Powerless FCC continues to accept under the table bribes; all public airwaves are for sale to the highest bidder.......Kenneth J. Martin loves the coin!
Credit Crisis May Curb Financing for Bidders But Agency Wants the Rules in Place
Federal regulators are pushing ahead with plans to put two valuable chunks of airwaves up for sale, despite market turmoil that could make it difficult for potential bidders to raise necessary financing.
Today, the Federal Communications Commission is expected to release draft rules for the re-auction of airwaves that would be used to create networks that allow fire, police and other emergency services to communicate more effectively. The idea, pushed in the wake of the Sept. 11, 2001 terrorist attacks, faltered earlier this year when the first effort to sell airwaves attracted no winning bids. Potential bidders were concerned about onerous conditions required of the winner. This time, the FCC is considering relaxing some of those conditions, including cutting the minimum bid to $750 million from $1.3 billion.
Separately, the FCC is considering an auction of airwaves that would require the winner to offer free wireless Internet service to consumers.
The turmoil in the credit markets raises a potential dilemma for regulators, who want to hold the two auctions as early as next spring. Smaller companies and start-ups could have problems raising financing and bids would likely be lower. In the case of the public safety airwaves, that could provide an opportunity for larger carriers such as AT&T Inc. and Verizon Communications Inc. to expand their already robust airwaves holdings relatively cheaply.
"If you're looking at start-ups and new entrants to come in this space, boy, that seems like a tall order to me under current finance conditions," says Michael Powell, a former FCC Chairman and current adviser to private-equity firm Providence Equity Partners.
There are different ways to measure an auction's success. In the two coming sales, the goal seems less about raising money than meeting various public needs. FCC Chairman Kevin Martin is trying to engineer both auctions to fulfill the desire by public-safety groups and consumers for more wireless broadband services.
Earlier this year, the FCC raised almost $20 billion in an airwaves auction, but public-interest groups complained that Verizon and AT&T won most of the airwaves. Smaller telecom companies groused that the rules were written to benefit larger carriers instead of potential competitors.
That could happen again, analysts say, if only because larger carriers may be the only ones who can raise enough financing to bid.
This week, influential House Democrats complained that the FCC is rushing to set rules for the public airwaves auction. Mr. Martin proposed a three-week deadline for public comment, an aggressive timetable but one that would ensure final rules would be set while he is still chairman.
It's not clear when the other airwaves, which would require the winner to offer free wireless Internet to consumers, might go on the block. Mr. Martin has championed the idea. The most likely bidder, M2Z Networks Inc., a start-up backed by Kleiner Perkins Caufield & Byers partner John Doerr, is lobbying for the FCC to set rules before the end of the year.
FCC officials say they can set rules for the auctions and delay them until lending conditions improve.
Some wireless-industry analysts question whether six or eight months would have much of an impact, however, given the amount of time it can take a smaller company or start-up to arrange financing.
"We've just seen the most radical transformation of the credit market in the last 80 years. That doesn't smooth itself out and we go back to the glory days in six months," says Roger Entner, Nielsen IAG's senior vice president of communications research.
Even Mr. Martin's critics give him credit for trying to tackle the issue of creating an interoperable wireless network for local police and fire departments. Congress set aside a large chunk of airwaves for first responders during a post 9-11 effort to improve communications, but never provided the billions needed to build a new network.
The FCC is essentially trying to tempt a commercial provider into building a network for public safety in exchange for the use of those valuable airwaves to sell high-speed wireless Internet services to consumers.
Agreement on how to do that has been elusive, however, and the effort has only become more complicated. "It's more obvious by the hour that there's less consensus about what we should do," said Robert McDowell, a Republican FCC commissioner.
By: Amy Schatz
Wall Street Journal; September 25, 2008
