News

Dish, Cox Notch Spectrum Gains

3/21/2008 8:00 PM Eastern

Dish Network won sizable amounts of spectrum in the government’s 700-Megahertz wireless-spectrum auction — and Cox Communications emerged as the largest winning cable entity — but the biggest slices went to Verizon Wireless and AT&T, the Federal Communications Commission announced last week.

The auction, which closed March 18, generated a net $19.1 billion in total bids, more than double some estimates.

About $1.5 billion will fund the Commerce Department’s digital-to-analog converter box program that started in January.

Preliminary FCC data regarding winning bidders indicated that, based on self-reporting, women-owned bidders failed to win any licenses and minority-owned bidders won less 1% of licenses.

FCC commissioner Jonathan Adelstein commented: “It’s appalling that women and minorities were virtually shut out of this monumental auction. This gives whole new meaning to 'white spaces’ in the spectrum.”

The FCC declined to ban cable and phone companies, which already control vast amounts of spectrum, from bidding in the 700-MHz auction, considered the agency’s last sale for many years to come.

Since obtaining auction authority in 1993, the FCC has routinely decided that revenue maximization is more important than an incumbent-exclusion policy designed to promote competition and ownership diversity.

“I don’t think it was appropriate — and I don’t think a majority of the commission thought it was appropriate — to exclude the major incumbent providers from participating,” FCC chairman Kevin Martin told reporters last Thursday.

The spectrum in the 700-MHz band is being made available as a result of the government’s mandate that TV broadcasters cease their analog over-the-air signals by Feb. 17, 2009. The DTV transition will free up 18 6-MHz channels once occupied by analog TV stations around the country.

Dish won 168 licenses in the E block, spectrum covering most of the United States, for a total of $711 million, according to the FCC’s Web site.

Because Dish’s E-block spectrum does not permit two-way communication, Citigroup analyst Jason Bazinet said he thinks the satellite provider will use it to offer mobile video services, not wireless data or wireless voice services.

Cox, bidding as Cox Wireless, will pay $304.6 million for 22 licenses, in the A and B blocks, in California, Virginia, Georgia, Florida, Louisiana, Arkansas, Kansas and Oklahoma. Cox’s largest single winning bid was $84.1 million for an A-block license in San Diego.

Cablevision Systems registered to bid but did not win any licenses. BendBroadband won a license in the B block in Oregon for $6.7 million.

Charter chairman Paul Allen’s Vulcan Capital secured two A-block licenses, in the Pacific Northwest, for $112 million. Analyst firm Stifel, Nicolaus & Co. predicted that spectrum will overlap with his cable holdings.

Verizon Wireless and AT&T — the two largest wireless carriers in the U.S. — accounted for 83% of the total bid in the auction.

Verizon Wireless won the regional licenses in the C block necessary for a near-nationwide footprint, paying in total $9.63 billion. AT&T will fork over $6.64 billion for 227 licenses, which are all in the B block.

The FCC Thursday issued an order de-linking the D block from the other blocks in the auction. The D block did not meet its $1.3 billion reserve price established in advance of the sale.

Martin said he hopes to conclude a new D-block auction by the end of the year.

All told, there were 99 winning bidders for 754 spectrum licenses. The auction had a total of 261 rounds.

Google ended up with no winning bids in the auction. The Internet-search giant had pressed the FCC to adopt a rule requiring the winning bidder of the C block to provide “open access” to third-party applications and devices, if a minimum bid price of $4.6 billion was met.

The winner of the D block was required to be a partner in the construction of a nationwide interoperable wireless broadband network for public-safety organizations.

Rep. Edward Markey (D-Mass.), chairman of the House Subcommittee on Telecommunications and the Internet, said last Tuesday he would hold a hearing on numerous issues related to the failed D-block auction.

Linda Moss and Ted Hearn contributed to this report.

March