Wireless Auction Ends With Mixed Feelings

Macworld is reporting that the conclusion of the wireless auction has ended with many participants having mixed feelings. While bigger companies hailed it as a success, including Google who didn't actually bid to win but was able to get open access rules introduced, many smaller companies were left feeling that they were doomed from the start. "A former mail carrier, McBride has been trying his luck at FCC auctions since 1996. He said new rules for the auction favored large companies with deep pockets. For example, the FCC shortened the amount of time that the winners would have to build their networks. "All that did was prevent small businesses from coming in. They were scared of the build-out requirements," he said."

Reminds me...

[downix]

I remember the US Army contract index had this little requirement for some filing cabinets to have "three letter names in the (can't recall) font" which of course limited the contracts to just IBM... until Commodore renamed itself Commodore Business Machines (CBM) and Digital became DEC.

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[Dr. Cody]

If you have a source on this, I'd love to pass it around.

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[downix]

Just something my father (former DEC employee) used to tell me.

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[TubeSteak]

I remember the US Army contract index had this little requirement for some filing cabinets to have "three letter names in the (can't recall) font" which of course limited the contracts to just IBM... until Commodore renamed itself Commodore Business Machines (CBM) and Digital became DEC.

That's pretty much how earmarks and appropriations work.

Instead of naming a specific contractor/company, the law is written to include requirements that exclude everyone but your intended recipient. It's one of the maneuvers that makes sorting through spending bills so difficult

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[bofkentucky]

Our phone company used to do this all the time, the bid spec would call for a 350ci/5.7L engine, which GMC and Chevy were happy to provide but ford's 351/5.8 and dodge's 360/5.9 need not apply.

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[downix]

If you have to ask this, then you would never understand the answer.

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[Cajun Hell]

They cost $20 to make and the Army buys them for $5000 apiece.

Sometimes, the tortoise gets hit by a car

[BadAnalogyGuy]

In the old fable, the tortoise won the race because it was slow but steady. The hare lost because although it was fast, it was also prone to take breaks.

In today's world, the hare is motorized and is about 1000 time larger than the tortoise.

If you're going to bet on one of them, bet on the hare. The FCC isn't stupid, they know who is going to do productive things with the airwaves

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[ScrewMaster]

The FCC isn't stupid, they know who is going to do productive things with the airwaves

Which is kind of a silly remark. The hares in the U.S. (i.e. the big cellular outfits) have done far less with the spectrum they have than their counterparts in other countries. The very last people I want in charge of our rate of progress are the goddamn Telcos, whose sole motivation is to squeeze any threatening innovators out of the market, and then squeeze their existing infrastructure (and us!) for every last drop

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[eln]

I don't think that fits in this case. The smaller companies are more nimble and can adapt faster. So, they are the hare. The large companies are still slow to change and can't get anything done quickly, so they are the tortoise. The only difference now is, rather than winning because the hare is lazy and overconfident, the tortoise wins by using its vast resources to buy itself a race car and hiring goons (ie, the government) to break the hare's legs before the race starts.

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[falconwolf]

If you're going to bet on one of them, bet on the hare. The FCC isn't stupid, they know who is going to do productive things with the airwaves

Well if the FCC, federal government really, wants productivity then they'd allow the airwaves to be open, homesteaded, instead of licensed. Prior to the creation of the Federal Radio Commission [wikipedia.org](FRC) in 1927, which became the Federal Communications Commission [wikipedia.org](FCC) in 1934, the airwaves were homesteaded, ie if someone in a given area started broadcasting on a spec

I didn't win either

[heroine]

I didn't win but I wanted open access. Why isn't everyone who didn't win but wanted open access a hero?

Re:I didn't win either

[BadAnalogyGuy]

I didn't win either (Score:2)
by heroine (1220) Alter Relationship on Friday March 21, @10:37AM (#22821638) Homepage
I didn't win but I wanted open access. Why isn't everyone who didn't win but wanted open access a hero?

They have a different word for female heros.

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[moderatorrater]

Perhaps because you and those like you weren't the main driver for getting that open access. Google petitioned to get the requirement put into the FCC rules, then bid large amounts of money to see it happen. It was a very smart move for Google and they had the bulk to pull it off. If only I had a few billion dollar to throw behind my causes. *sigh*

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[mweather]

How much did you bid? You didn't? Well, there is your answer.

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[Stormwatch]

Could be worse. At least you are not an hero.

Breaking News!

[Anonymous Coward]

Auctions favour those with more money at hand!

News at 11.

Who?

[Kozar_The_Malignant]

>A former mail carrier, McBride has been trying his luck at FCC auctions since 1996.

Darl, is that you?

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[Shagg]

They're complaining that the auction favored the highest bidder. Yeah, that sounds like Darl's intellectual level.

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[falconwolf]

>A former mail carrier, McBride has been trying his luck at FCC auctions since 1996.

Darl, is that you?

That was my first thought too.

Falcon

so?

[ILuvRamen]

Who would want a small company to win a part of the spectrum? By definition, they wouldn't be able to use it universally for all Americans. If some New York only company bought it and never spread across the country or took 10 years to expand that large, the entire rest of the country wouldn't be able to use it immediately. But nationwide cellphone companies can implement it immediately to increase quality and number of available connections to a single tower for just about everyone everywhere. That's even important for when cell towers fail from too much traffic when everyone gets on their cell after an emergency like a natural disaster. That's way better than some company nobody's heard of making 10,000 wireless routers and tunrning great profits but effectively only being able to offer their product to 0.001% of America because of their limited size. That's like being a small patent troll company and sitting on some wonderful technology and not letting anyone else use it. Too bad cell companies are evil, greedy bastards.

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[Bieeanda]

I agree totally. A small company in this situation is going to end up doing one of three things:

a) Roll out to a truly miniscule coverage area, probably bankrupting themselves when they're overlooked in favour of one that isn't a hare-brained startup scheme

b) garnish themselves with parsley and those little chef-hats you always see on turkeys in cartoons, and hope that one of the big carriers will buy them out for a princely sum

c) Lie in wait like a patent troll, then threaten to sue someone for trespassin

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[PJ1216]

i'm not sure, but i believe you license it by region, so your first reason is flawed (assuming i'm right, though). and nationwide cellphone companies will can *not* implement it *immediately*. they can implement it fairly quickly. definitely much more quickly than a small company, but not immediately. also, your reasoning that the person who can help the most people should get a specific resource is also faulty. if thats the case, we should take any spectrum ANY small provider has and give it to the big

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[falconwolf]

Who would want a small company to win a part of the spectrum? By definition, they wouldn't be able to use it universally for all Americans.

Except not all of the airwaves auctioned off were nationwide. Some of those auctions were for specific locations, like NYC.

Falcon

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[kd3bj]

Who would want a small company to win a part of the spectrum? By definition, they wouldn't be able to use it universally for all Americans.

"What's good for General Motors is good for the country."

I can think of zillions of product ideas that a small company could develop and market that require spectrum allocation. And small companies are where true innovation comes from. Innovation breeds competition and competition benefits everyone. On the other hand, what benefits big companies largely benefits on

Do you think they will simply not use it?

[erroneus]

See, "they" (Big Communications) were rather afraid of what Google might do with it. It would mean a LOT of changes to them, not to mention unpredictable competition.

But now that these spectrum have been sold to them, might they then be inclined to simply NOT use it? After all, they are not going to be able to use it in a way they want to. And they have succeeded in preventing their worst fears from coming to light. It would be rather typical of them to sit on their hands and do nothing now that they've

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[PJ1216]

i'm pretty sure they're required to use it within a certain timeframe.

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[erroneus]

Since when do big companies do what they are 'required' to do if they believe it's in their best interests not to? Stalling tactics would likely come into play there... 'new technology testing and development' could take about as long as you can imagine... and longer.

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[PJ1216]

well, they had to agree to a time frame to even be allowed to bid. if they say they can't do it, they shouldn't have agreed in the first place. if they do that, they should take away the license (probably won't happen). so yea, this might happen. THOUGH, it'd really only be in their best interest to not use the c-block with the open access restrictions. even then, its a trade off. the c-block spectrum is great at penetrating walls, etc. so, to not use it, sucks. however, if they DO decide to not use

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[religious freak]

I think explaining to Wall Street why you just plunked down $19 billion for something you're not using would be a pretty tough sell.

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[erroneus]

Wall Street doesn't have much in the way of a short term memory, let alone a long term memory. (If they did, it would be evidenced by their learning from their mistakes which they never seem to do.)

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[The One and Only]

Because you just paid $19 billion to ensure that no one else uses it, either.

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[falconwolf]

But now that these spectrum have been sold to them, might they then be inclined to simply NOT use it?

I could see a lawsuit if they didn't use the airwaves. As an example if I were a stockholder in one of these companies and it didn't try to use the license they won to create a market then I'd be tempted to sue, instead of paying billions of dollars they could have paid me a dividend. Though not always shareholder activism [wikipedia.org] can get things done.

Falcon

Mixed feelings?

[ScrewMaster]

Wireless Auction Ends With Mixed Feelings

Let's see now. I kinda like Google better since they got those open-access rules in ... and I still hate the Telcos.

Yep, mixed it is.

Aha

[chemindefer]

"A former mail carrier, McBride has been trying his luck at FCC auctions since 1996."

Nice try, Darl.

Who cares?

[morphizm]

Small or large is missing the point. The point as I see it is that the same telecoms that own the pipes now own the waves. If you want to extricate yourself from a relationship with them, who are you going to turn to? Am I going to have to move to the PacNorth and set up a Clearwire account? Weak sauce.

Really?

[Yaa 101]

Like anything in the US, it's fixed to serve the rich, what else is new?

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[ScrewMaster]

Like anything in the US, it's fixed to serve the rich, what else is new?

Why pick on us? Like everything else in the world it's fixed to serve the rich, and will always be fixed to serve the rich. At least the Founders made more of an attempt to serve the citizen than most. But that time is over, I can agree to that.

Speculation

[Guppy]

For example, the FCC shortened the amount of time that the winners would have to build their networks. "All that did was prevent small businesses from coming in. They were scared of the build-out requirements," he said."

It probably also prevents speculators with no intention of building a network from camping on bandwidth in hopes of flipping it for a profit.

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[Crazy Taco]

I agree. I think that's the most reasonable thing I've read yet. Think of it as the anti-patent troll measure, only on the airwaves.

Trying to avoid the Nextwave fiasco.

[R2.0]

In 95-96, the FCC bid out a bunch of frequencies, and there were special Congressional mandates to allow "small businesses" to compete - mainly, very little deposit. Nextwave bought up a whole lot of licenses, and other companies did as well. Then the market took a downturn, and the value of the licenses dropped, and a lot of the participants declared bankruptcy. In Nextwave's case, the FCC "repossessed" the licenses for non-payment, but it was reversed by the court, and Nextwave was given relief. Then the business cycle turned again, and the licenses were worth 3x as much as Nextwave paid for them. The speculation was that they were going to sell them off for an insane profit. The word around the communications industry was they were really just a shell company and never intended to build, just to sell them off later. It looks like they kept the frequencies and are rolling out WiMax on it - *10 YEARS* after the frequencies were auctioned.

The construction provisions are there to make sure that the spectrum actually gets used and not held as an investment. In addition, most S/W/DBE's that get involved in government doings are a fraud: 50.5% of the company is "owned" by a woman, who just happens to be the wife of the CEO and owner of the other 49.5%. Or construction "general contractors" who hire's a "prime subcontractors" - i.e the real general contractor - to do 100% of the scope. Their price to the government? The price that the GC bid plus 1%. So on a $10,000,000 Baltimore City school job, some guy sitting in an office made $100,000, never set foot on site, and never dealt with the city or the other subcontractors.

There is a Nextwave in existence now, but if the WiMax service they are

How long do the licenses last?

[JSBiff]

First, let me point out that it appears you accidentally submitted before you had finished the full text of your post. It just kind of ends mid-sentence.

Anyhow, I've wondered, are spectrum auctions time-limited, or for posterity? If I were the government, I'd only auction spectrum for like 10 (well, maybe 15, because forcing companies to be in a situation where they must build a network, recover the costs, and make a profit in only 10 years might be a bit too short of a time) years at a time, then recover t

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[falconwolf]

Anyhow, I've wondered, are spectrum auctions time-limited, or for posterity? If I were the government, I'd only auction spectrum for like 10 (well, maybe 15, because forcing companies to be in a situation where they must build a network, recover the costs, and make a profit in only 10 years might be a bit too short of a time) years at a time, then recover the spectrum rights after that time to either re-auction, or potentially do something else with.

It's relatively easy to fix it so a company can make a

I will tell you something

[Gizzmonic]

Many of my relationships end with mixed feelings as well!

Suggestion of a new way of auctioning spectrum

[JSBiff]

I doubt my idea will ever be heard by anyone in power, or if it were, taken seriously but. . . wireless spectrum is kind of a public resource. Because, of course, bandwidth is relatively limited, there does need to be some sort of regulation of the spectrum, and generally, I think the FCC has done a pretty good job of that. But, these spectrum auctions bother me somewhat. They basically come down to an agreement between the arbiter of monopoly power (the Government/FCC) and private par

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[Bombula]

The spirit of your idea is commendable, but in practice it is difficult to motivate any major for-profit enterprise to voluntarily lower its prices. There would have to be a direct line to profit in doing so, otherwise it just isn't going to happen. I can't think of any way to keep profit in the equation while lowering prices other than flat-out government subsidy, and the last thing you want is the government providing more corporate welfare.

The obvious solution is to remove profit from the equation. As

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[Orestesx]

Why wouldn't this work? He's not trying to get companies to voluntarily reduce prices. It's essentially the same thing as an auction...He just wants the gov't to say "We will give the rights to this spectrum to the company who's proposal is best." instead of "We will give the rights to this spectrum to the company who gives us the most money."

It's really simple actually, break it down by state. Then you collect the proposals, draw up some contracts. Maybe you could even have a vote (gasp!) about which ser

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[Bombula]

Probably you've not worked in a contract bidding environment before. Awarding contracts to the lowest bidder is usually a recipe in disaster, whether for a goods or for a services order. If you're NYC and you want a new bridge built, for example, do you just automatically award the contract ot the lowest bidder? Of course not. Why? Because companies underbid and lowball each other to get the job, then get halfway through and say, "sorry, we need more money." Then what do you do? You're stuck. You ha

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[Orestesx]

I agree that the lowest bidder cannot be trusted, which is why you have to make a value judgment. I don't see what's wrong with having some sort knowledge before hand of what service the company plans on offering and at what price. Maybe you also factor in the amount of money they're willing to pay.

The original poster's main point was that by awarding to the highest bidder, you are pretty much ensuring that the service will be as expensive as possible and all you get in return is extra money in the federa

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[Cajun Hell]

I don't think he's suggesting removing profit; he's suggesting they compete on having the smallest margin.

it is difficult to motivate any major for-profit enterprise to voluntarily lower its prices

Happens all the time, when there's competition. The difference is that they'd be competing at bid time, rather than month by month.

I think it's a clever idea. JSBiff for FCC chairman.

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[JSBiff]

To add to Orestex's reply, I'd like to add that you have to keep one thing in mind - in the scheme I propose, I would expect that either the companies would pay no license fees at all (since the idea is to auction based on best proposal) or a relatively small, flat licensing fee (something significantly cheaper than the current auction rates).

Since none of the companies would have to build the cost of a $6 billion bid into their pricing, they can offer a proposal that is $6 billion cheaper. There's still ro

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[Bombula]

Again, the spirit of your ideas is commendable, but you're getting away from what the intention of a public auction is. In the latest round of complexity you've introduced, you're essentially suggesting that instead of companies bidding on a public resource they would like to use, they are instead bidding on a government contract - in this case, the government wants consumers to have telecom services and is shopping out the contract to a private services company. An analogy would be roads: the government

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[falconwolf]

The obvious solution is to remove profit from the equation. As for how, well, that's the tricky part.

I can't say "obvious" because most haven't even thought of it but I believe the best solution is to go back to homesteading the airwaves.

Falcon