The Holy War Over Wireless Spectrum

With the bid deadline looming for the F.C.C.'s upcoming 700Mhz wireless spectrum, Verizon, Apple, Google, and other major players in the telecom and high tech industries are circling like hungry hawks warily eyeing their prey—and each other.

The stakes are huge for the both the government and industry. The wireless spectrum going on the block is likely to be the last big collection of frequencies to be sold at one time. The federal government hopes to raise at least $15 billion by selling the spectrum, which is becoming available as television stations transition to digital broadcasting on other frequencies.

At a tech conference sponsored by The Deal magazine in New York on Monday, several prominent experts discussed the upcoming spectrum auction, set to begin January 16, 2008. Companies planning to bid must file a so-called "short form" with the agency 45 days before that.

Blair Levin, an analyst at Stifel Nicolaus and a former high level F.C.C. staffer, told attendees that the question of how to allocate the newly available wireless spectrum will be the single biggest issue facing the F.C.C. over the next 18 months.

"This is last great sale of spectrum," Levin said. "If you want to be in the wireless game this is your last chance to buy raw spectrum."

This fact has not been lost on Google, which has long been rumored to be getting into the broadband business, despite repeated official denials. The tech giant, which is working on a highly secret cell phone project, has said it plans to bid at least $4.6 billion on the wireless spectrum.

Google has been vigorously lobbying the F.C.C. to include four rules adopted by a consortium of consumer rights groups led by Public Knowledge, a consumer advocacy group.

In the end, the F.C.C. adopted two of them—"open applications" and "open devices"—which would effectively allow consumers to mix and match cell phone hardware and software.

(By now, everyone knows the story of the New Jersey teen who hacked his iPhone to allow it to operate on networks other than AT&T, the iPhone's exclusive service provider.

Last week, Apple itself said it was mulling bidding on the spectrum, a move widely believed to bear the fingerprints of Eric Schmidt, and Apple board member and, not coincidentally, Google's C.E.O.)

F.C.C. Chairman Kevin Martin's "split decision" on the four rules had the effect of angering both sides, said Adam D. Thierer, a senior fellow at the Progress and Freedom Foundation who runs the organization's Center for Digital Media Freedom.

"Martin split the baby between two large constituencies: The telecom incumbents and emerging tech companies," Theirer told conference attendees. "And he succeeded in doing nothing other than [ticking] off both sides."

Given that Google is already building the largest fiber network in the world to connect its sprawling array of global data centers, if the company won the auction, it would be in the position to roll-out a truly massive hybrid global mesh network, as tech pundit Robert X. Cringely recently pointed out.

At a minimum, Cringely wrote, "Google could make it very expensive to hold together the existing U.S. mobile phone oligarchy."

The telecommunications industry is not amused. The Center for Public Integrity has recorded nearly 600 lobbyist meetings that have taken place at the F.C.C. on the subject of the 700Mhz auction, according to C.P.I. Senior Fellow Drew Clark, who addressed the conference.

In an indication of how serious telecom titans are taking the issue, Verizon last week filed a lawsuit in federal court seeking to overturn "open-access" provisions that the F.C.C. has imposed on the auction that would require the winner to allow users to mix and match cell phone handsets and software.

Verizon argued that the open-access rules are unconstitutional and that the F.C.C. overstepped its authority when it approved them. In its filing, Verizon called the agency's policy "arbitrary and capricious, unsupported by substantial evidence and otherwise contrary to law."

In response Google issued a blistering statement accusing Verizon of stifling consumer choice.

"The nation's spectrum airwaves are not the birthright of any one company," wrote Chris Sacca, Google's Head of Special Initiatives. "It's regrettable that Verizon has decided to use the court system to try to prevent consumers from having any choice of innovative services. Once again, it is American consumers who lose from these tactics."

In a recent blog posting, Public Knowledge communications director Art Brodsky, who addressed the conference, slammed Verizon.

"Verizon has surrounded the Federal courthouse in Washington with that whole network-tech gang from the TV commercials," Brodsky cracked. "The helicopters, the guys with equipment, the whole lot of them took off for Pennsylvania Avenue with one purpose in mind—to make sure consumers don't get the best use from their own cell phones."

As the December "short form" deadline approaches, there is sure to be more heated rhetoric on this subject, Progress and Freedom Foundation's Thierer said, adding: "This issue has become a holy war in Washington D.C."

by Sam Gustin