Buying and Selling the Wireless Spectrum

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The Federal Communications Commission closed one of the government's most lucrative auctions in history this week — with bids totaling more than $19 billion. Explaining why you should care is public advocate Art Brodsky.


The FCC, the Federal Communications Commission, closed one of the government's most lucrative auctions in history, with bids totaling more than 19 billion dollars. They were bidding on something they couldn't see, touch, taste or feel, the rights to wireless spectrum licenses. OK, maybe they might feel it in their pocketbooks. It was also one of the potentially most important auctions because some of that spectrum, known as "Block D," is set aside for safety communications, as in the first responders to huge and horrible disasters like Katrina or 9/11.

We'll talk more about that in just a few, but right now let's get commercial. A lot of major telecommunications companies like AT&T, Verizon Wireless, and big new media folks like Google put up large bids for this space through which the wireless signals travel. That's blocks A, B, and C, as they're called in this case. So those are the A-B-C-Ds of this story, but does anybody outside the wireless world care about this?

(Soundbite of music)

Today on the BPP reoccurring series, Make Me Care, where we take news stories you get the feeling you should pay attention to, but you don't. It's the wireless spectrum auction. Here to take the challenge today is Art Brodsky, a communications director for Public Knowledge, a public advocacy group focused on digital communication. Hi, Art.

Mr. ART BRODSKY (Communications Director, Public Knowledge): Good morning.

STEWART: So first of all...

Mr. BRODSKY: Hey, wait. You don't expect me to sing about the spectrum auction, do you?


Mr. BRODSKY: Because that's a tough act to follow.

STEWART: You really don't have to, unless you want to.

Mr. BRODSKY: I don't think you or your listeners would want me to.

STEWART: All right, fair enough. Tell us what these spectrum licenses are and why they've become available.

Mr. BRODSKY: What they are is a license that the government gives a company to operate in a particular slice of the airwaves, the way a TV operates now or your cell phone operates now. They became available because the government has determined that as of February 2009 all the slices of the airwaves on which the TV stations now operate are going to go dark and move to another slice of airwaves, therefore leaving some vacant. It's those vacant beachfront properties that they're auctioning off in the auction that just closed the other day.

STEWART: So this is part of that whole digital conversion we've heard so much...

Mr. BRODSKY: It's the whole digital - that's right. That's the tradeoff that should have happened years ago. That the broadcasters got a whole chunk of new spectrum for free, and the public gets the benefits of the places that they are vacating.

STEWART: All right, Art. We're not going to make you sing, and we're not going to make you play the guitar, but we are going to give you one minute to play this game to tell us why we should care about major telecommunications bidding on these licenses. When you hear the ticking you have just ten seconds left. All right, Art, Make Me Care - go.

Mr. BRODSKY: Right now, you can spent 500 dollars for a device like an iTunes, or like an iPhone or some other PDA, and if you change services, the thing will become a 500 dollar brick. Under one particular part of this auction, the terms of service are that your brick would be able to go with you from one service to another. That's called "open access," and you won't lose your money if you decide to invest in an expensive device.

STEWART: You have a few more seconds.

Mr. BRODSKY: That's OK.

STEWART: All right.

Mr. BRODSKY: We try and be efficient in the public interest world, you know?

(Soundbite of laughter)

STEWART: There you go, OK. So this, it's a brick, you said?

Mr. BRODSKY: Well, what I said, the theory is if you spend a lot of money for an iPhone, let's say you're on AT&T's service now, which is the only one that offers the iPhone. And assuming you don't hack it. If you wanted to ditch AT&T and go to Verizon, your iPhone would be useless. So the term of art for an expensive phone you can't do anything with is a "brick."

STEWART: All right, so here's the deal though with this auction from what I understand. We won't know the auction winners until April, but have there been any details as to how certain companies plan to use the spectrum if they win?

Mr. BRODSKY: Not yet, I mean, part of the deal was that because of anonymous bidding we don't know who won. But you can assume for the largest licenses it's the companies with the most money. And in this game, it's AT&T and Verizon.

STEWART: OK, so they make mobile devices, AT&T and Verizon. We understand that.

Mr. BRODSKY: Well, they don't make the devices. They own the airwaves.

STEWART: They own the airwaves, I'm sorry.

Mr. BRODSKY: They let the devices operate on their airways.

STEWART: But you know what, Google doesn't - and they were really interested in this, putting up, was it a 4.6 billion dollar bid at one point?

Mr. BRODSKY: Right. What Google did was to force the issue for a particular chunk - that C Block you mentioned in your introduction. Thanks to the work of a bunch of public interest groups, of which Public Knowledge was one, the FCC decided in this one little slice of the spectrum, whoever won it would have to offer what the commission called "open access."

That means that phones can go from one service to another and there's less of a limit on what kind of applications you can run in that particular chunk of spectrum. It's not something any cell phone user has a choice in now. But thanks to the commission's decision in that regard, 700 megahertz services going forward could be a lot more flexible.

STEWART: So here's the 64,000 dollar question, where does that 19 million dollars go?

Mr. BRODSKY: The 19 billion?

STEWART: Billion, excuse me.

Mr. BRODSKY: Back the Treasury. I mean, last time I checked we had a "humungo" national debt and deficit. So, you know, that will pay for lunch somewhere in reducing the deficit.

STEWART: Art Brodsky is a communication director for Public Knowledge, a public advocacy group focused on digital communication. Thanks for being with us, Art.

Mr. BRODSKY: My pleasure.

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