700 MHz Auction Bids Continue Climbing and Far Exceeding Expectations

Even the FCC underestimated the demand for 700 MHz. Originally expected to raise between $10 billion and $15 billion, total current bids exceed $18.9 billion. Bidding on the sought-after C block also surpasses the FCC requirements ($4.6 billion) and now has a PWB (Provisional Winning Bid) of $4.7 billion. ABI Research notes that demand for 700 MHz is so great, not even the pending recession impacts the bidding process.

This auction may be the last opportunity for new participants to gain ground in the wireless realm, which is dominated by incumbent carriers. New participants include Google, Vulcan Spectrum LLC, Tower Stream, and Cox, while traditional participants include Verizon and AT&T.

"700 MHz provides better propagation characteristics than 850 MHz, 1900 MHz, 2100 MHz, and higher-frequency spectrums," says ABI Research senior analyst Nadine Manjaro. "For instance, cable companies can utilize this spectrum by launching their own mobile broadband networks -- thereby alleviating the need to rely on wireless operators. But Google draws the most speculation, since the company's entrance into the wireless market could significantly change the wireless industry."

Moreover, incumbent operators absolutely want to strengthen 4G deployments; and 700 MHz will improve rural and in-building coverage at a lower cost than existing frequencies.

One surprise is the nationwide D block, set aside by the FCC for public safety. Frontline Wireless -- the expected front-runner -- was disqualified due to its inability to pay the minimum bid. And there has been only one bid, which failed to meet the reserve bid price of $519 million. The D block price is set at $1.3 billion.

"Beginning in 2009," concludes Manjaro, "the 700 MHz auction could alter wireless broadband services in the United States and abroad. Google's interest in the C block influenced Verizon's decision to open up access to its network, just as Apple's introduction of the iPhone stirred up the cellphone market. If Google or Microsoft (via Vulcan Spectrum) secures the C block spectrum, it could change the whole industry."