Spectrum Auction Could Be A Game of Chicken

Ardvark writes "Google promised some time ago to bid at least the reserve price for the C block of 700Mhz spectrum if the FCC accepted its demand for an open access rule for devices using the band, which the FCC did over Verizon's objections. If the reserve price is not met the rule will be dropped and the block re-auctioned. It appears now that bidding has stalled just short of the reserve price. It's assumed that Google has no interest in becoming a cell phone company and with a recession looming the 700MHz spectrum now seems worth a whole lot less. If Google's strategy was to force the bidding above the reserve but still lose the auction, Verizon could be calling their bluff, threatening them to live up to their word and buy what to Google could be the equivalent of a $4.6 billion 'doohickey.'" Update: 01/31 16:01 GMT by Z : And just like that, the plot thickens: the C block has hit the reserve price during bidding.

UK 3G

I'm not surprised that US companies aren't falling over themselves to bid.

Take a look at what happened in the UK when the 3G air was up for sale - they threw money at it and ended up with next to no customers.

With the way things are economically at the moment, people are not looking to up their monthly spend on their mobile phone bill. Companies will have a hard time recouping a huge outlay.

Clever

The telecoms can take the heat for being heartless monopolies, for providing terrible service at a high price, and for leveraging their monopolies to avoid upgrading their taxpayer-financed infrastructure.

They can't, however, be accused of not doing what will profit them the most in the short term.

In this case, they've collectively called Google's bluff. I don't see Google having $4.6B in spare cash, to purchase the spectrum they have no idea how to make money on. This is a tough spot for Google, because not only do they stand to lose their coveted "shared spectrum" rule, but they also stand to lose much of their perceived invulnerability on the market.

Re:FIOS

FIOS isn't "good" because it's a good service. FIOS is only "good" because this is Verizon's final "fuck you" to the taxpayers that helped fund its infrastructure, and an open attempt to become a totally unregulated monopoly. You see, they HAD TO lease the copper lines, because FCC mandated it. They don't have to share the fiber optics. As a result, they've been busy building the fiber network that would cement them as a monopoly, while completely ignoring troubles with their copper... leveraging the reduction in the quality of service over the copper lines, to attract people to the fiber.

Re:FIOS

The reason they had to lease the copper, was the original copper infrastructure was gov subsidized. The fiber costs are being eaten completely by Verizon, and while I am sure there are some tax breaks involved, there is no subsidy from the gov, state or local. Surprisingly though, the service itself is great, I have had very few problems, (yes there are some that had horrible installs and could never get some things working), the only issue I have is with the billing department which I have to call every month to get the appropriate triple play discount credited to my account since their system keeps losing it, and their CS.. it is abysmal and thats me being nice to them. The install actually was pleasant, and its not subcontracted like comcasts installers, they get paid hourly, not by the number of jobs they get done, so whether they do 5 installs in a day, or spend all day at your house rewiring your internal cable infrastructure, they get paid the same.

Nah . . .

I bet they're just waiting. 30 seconds before it ends all their auction sniper programs will bid it up another 30%.

Check out the FCC auction yourself!

First, go here https://auctionsignon.fcc.gov/signon/index.htm [fcc.gov] Then put in Auction number 73 under public access... then click go. According to this, they are at a total of $11.5 billion now for the total... next round starts in ten minutes.

Re:Check out the FCC auction yourself!

New bid, just went to $4,713,823,000...

Open Access is good to go!

Google will not let us down.

I trust Google will not let us down. They are just waiting to see if they can get it for 4.6 instead of 4.7 Billion.
And then when they get it they will build out a solar powered wireless network that will offer broadband everywhere. Not only that it will be free and be faster than FIOS. It will be IPv6 so every user can have their own block of static IPs and it will smell like home made cookies and be as warm as a puppy.
Yea that is it.

Did! Did Not!

the FCC did over Verizon's objections.

The article summary is garbage, or should I say simply wrong?

Google set 4 conditions it wanted to see. The FCC agreed with 2 of them, so Google is faced with half a glass. (Yes I know the Engineer's view of half a glass.) I don't recall them saying they'd bid reserve to ensure only half of their wishes.

when the usa purchased alaska from russia

they called it "seward's folly"

it was a joke. why did we spend $7 million on some permafrost again?

same with anyone who doubts the value of this auction

i can't see why a monopoly on a prime band of communication spectrum can't be anything but pure gold. there's only so much spectrum, but more and more people and more need for communication tech every day

Re:when the usa purchased alaska from russia

same with anyone who doubts the value of this auction

i can't see why a monopoly on a prime band of communication spectrum can't be anything but pure gold. there's only so much spectrum, but more and more people and more need for communication tech every day

The auction is a gigantic tax and nothing more. If the markets are efficient, the winning company will be rewarded only related to the risks it is taking. Everything else will be going to the government, and out of the pockets of consumers.

It's laughable how the auctions are being sold as a good way to raise funds for the government without impacting the taxpayer. Who doesn't use communications technology if not the taxpayer? This is the perfect way to cripple a single industry, because a) the winning company will have less immediate funding available for infrastructure b) consumer prices will be much higher, lowering the adoption rate significantly.

Just look at what happened in Europe. A lot of countries did the smart thing and gave the spectrum to the companies that were willing to guarantee the best service levels for the cheapest consumer prices, but then a few large countries ruined it for everyone by suckering companies into auctions. (To be viewed as a serious competitor, you had to take part in the largest markets.) The end result was what I described above, and we are only now starting to recover.

If you think that the beauty contest model will result in excessive profits for the winner, keep in mind the guarantees, and the fact that one winner wasn't awarded all the spectrum.

Everyone on ebay knows...

That the bidding often stalls in the middle of the auction, and picks up like crazy near the end. This isn't ebay of course, but it's certainly an example of auction behavior to pay attention to.

This auction will go on for months, and we're at the one week mark now?

Anyone who says Google is "bluffing", or the price won't go up is full of it. Google may not bid as much as they say, they may, someone else might bid more, or who knows? It's just way to early to be saying much of anything about the auction, what the different strategies are, and who will win.

Here's the link to the auction status

Here's the link for status
http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73 [fcc.gov]

Under Results click: View Auction Results (buttheads are using javascript for linking so no direct linking possible).

Please note it wants you to run some java. I clicked no and everything runs fine.

Who said anything about a recession?

Google has no interest in becoming a cell phone company and with a recession looming the 700MHz spectrum now seems worth a whole lot less

Who said anything about a recession? You do not know you are in a recession until after it happens. How do you know we're not spiraling into a depression?

Nothing to see here yet, move along...

Lemme see. Reserve is 4.6B, bid is 4.3B. 6.5% difference, 300M. If I were buying a rusty old Duster for $600, this would be a difference of $40.

Obviously this is just gamesmanship.

As of 11 AM EST this story is false

The NY Times blog was just useless speculation from yesterday:

https://auctionbidding.fcc.gov/auction/home/announcementDetail.htm?ann_id=402 [fcc.gov]

Announcement

1/31/2008 11:00:41 AM
C Block Reserve Price Met in Round 17
At the conclusion of Round 17, the provisionally
winning bids for the C Block licenses exceeded the
aggregate reserve price of $4,637,854,000 for the
block.

The plot "thickens"?

Since hitting the reserve price brings more clarity, wouldn't it be more accurate to say "the plot thins"?

Once the auction hits reserve

All the other telcom companies companies come under a massive DOS attack from the middle east / central asia and google wins at reserve price. :)

Google doesn't need to build out C-block.

they can rent it out if they win it. as in beer. they could throw it open to all carriers using an open GSM platform using whatever flavor of G3 data they like so it's fully world-compatible.

there's an idea that should have "it's MY network, and all these guys behind me will beat you if you disagree" shivering.

yes, bring your BT, NTT, Korean phone over here with you. it will work. every time you hit send, two cents to Google for use of the C block airwaves. one cent if the home phoneco had built the network in that regional area.

profit per click. no investment in the backbone. that's something they know about.

it can work.

Re:too bad

Housing is still affordable....just not where the jobs are.

Fixed a typo for you.

Telecommuting just isn't all it's cracked up to be.

Re:too bad

I like how he used Income Taxes implying that that's where the US government gets most of its revenue. Note: Social Security at $544 billion / year is not part of the IRS's Income tax numbers and it's mostly paid by those making 100k or less each year.

The share of total income taxes paid by the top 1% of wage earners rose to 34.27% from 33.71% in 2002. Their income share (not just wages) rose from 16.12% to 16.77%. However, their average tax rate actually dropped from 27.25% down to 24.31%

So the rich 1% pay 34.27% the middle class pay ~96.54% - 34.27% = 62.27% of income taxes and the middle class also pays 500 billion for Social Security and most property, excise and sales taxes.

So yes if you look at all the numbers the middle class is paying most of the taxes.

Re:too bad

There's just one problem with that data: it's based on the top 1% of wage earners . The wealthy do not earn wages. It is my opinion that wage earners define the middle class, although the notion of class distinction in a democratic Republic is open to interpretation.

For that matter, any assertion involving the term "middle class" is open to interpretation.

It's not so much that Limbaugh isn't popular with technically-minded people, it's that he is not nearly as interested in facts as he is in attention. He himself has admitted as much. He makes money by remaining popular, by inciting listeners to excitement. That's the stock in trade of talk radio: Current events plus interpretation with a clear agenda, designed to leave you feeling a certain way.

There's nothing wrong with choosing that flavor of entertainment. The problems crop up when you begin to use data from an entertainment source as fact. For example, I thoroughly enjoyed Michael Clayton [imdb.com], but if I wanted facts about corporate crime, I'd look elsewhere.

If Limbaugh inspires you, great. Inspired people move things forward. One of our biggest problems lately is that the inspired don't step out and think for themselves. My recommendation is that you maintain the distinction between entertainment and news. Get your facts from a reliable source, i.e., from a different source than your inspiration.

If you like thinking for yourself, that is. If you'd prefer to just listen without asking any questions, go right ahead. Just don't expect anyone who isn't plugged into the same source to treat you with any respect.

Re:too bad

My company has tripled in size over the last 2 years.

Yeah. People throw their hands in the air over this incoming recession, and sure the stock market is having some problems, but so many areas of this country are still doing well. The company I'm working for is hiring like mad (any aerospace engineers looking for work? let me know). Within my house, which used to be out in the country surrounded by fields, there are no less than five new housing developments that sprung up in the last year ... and yes, they are still being constructed. For all the doom and gloom, business is booming in my world.

(and "recessions" aren't all bad ... the corrections that are made often empower people to get lower interest loans, refinance debt to pay it off quicker, and often provide incentives to allow for businesses to grow)

Re:Release it!

If Google wins, and they don't know what else to do with it, I think they should release their block of the 700 MHz bandwidth under the GPL.

It would be worth it just to see approximately a million dorks have their heads explode as they endlessly debate what it means to copyright bandwidth.

Re:I don't understand why...

Basically, it's a tool to stimulate bidding. In a typical auction, the seller is obligated (by contract or at least good faith) to sell the item to the highest bidder. A reserve allows the seller to hedge her/his bets by defining a window between the minimum bid and the reserve in which a they're not required to sell, but do have the option. Often the reserve is not disclosed since bidders might be turned away by sticker shock.