Written by by Jesse Kopelman [qi:81] Lost amid all the speculation about Google’s (GOOG) involvement in the forthcoming 700 MHz auction and whether or not the search giant would manage to impose its will on an incumbent-loving Federal Communications Commission was a decision by the agency […]

Written by by Jesse Kopelman

[qi:81] Lost amid all the speculation about Google’s (GOOG) involvement in the forthcoming 700 MHz auction and whether or not the search giant would manage to impose its will on an incumbent-loving Federal Communications Commission was a decision by the agency that may prove to be the most significant one it’s made over the past 10 years.

The FCC on July 31 issued a statement in which it noted that the 700 MHz C Block spectrum winner would be required to have open-device access on their network. This Carterfone for wireless was one of the things Google had asked for and was, depending on your viewpoint, either a small victory for the company or a meaningless token meant to impress the unwashed masses but do nothing to change the status quo.

Far more interesting, however, was the FCC’s revelation that the 700 MHz public safety band was being rechannelized to support broadband and that the 700 MHz D Block license would be devoted to a national public/private partnership to deliver both public safety and commercial broadband.

This decision to enable a public/private wireless broadband partnership is extremely important because it represents the best hope yet for both a modern public safety wireless network and offers a realistic solution to the digital divide.

On Aug.10, the FCC issued a 312-page report in which it laid out rules governing wireless licenses in the 700 MHz spectrum. In short, the winner of the D Block will have to enter into a deal with the Department of Homeland Security to determine how both the D Block and the broadband portion of the public safety spectrum will be administered. The winner gets the only franchise (with one exciting exception) to build and maintain networks using the combined spectrum. The D Block and broadband public safety spectrum are adjacent 10 MHz (5 X 5 MHz) bands that can be operated as a single 20 MHz (10 X 10 MHz) allocation. This spectrum has some very important build-out criteria. While public safety users are only primary in half of it, they must be able to preempt commercial users (at the decree of Homeland Security) over both bands. The D Block itself must be 75 percent (by covered population) built-out in four years, 95 percent in seven years, and 99.3 percent in 10 years. Most commercial licenses, by comparison, only have to be 25 percent or 33 percent built-out in five years.

The exciting exception to the D Block winners franchise is that local public safety agencies can preemptively build-out their networks if they don’t like where they sit in the license winner’s schedule (I have personally dealt with several municipalities that would have loved to do this with the 2.6 GHz spectrum owned by Sprint (FON) and Clearwire).

So, what’s the big deal? Well, the idea that’s been floating around for years (long before 9/11) — that of building out a dedicated national first responder network — is never going to happen. It’s just so inefficient. Ten billion dollars in capital costs, plus relying on some yet-to-be-created arm of the bureaucracy for operations and maintenance, would be a hard pill to swallow come appropriations time. The multiuse network idea being presented here, on the other hand, is a huge win all around. Not only is there now a tenfold increase in potential user base through which to recoup costs, but thanks to the need for ubiquitous public safety coverage, there will finally be a wireless network with better than laughable coverage in rural areas.

In the meantime, access to a reasonable amount of spectrum-building penetrating 700 MHz frequencies, national network economies of scale, and public safety anchor tenants all combine to form a business case that might actually support low-cost Internet access and bridge the digital divide. And even if nobody actually builds their own network, at least a little more leverage gets put back on the side of the customer — where it belongs.

Of course, all my excitement might be for nothing. There are some serious hurdles to overcome here. Even though the FCC is pricing the minimum bid for D Block at a mere $1.33 billion (about a third of what they consider market value for access to 20 MHz of spectrum), it will cost at least another $5 billion to get that 75 percent build-out in four years. Spending $6 billion over the course of four years is not for dilettantes, and if the incumbents get a hold of this spectrum it might be more in their interest to try and break even on the public safety stuff rather than risk the profit margins of their existing broadband networks (at least they will have prevented the formation of new competition, and that is certainly worth $1.33 billion to the likes of AT&T (T) and Verizon (VZ)).

Perhaps the bigger hurdle is having to negotiate all of the technology and deployment decisions with the Department of Homeland Security. By the time everything is agreed to, budgets and deadlines will be blown and the network itself runs a good risk of being obsolete before it is ever deployed. The license winner will have to be well-versed in dealing with government contracts, and that, sadly, once again points to an incumbent or, worse yet, Halliburton Wireless (Dick Cheney will need a new job by the time this network launches).

Whether the FCC’s move results in a progressive, multiuse network or just another half-measure by some incumbent, I applaud the agency for making a decision that at least carries some rational expectation of positive results. This idea of trading upfront cash for stringent build-out requirements with an eye to the public good is huge break from the past 15 or so years of spectrum policy. It is also a change wholly for the better. Going forward, this is exactly what we need from the FCC.

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  1. $1.33B is the reserve price for the D-block. The minimum bid is $472M and change.

  2. Jesse — I agree that the D-block holds a lot of promise. I expect VZ has the inside track. The public safety sharing requirement will likely lead to another “open device” service.

  3. Jesse Kopelman Monday, August 20, 2007

    Tom, I would think the public safety sharing would preclude any sort of “open device” access. My reading of the FCC’s order is that any device may potentially have to be approved by the Department of Homeland Security (even if just implicitly). Whether that is really the case doesn’t matter so much as it makes a convenient excuse for why the network operator doesn’t allow “open device” access. Carriers have been using this kind of nonsense for years to avoid deploying open access LBS (substitute PSAP for DOHS). It’s stuff like this that is kind of the dark side of the idea. Still an overall step in the right direction compared to the rest of the auction.

  4. Whew. A little technical, but good overview on this first responders network.

  5. FYI, the Department of Homeland Security won’t manage the public safety license and (with exceptions) the network is intended for non-federal public safety use. The public safety block license will be awarded to a non-profit that represents a broad range of public safety interests (everyone from the the Association of Public Safety Communications Officials to the International City/County Management Association). The FCC’s own Public Safety and Homeland Security Bureau will have a seat on the licensee’s board, but that bureau is part of the FCC, not DHS, and it holds only one of eleven board seats.

  6. FAR FAR more important than any of these is the rule-making that will determine the use of the UHF (aka DTV transition) white space. The FCC is consdiering whether or not, and how to allow the use of the white space between channels and of un-usued channel space FOR UNLICENSED OPERATIONS using a technology under-study at the IEEE called WRAN or 802.22. It’s essentially OFDM (aka similar to WiMax PHY) with modifications to AVOID channels in use through the use of signal detection and beacons. THIS IS THE MOST IMPORTANT DECISION THE FCC WILL MAKE. If permitted it could allow large (aka MACRO) cell WRAN deployments to compete with WiMax in UNLICENSED AKA LOW COST OPERATIONS AND REDUCE THE BARRIER TO ENTRY FOR BOTH NEW ENTRANTS TO TELECOM AND CURRENT TELECOM OPERATORS THAT ARE NEW ENTRANTS TO WIRELESS.

    While AWS spectrum is great — it would be EVEN GREATER if some of it were useable WITHOUT HAVING TO PAY LICENSES.

    Of course the National Association of Broadcaster is FIGHTING it because they are concerned that ANYBODY could compete with them with a low barrier to entry. Of course that isn’t what their argument is. Their ARGUMENT is that it would interferre with DTV broadcast. Yeah, that’s what they said about cordless phones in the 700MHz range and that’s what they said about CABLE, etc….

    Let’s FACE IT, un-licensed operations (like WiFi) HAVE BENEFITED TELECOM OPERATORS MORE THAN IT HAS HURT THEM. It’s added FUEL to the ADDICITION OF BANDWIDTH EVERYWHERE. So when it isn’t there PEOPLE PAY FOR IT OVER MORE EXPENSIVE NETWORKS. It’s called the “net” effect. Get it “net”?

  7. Jesse — Being one of many carriers supporting 911 is nothing like being the only wireless carrier to operate a shared network with the government. The private company will do everything in its power to eliminate joint-decisions. It’s like trying to run a three-legged race tied to a boulder.

    The DHS will definitely need to certify every public safety device (or at least the manufacturer). If they create a closed “custom” network, DHS will also need to certify every single consumer device to ensure interoperability.

    This will present the private company a delima. They can’t afford to constantly negotiate with DHS to add new consumer features. The better answer is to pick an open standard, and agree that anything that meets a certain version of a published spec can be deployed. Obviously, DHS would still certify public safety devices for robustness and unique value added function.

    The private company would be motivated to add value outside of the network to improve time to market. This is where Frontline failed in its explanation of its wholesale requirement. In their first plan document, Frontline said wholesale was needed, because operating a retail service would be a “distraction.” They needed to say, “creating an open network design would firewall the public safety network from retail services.”

  8. Jesse Kopelman Tuesday, August 21, 2007

    Tom, I think you and I agree on the technical side of things. Where we disagree is on the motives side of things. My own experience working for and dealing with carriers is that they would rather do things the hard way if that is what it takes to maintain control. Of course allowing “open devices” would make more money all around, but there is nothing stopping either the GSM or CDMA carriers from doing this today and they don’t. In this case, the network operator would seem to have good surface excuse, “the government won’t let me.” AT&T, Vz, Sprint, and T-Mobile already use this excuse for why they can’t support QOS defined by user class on their data networks.

  9. Jesse Kopelman Tuesday, August 21, 2007

    John, you are probably correct. I remember reading stuff about boards and seats somewhere in that 312 page document. That said, do you really think Homeland Security won’t be the elephant in the room? Since this is supposed to be a nationwide network, any decisions having to do with technology will have to be approved by those with a national purview. There is no way the FCC is going against DHS. From that perspective, my intuition is that the network operator will largely be dealing with DHS.

  10. Jesse — I know we share a lot of similar experiences. The mobile industry is a highly competitive market failure. There are some failures that competition alone haven’t and won’t fix, because fixing it would reduce ROI. For example, relaxing credit standards would net a carrier significantly more subscribers, but the majors won’t do it because deadbeats cost money in the long run.

    Every operator I know would trade walled-garden feature revenue (which outside of SMS is less than 5% of revenue) for shorter time-to-market for new phones. Mobile has always been a phone driven market.

    Up until now, locked phones with proprietary walled-garden functions hasn’t created a time-to-market disadvantage. Witness the new Moto RAZR2. Even though they all have different OS, Apps and network services, they are released in sync. Why? It’s not because the major operators and Moto have conspired, but because Moto gave them all plenty of lead time and none of them wanted to appear behind the other.

    Can you imagine VZ (or whoever on the D-block) being willing to release a device 6 months later than Sprint/Google/Intel (or whoever on the C-block) because they needed to get approval from DHS to put it on their shared closed network? I just can’t imagine it.

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