Reuters - U.S. watchdog groups query part of wireless auction

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U.S. watchdog groups query part of wireless auction

Thursday, Mar 20, 2008 5:47PM UTC

By Peter Kaplan

WASHINGTON (Reuters) - U.S. consumer groups are asking regulators to investigate why a major auction of airwaves failed to draw enough bids to kick-start plans for a new private wireless network to be shared with public safety agencies.

A coalition of nine watchdog groups sent a letter to the chairman of the Federal Communications Commission asking the agency to look into allegations that the auction of the "D" block portion of the spectrum had been thwarted by demands made on behalf of public safety agencies.

The groups, including the Consumer Federation of America, Consumers Union and the Media Access Project, said they also had asked the FCC to study whether plans for a shared public-private network were still workable.

A spokesman for FCC Chairman Kevin Martin said the chairman has asked the agency's inspector general to look into complaints about the D block auction, but declined to be more specific.

Bidding in the landmark 700-megahertz auction ended on Tuesday with the auction raising a record $19.59 billion, but investors were unwilling to meet the government's minimum price for the D block spectrum.

The lone bid on the D block spectrum was a fraction of the $1.3 billion minimum price set by the FCC.

The 700-MHz signals are considered valuable because they can go long distances and penetrate thick walls. The airwaves are being returned by television broadcasters as they move to digital from analog signals in early 2009.

Under rules set by the FCC, the winning bidder for the D block spectrum was required to enter a partnership with police, firefighters and other public safety groups.

The winner would have to negotiate an agreement with the public safety groups' representative, a company called Cyren Call, giving public safety priority use during an emergency.

Plans for the public-safety network ran into trouble early. Even before the auction started, potential bidder Frontline Wireless closed its operations for unspecified reasons.

The auction failure has raised questions about whether the minimum price for the spectrum was too high, whether rules for negotiations with emergency responders were too onerous, and if penalties for failing to reach a pact were too severe.

In their letter to the FCC, the public advocacy groups singled out a meeting between Frontline and the chairman of Cyren Call. They asked whether discussions during the meeting "may have had the effect of preventing Frontline from attracting needed capital and discouraging other bidders."

The FCC should find out "whether concerns over the possible financial exposure of the D Block winner and/or the role of Cyren Call as an intermediary played a role in the failure of D Block to attract bidders," the groups said.

Cyren Call has declined to comment on the meeting and the allegations, citing FCC anti-collusion rules.

FCC Chairman Martin has said the agency will have to re-examine the rules governing the D block auction. But he has also stressed that the needs of police and firefighters should be kept at the forefront as the FCC considers what to do next about the D Block auction.

(Reporting by Peter Kaplan; Editing by Tim Dobbyn)