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FCC auction anxieties for content owners - September 11, 2007

The FCC's upcoming auction of prime slices of spectrum may seem of peripheral interest to most content owners, but it's likely to go a long way toward setting the rules of the road for mobile content delivery. And right now, it's shaping up to be a tough rule book.

The slice up spectrum up for sale falls in the 700 MHz band currently used by TV broadcasters. By law, they have to return that spectrum to the government in 2009, when the switch to digital broadcasting becomes mandatory.

Because electromagnetic waves in that frequency range can travel long distances without distortion and penetrate walls with ease, the 700 MHz band is ideal for providing wireless broadband Internet service--the sort of service that could support a robust business in wireless video and other applications.

Although the FCC adopted rules for the auction requiring that the winners of the auction to open a portion of their new spectrum to third party devices and applications, leading to some grumbling from wireless carriers, the structure of the auction system still vastly favors incumbent carriers like Verizon and Sprint.

The agency has set a baseline revenue target for the auction of $4.6 billion, so only those with deep pockets need apply. The incumbents already have an infrastructure of routers, switches and towers in place that could be leveraged to build out a new wireless broadband network. Any new entrant rich and lucky enough to win some of the new spectrum would need to spend billions more to build a comparable infrastructure.

The net result is that content owners are likely to find the same group of gatekeepers guarding the new wireless broadband system as currently sit athwart cellular networks.

If content owners were hoping for a white knight, however, things are not looking good.

The leading candidate to challenge the incumbent carriers in the auction so far is Google, which has said it will "probably" follow through on its plan to bid as much as $4.6 billion for a slice of spectrum. But given the content owners' disputes with Google over YouTube, I'm not sure it qualifies as a white knight.

On Monday, Business Week reported that Apple is also mulling a bid (not surprising given its recent iMoves). But Apple has some very clear ideas about content's place in the digital food chain, which are increasingly at odds with the views of content owners. That probably disqualifies Apple as a white knight, too.

Do I see those lonely eyes turning to Redmond?
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