The Spectrum Auction Secrecy Begins

By Saul Hansell, NYT

A veil of mystery is about to descend over the auction of the 700-megahertz band, a useful swath of the electromagnetic spectrum that is being freed up by the move to digital television.

Today was the deadline for potential bidders to file with the Federal Communications Commission. Once they do so they become subject to strict “anticollusion” rules that in effect prohibit participants from discussing any aspect of their bidding until the auction is over. The commission is trying to prevent bidders from getting into various forms of mischief, such as maliciously bidding up prices to hurt competitors or colluding with rivals to keep prices low.

Those rules explain why Google announced Friday that it was going to bid in the auction. It can’t discuss its bidding once it filed to participate.

The rules are so sweeping, in fact, that if Echostar and AT&T each filed to bid in the auction, they would have to stop any potential discussions about AT&T buying Echostar, for example.

For those of us interested in watching this $10 billion poker game for the future of wireless communication, this will make for a lot of guessing with little official information. The next official word will be sometime at the end of December or in the middle of January, when the F.C.C. announces who has been approved to bid.

The auction will start on Jan. 24. Participants will use an Internet system to enter bids on any of 1,099 separate licenses that are being offered. The bidding will be conducted in a series of rounds, and the commission will announce the amount of the high bid for each license at the end of each round. But it will not identify the high bidder.

“We will all be speculating about it, but we won’t know what is really happening,” said Blair Levin, a technology policy analyst with Stifel, Nicolaus & Company. “Envision a football game, where you know one team has six and another team has nine, but you don’t know who has what or the story behind it.”

This process is meant to help bidders become comfortable with the market and compare alternative strategies. Experts figure it may well take two months for all the bidding to be done.

Then things really get interesting. The winning bidder will have ten days to put up 20 percent of the amount it bid. After that, it is allowed to discuss its bids publicly and negotiate with potential partners, such as losing bidders who may want to get in on the action. But it only has ten more days to make deals before it has to pay the rest of the money it bid.

How frenzied this all will be, however, is very much up in the air, as there are now only four presumed bidders on a national scale: A&T, Verizon, Google and Clearwire, a startup founded by Craig O. McCaw, the cellphone veteran.

Sprint and T-Mobile, the other two major wireless carriers in the United States, are not expected to be significant bidders in this auction. And today, the two biggest cable carriers, Comcast and Time Warner, said they had decided not to bid in the auction.

Of course, bidders could come from any corner: investor groups, foreign wireless companies, even retail names like Wal-Mart and Best Buy have been bandied about in the press. The regional phone companies, like Alltel, which are expected to use the auction to expand their networks, might get more ambitious.

There are several attractive options for bidders. Most coveted seems to be the C block, 12 regional licenses that can be combined to create a national wireless network. This is the spectrum Google is presumed to be most interested in. There is also the D block, which is one nationwide license, but it has to be shared with local police and emergency workers. The A, B, and E bands are cut up into smaller units but could be useful to a carrier with existing operations.

All this means that if there really turn out to be only four major bidders, the veil of mystery over the auction may not stay on as long, and the money raised for the Treasury may not be as much as many had expected.