After so much pre-game hype, it’s hard to believe we have actually gotten down to the 700 MHz Auction week. The fun and games will start January 24, although we won’t know (much) about the auction until it is all over sometime in late February or early March.
Not surprisingly, the news that Frontline Wireless , the company that did so much to shape the rulemaking around the “D Block” public/private partnership, went belly up before the auction even started has triggered a round of hand-wringing about the fate of D Block and finger-wagging by those who always thought it was a bad idea to impose any kind of conditions on licenses. As a result, we see a slew of stories questioning whether anyone will bid for D Block (or, at least, meet it’s $1.3 billion reserve price), with some spillover questioning about the future of the auction itself.
While I agree with GigaOm that wireless auctions aren’t for wimps, I do think the panic over Frontline’s failure to scrounge up capital to make the necessary up front payment (the “ante” required to buy “bidding credits” to participate in the auction) is exaggerated. Nor am I as pessimistic that the auction will produce some groundbreaking changes as others, although it could well happen that we get through this auction with no new “disruptive third-pipe providers.” I think we will certainly see the auction hit the $10 billion Congress estimated (and the FCC set as aggreagte reserve price), and we will see C Block meet its $4.6 billion reserve price.
On the other hand, if things start to go poorly in the auction, we may see some panic moves by the FCC, particularly with regard to D Block. The possibility that the FCC may retroactively drop the reserve price on D Block (possibly without holding a reauction) may introduce strategic behavior into the auction. Of course, since no one (including the FCC) can actually talk about this possibility makes the speculation even more insubstantial than usual. Still, since the possibility does exist, and because I think such a course would create real problems with the auction, I briefly discuss it below.
Analysis below . . . .