D Block Spectrum Auction Fraud Alleged

eweekhickins writes "A public interest group is saying that a consulting firm hired to help the government hand over the D-block spectrum may have acted improperly and discouraged potential bidders by suggesting that any winning bid would have to pay $50 million in annual fees, in addition to the auction price. Any wonder the D-block didn't meet the reserve price?"

Comments

Re:first

[Constantine XVI]

Sorry, your first post didn't have enough characters to meet the reserve. Try again some other time.

Potenially...

[Capt James McCarthy]

Could it be that the contract signed with the Government had a clause for getting a percentage of the sales/lease price?

Re:Potenially...

[Propaganda13]

Could it be that the contract signed with the Government had a clause for getting a percentage of the sales/lease price?

No, they'd want a higher sale price then. You'd say that there was no fees and the government would give you tax breaks.

Oooh Oooh

[chuckymonkey]

Is it conspiracy time? I just bought a whole new roll of aluminum foil for a really new stylish hat that keeps out the brain reading lasers. I also have popcorn and I'm willing to share.

Re:Oooh Oooh

[Hanners1979]

I wouldn't worry about the tinfoil hat too much, considering nobody wanted to pay for the block of the wireless spectrum they were planning to use to beam thoughts into your brain.

D Block Restrictions

[Silentknyght]

The nationwide D Block licensee must provide signal coverage and offer service to (1) at least 75 percent of the population of the license area by the end of the fourth year, (2) at least 95 percent of the population by the end of the seventh year, and (3) at least 99.3 percent of the population by the end of the tenth year. These three construction benchmarks will take effect beginning on February 17, 2009. Moreover, the nationwide D Block licensee must meet the construction benchmarks based on the build-out schedule specified in the NSA. If the licensee fails to meet a construction benchmark, the Commission may cancel its license, depending on the circumstances. From http://wireless.fcc.gov/auctions/default.htm?job=auction_summary&id=73

75% coverage of the "license area" (for a Nationwide license) seems daunting after four years, let alone 99.3% after ten years. I'm not sure how the FCC would actually determine compliance with that provision, but that sounds like a massive undertaking to me. Other blocks have a requirement to provide something like 35%-70% coverage of their smaller, geographic area.

Re:D Block Restrictions

[squiggleslash]

The mandate is for population coverage not geographic coverage, which makes it considerably easier than you might think. Essentially you're talking about, in ten years, covering every main road in the US and every city and major population center outside of a city. And it doesn't even have to be high capacity coverage: if the emergency services are able to use the system, who can be expected to have relatively light requirements, the mandate is covered.

If you look at companies like Sprint PCS and T-Mobile, after ten years of operation (in T-Mobile's case including it's predecessors, obviously) they certainly were at that kind of level of coverage for the license areas they serve. Both operators had to overcome more physical hurdles than the 700MHz operators will have to - 1900MHz signals pass through buildings with much more difficulty than 700MHz signals do, and this affects both in-building and outside coverage. The real problem with most operators who have a reputation for less than perfect coverage has to do with a lack of licenses, due to the moronic PCS geographically based licensing system, where an operator could have licenses in one county but not in the next due to the luck of the draw. This, obviously, will not be an issue for a company with a national license.

Re:D Block Restrictions

[morgan_greywolf]

Shouldn't be a problem for a big money company like Google. A lot of the equipment they would need to do that will be going at fire sale prices from television stations who will no longer need the equipment.

No, I smell a rat. Definitely.

Re:D Block Restrictions

[Mikkeles]

'75% coverage of the "license area" (for a Nationwide license) seems daunting after four years,...'

Not really, since it is actually 75% of the population in the Nation. That's about 250M. The top 5 or 6 cities has a pop. of about 20M; the urban areas are about 80M. As a rough oestimate, it would take 50-60 cities (including the urban areas) to achieve this coverage. For flexibility in development, I would use 100 cities (with less of the surrounding urban areas) for the initial placements and expand outward from there to achieve the remaining required coverage.

Re:D Block Restrictions

[raddan]

It's true that those requirements are rather steep, but keep in mind that the D block is an auction for a special piece of the spectrum-- it is going to be used not just for the private sector, but also for public safety. With that in mind, the requirements don't seem as bad. Also, since this will be a public-private partnership, with public safety presumably as a captive customer, there's some reason to think that the D block would be a solid money-maker, and that private services offered on top of the public ones would come "for free", since building infrastructure for the public services would also serve the private. Ten years for 99% penetration does light a fire under the winning bidder's ass, but then again, the taxpayer will probably be paying for this in the long run, so in that context, ten years doesn't sound so bad to me...

Figures

[mraudigy]

It figures something like this would happen, a seemingly sensible move by the government just turns out to be another big block of crap. In my mind there's absolutely no question that something unethical went down. It seems funny that when you're bidding D-Block and there are two or three frontrunners picked and almost a *definite* surefire contender, and the suddenly no one meets the reserve. Its quite simply a disgrace and a big block eye for all involved -- discouraged bids, no contract bids, what will they think of next?!

Same Old Song & Dance

[TheGrumpster]

For those of you not wanting to endure E-Weak's spam, a better summary can be found here: http://www.publicknowledge.org/node/707 This group of scam artists has been around the wireless industry for ages, and what a great way to steal. Take something the government already owns and sell it back to them. What will they think of next?

Re:Same Old Song & Dance

[wrook]

I wish I had mod points. The original article made no sense to me at all. The one you link implies that the reason for sabotaging the auction was to establish that this part of the spectrum was "worthless". Then go back to the government and offer to manage this "worthless asset" in order to create some value. Of course rental fees would be applied. That way they are basically given that spectrum for free. If it's true, I hope someone is smart enough to shut the door *very* hard on their fingers...

Re:Don't worry

[gclef]

Does anyone here speak jive?

Excuse me, I speak Jive

[mamono]

Cut me som' slac' jak! Chump don wan no help, chump don git no help. Jive ass dude don got no brains anyhow. Shi-iiiii

Mexican Stand-Off

[Anonymous Coward]

If the reserve price of the D-Block was known, then why did anyone even bother to bid anything less than the reserve? I mean, ~$300 million, is a *lot* less than the reserve they had to meet. Why even bother making that bid?

As far as the other players, I can see this having been a case of both sides daring the other to flinch... and nobody flinched (and the auction ended under the reserve price).

Google is on the 'open' side of the issue. They want the spectrum to be REQUIRED to be open to wholesale resale, anyone's wireless devices, etc. IIRC, the FCC only made a requirement that it be open to anyone's devices. (There were four points that google publicly stated; and I think that the FCC only took two of them to heart) Google could have been waiting it out. If someone else met the reserve price, then Google would have to jump into the fight and try and come out on top. On the other hand, if no one meets the reserve, there is a chance to get the FCC to place additional 'open-ness' restrictions on the D-Block national spectrum license.

One the other side of the issue are the telcos like Verizon. Verizon doesn't want to be forced to keep their new network open. Verizon (and/or the other telcos) could have been waiting it out too. If someone meets the reserve price, then they have to jump in and try and make sure they are the winning bidder. If no one meets the reserve, they have a chance to lobby/convince the FCC that getting rid of those 'open-ness' restrictions will encourage bidding on the block in a new auction.

There's also another player here. Cyren Call, is a company that is the 'advisor' for the public side of the D-block spectrum. And (as eweek states), any winner will have to negotiate with them. At the heart of this issue, are rumors that Cyrel Call was dropping hints at all kinds of extra money they would require a winner of the auction to pay in 'fees.' The conflict of interest here is that Cyren Call has an interest in seeing the D-Block auction fail. They have already made proposals that the D-Block be handed over to them, and that they would (out of the goodness of their hearts) make some money in order to support the operation of the public side of things. Of course, this would exclude the need for an auction. It could just be handed over to them for free since they would be doing a public service in supporting the public/emergency side of things.

This is a ******HUGE****** conflict of interest. I don't even know why they are even allowed to be anywhere near this auction. They have stated that they themselves want the spectrum, yet they are put in charge of aspects of the auction itself? Would anyone be surprized if it's found out that they tried to discourage bidding on the spectrum so that they can plead to Congress that they should have this for free instead?