Minimum bid hit in FCC auction, triggering open access

The reserve price on a valuable sliver of spectrum was reached in the Federal Communications Commission's 700MHz auction on Thursday, triggering rules that would make the spectrum accessible to any device or software application.

After the 17th round in the auction, a bidder for eight licenses in the "C" block of the 700MHz spectrum auction surpassed the minimum reserve price of $4.64 billion, which had been set by the FCC before the auction began. The current bid is now at $4.71 billion. The minimum bid for round 21 is $5.18 billion, according to the FCC's Web site.

Because the bidders in the auction are anonymous, it's difficult to know who is bidding on it. But many analysts believe that Google and Verizon Wireless are the two most likely bidders in the auction. Google CEO Eric Schmidt had said publicly the company was willing to put up at least the minimum reserve price for the spectrum.

Some experts have speculated that Google may want the spectrum to build its own wireless network to compete with traditional players such as AT&T and Verizon. Others think that Google wants to build a wireless network that it can lease to other operators. But I'm more inclined to believe that Google may not really want the spectrum at all.

There's a good chance the company bid on the spectrum to make sure it reached the $4.6 billion threshold to trigger the open access requirements. And now that those requirements have been met, the company may bow out of the race.

But there is also a chance that Google has the winning bid. And if it does, the company may end up with the spectrum anyway.

Regardless of whether Google stays in the auction or not, now that the minimum has been reached, the company that eventually wins the spectrum license will have to make their network open to any devices and applications, which is exactly what Google wanted from the beginning.

Today, U.S. wireless operators have tight control over which devices can be used on their networks and which applications can be used on those handsets. Google and other companies, such as Skype, have complained that this is too restrictive.

Verizon, which has traditionally been the most strict operator in the U.S. about what it lets on its network, recently said it would allow non-certified devices on its network.

Skype, which makes software that allows people to make free and low-cost phone calls over the Internet, issued a statement praising the FCC for putting in the open access. Currently, most U.S. operators do not allow Skype to be used on handsets that operate on their networks.

"The FCC got it right in putting this spectrum to work for consumers' best interests," Christopher Libertelli, senior director of government and regulatory affairs for Skype, said in a statement. "We look forward to the day when this spectrum is made available to the broader market, so that Skype users can have their conversations whenever and wherever they would like."

Now that the open access rule has been triggered, it will be interesting to see what happens next in the auction. Earlier in the week, there was speculation that the "C" block might not reach the reserve price. After intense early bidding, the price seemed to languish. Even though there is no way to tell who is bidding, if the bidding slows again or if someone drops out, it might be an indication that Google was simply trying to pump up the price.

The "C" block is one of five blocks of spectrum in the 700MHz frequency that is being auctioned off. The spectrum is being turned back into the government auction by broadcast television operators who will switch their broadcasts to digital from analog in February 2009. The spectrum is considered valuable because it can travel long distances and penetrate obstacles like walls.

Traditional wireless companies like AT&T are bidding on spectrum. The auction has also attracted several wireless newcomers such as Google, TV satellite provider EchoStar Communications, cable operator Cablevision Systems, and wireless chipmaker Qualcomm.

The auction could last for weeks or possibly months, depending on how long the bidding goes on. The auction was expected to generate at least $10 billion. As of Thursday morning, the total bids came to $12.79 billion for all five spectrum blocks.