range of advanced services in the wireless domain, including high speed Internet access.

Despite the overbearing shadow of the two cell phone majors in the auction and the concerns the scenario throws up, Kevin Martin, the FCC certain, seemed quite happy with the outcome.

Martin said, “A bidder other than a nationwide incumbent won a license in every market.” According to him, this increased the possibility of a ‘wireless third-pipe’ rival to make an impact in markets across the United States, he said.

According to Martin, the parties with the biggest say in the area of broadband access are the large telecommunications and cable outfits. In such a scenario, wireless could provide fresh ground for competition by developing into the third platform.

However, there are people who say that is exactly where the auction came a cropper. As Ben Scott, the policy director of an advocacy group supporting increased access to communications services called Free Press, put it, the auction was a failure in the area mentioned because Verizon is also a big player in the area of Internet access. According to Scott, “The prospect of a genuine third-pipe competitor in the wireless world is now slim to none.”

Precautions were taken to ensure there was fair play during the auctions and prevent bidders from working together in individual clusters. To this end, the FCC refrained from letting out the names of the bidders involved in the auction.

Martin also announced an investigation to determine why the D block could not rope in a single winning bid. Making the announcement Thursday, Martin said the internal watchdog of the FCC would conduct the investigation.

On Wednesday, there had been a call from public interest groups to the FCC to launch a probe into charges about officials and financial backers of Frontline Wireless LLC engaging in a meeting with Cyren Call, a company that Morgan O’Brien, the co-founder of Nextel Corp., had created.