The Bottom Line on Frontline?Friday, January 11, 2008
Speculation about who would or would not bid on the D block in the upcoming 700-MHz auction has been a topic of conversation for a long time now. Four days after the down payments and update forms were due at the FCC, Frontline Wireless, the only "known" bidder, issued a single statement: "Frontline is closed for business at this time." Now, being both a writer and an analyst, I could spend a lot of time dissecting that one statement-"at this time"? Does that mean forever, does it mean it might be working with a partner because it couldn't raise the capital to show up and bid? What happens next?
Industry speculation runs the gamut from Frontline not even being able to secure the $128 million needed on the 4th to stay in the auction to it having resources for that amount but unable to secure funds for the actual bidding. Another favorite explanation is that Frontline believed it would be the only bidder for the D block and, if it doesn't bid, the FCC will have to decide what to do next, giving Frontline a chance to work with the FCC again on a different type of solution. This would explain why it issued the statement four days after the final filling date―to keep anyone else from popping up and entering the bidding.
All that is known for sure is that there will be one less bidder for the D block when the auction starts. We don't know if there will be any bidders at all, and I have seen several articles from writers who think that if there are no bidders, this might give new life to Nextel's iDEN or that WiMAX systems would come to the rescue of the first responders, along with many other opinions.
There are also some interesting rumors about one of the Frontline principles, Reed Hundt, and Morgan O'Brien, founder and CEO of Cyren Call, the company representing the Public Safety Spectrum Trust that will, most likely, be sitting across the table from the successful bidder for the D block, if there is one. Are they putting their heads together?
Without access to more information than the FCC has made available as of today, there is no real way I know of to determine if there are bidders interested in the D block. Perusing the list of bidders, I have come up with my own list of those who might be interested. There are Verizon and AT&T since they already have a number of first responder customers and significant system build-outs. With this spectrum, it would not be as expensive for them to construct a nationwide system. Perhaps Google could go after both the C and D blocks and come up with a nationwide footprint of 44 MHz as I have discussed before, and some of this would be shared with first responders. Then there is Qualcomm, which could see the D block as an opportunity to win a nationwide license and then build out UMB (Ultra Mobile Broadband) and perhaps wholesale the spectrum to others.
There may be some others lurking in the applications, but so far I haven't heard of anyone coming up with other companies to add to this list. With Frontline gone, it will be interesting to see what develops. We are less than two weeks away from the start of the auction and if you read the Form 175s of the applicants, there is one question to which ATT and Verizon answered "yes" but Google did not: "Agreements with other parties and joint bidding arrangements?" The Frontline application, which is still on file (as Licenseco, LLC), also answered "yes" to this question, so it is possible that it has a bidding partner hidden well enough within the applications that I have not been able to ferret it out so far.
I am sure that both Frontline and Cyren Call would like nothing better than for no one to bid on the D block. If that happens, the politics will be hot and heavy and there will be many people with ideas on how to solve the problem. The losers, of course, will be the first responder community because the process will be delayed or abandoned. But keep in mind that broadband spectrum in and of itself will not begin to solve all of the interoperability issues facing the first responder community. Unless the feds step up and buy three million 700-MHz radios and distribute them to all of the first responders to be used for secondary communications and interoperability during major incidents, it will be a long time before we see the 700-MHz broadband spectrum having much effect on the issue of interoperability. Even then, it won't solve the "on scene" problems where simplex tactical channels are needed (sorry, peer-to-multi-peer).
I certainly hope at least one company with the financial backing to invest in a network steps up and bids for the spectrum. I would hate to see this opportunity delayed and become a political football once again. It won't be Frontline, or at least not the Frontline that didn't make a down payment, but that does not mean to me that it is out of the game completely.