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Thursday, January 10, 2008

All-in and Unlucky
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Stacking the Deck in the D-Block Auction Never was a Good Idea

If bidding in the upcoming FCC 700 MHz auction can be likened to placing bets in a game of Texas Hold ‘em, a player for whom the deck appeared to be stacked just cashed-out and walked away, mid-hand. As has been widely reported, FrontLine Wireless announced on January 8th that it is “closed for business,” reportedly because it was unable to attract sufficient investment.

FrontLine had been expected to be one of the leading bidders for a license in the D block spectrum, which will come with strings such as requiring joint public-safety use, nationwide geographic coverage and a public safety veto over what could and could not go on the network. Indeed, the very existence of Frontline hinged on winning the D-block, and the company had worked closely with the FCC on crafting a set of rules for the spectrum that were all but tailor-made for Frontline’s business plan. Nonetheless, even with the deck effectively stacked in its favor, the market was not willing to bankroll FrontLine’s play.

FrontLine’s announcement that it has folded should come as no surprise. Far from being an occasion for mourning, however, the foundering of FrontLine hopefully signals the end of what has been a tragically flawed experiment in the D-block from the outset.

The hamartia, or tragic flaw, in the conception of the D-block lies not in the major premise – that public safety communications systems are woefully in need of modernization. Nor does it lie in the minor – that it is more efficient for public safety entities to make use of commercial networks than build their own. Rather, the D-block is doomed to fail because of the erroneous conclusion that a new hybrid public-private network is necessary or feasible.

To the contrary, billions of dollars have already been spent on wireless network infrastructure and, for commercial reasons, billions more promise to be invested in those networks in the very near future. The notion that a new public-private network, particularly one leaden with onerous build-out requirements and use restrictions, can be economically viable in that environment is more than a little naïve. Hence, FrontLine’s inability to attract sufficient support from the capital markets to bid for D block spectrum is unremarkable, if not anticipated. Indeed, there will be grounds for concern regarding any entity that antes up for this portion of the 700 MHz auction and, because of the stakes involved, there is no room for error.

Where, then, does this leave the public safety community? Fortunately, there are solutions available in the market, which rely on the very same commercial networks that make the success of any D block licensee uncertain. For example, Rivada Networks uses off the shelf, commercially available equipment, in conjunction with existing commercial networks, to create a turnkey solution for public safety communications entities. Likewise, WiMaxx and WiFi technologies, when deployed on a large scale, have tremendous untapped potential for public safety use. Although the D block concept is correct to the extent that it suggests the solution to public safety needs involves the use of commercial capacity rather than construction of a dedicated public safety broadband communications system, it goes horribly wrong in presupposing that the commercial capacity must come from a new network.

The D block gambit thus bets the future of public safety communications on a venture that will all but inevitably fail. Although the FCC can stack the deck in the auction rules to encourage the development of a new public-private hybrid network, it cannot ensure that such a network will succeed. And in rigging the game in favor of a preferred model, the FCC leaves not only a stack of $15 billion worth of chips (the supposed value of the band), but also the lives first-responders and the people who depend upon them in the pot. We all should be wiping the sweat from our brows wondering how the cards will fall as the FCC prepares to deal from a deck it has so neatly stacked.

Note: Ken Ferree contributed to this entry.

posted by Grant Eskelsen @ 4:14 PM | Communications , Spectrum , Wireless

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