700 MHz Aftermath: Assessing A Rather Complicated Result — But Not A Disaster As Some Maintain.

The intervention of the Jewish holiday of Purim, which is celebrated by getting drunk until you cannot tell the difference between Verizon winning the C Block and Google winning the C Block, kept me from posting sooner. I would have held off until I could give more details, but there are so many people rushing to call it a disaster that a few words need to be said here.

O.K., Google didn’t win, but Echostar did, giving me a .500 batting average in prophecy against the conventional wisdom. I’m not covinced that Echostar winning gives us a third pipe (Martin’s suggestions about combining this with other spectrum assets to the contrary). But even if not, it is important for keeping Echostar competitive with cable and with DIRECTV (which will have an advantage in programming assests). I shall try to do a more detailed analysis of Echostar and what the E Block does for them in a future post.

It is also interesting to note that some non-incumbents like Cavtel picked up licenses, although I am not as enthusaistic about this for competition as Martin was at the press release.

That said, I do not see how the rules could have been structured any better without barring Verizon and AT&T from playing. While we might have done better for new entrants after all with smalled licenses rather than REAGs, as demonstrted by Echostar doing an end run to assemble a near national footprint after they begged and pleaded to have the FCC offer a national license, I can’t say for sure (I’ll have a longer discussion on this later, and I expect Greg Rose will have some things to say on his blog once he has crunched the numbers). My preliminary conclusion is that Verizon (and to a lesser degree AT&T) was simply determined to get the spectrum it wanted and did not let anything stand in its why. The fact that Verizon paid $9 MHz/Pop for a B block license for Chicago, and that Verizon and AT&T spent over $16 billion of the approximately $19 billion raised should tell anyone who cares about the reality all they need to know. Verizon and AT&T were not “bargain hunting.” They were at each other’s throats and cutting out anyone who dared to get in their way. The only way to stop them was to keep them out entirely, and there was not a heck of a lot of support for that from the Hill or at the FCC beyond the Dems.

I think Commissioner Adelstein gives a fair assesment when he says we won on revenue and openness and lost on diversity and competition. But again, the only way we could have done any better was by adopting auction rules that banned Verizon and AT&T from playing and by using aggressive means to address minority and women ownership (as MAP requested as early as March 2006). Perhaps now Congressional Democrats will add their voices to those of Commissioners Adelstein and Copps on restoring the minority bidding credit and supporting incumbent exclusions or — at a minimum — restoring the spectrum cap.

As it was, thanks to anonymous bidding, Echostar was able to do an end run and acquire a national footprint — something previously denied to it in the AWS Auction in 2006. And, while AT&T and Verizon got most of the licenses, they had to pay through the nose to get them — rather than sopping them up dirt cheap as happened in the AWS auction (where licenses equivalent to the A & B block licenses went for 45 cents MHZ/pop not $9 MHZ/pop). This auction attracted more new bidders and more minority bidders than previous auctions, so the field was ripe for a success on these fronts. But they were simply outspent by Verizon and AT&T.

To conclude, unlike the utter failure of the AWS auction (which everyone else hailed as a success — despite the incumbents winning more licenses for less money), this auction produced some very positive results. But it also shows us the limit of what purely competitive auctions will do. Neither this auction nor freeing more spectrum for future auctions, on their own, will provide us with a third pipe or introduce new competitiors in wireless. The advanatges enjoyed by incumbents in a relatively mature industry (as opposed to back in the early/mid-1990s when the first auctions were conducted) are simply too great to overcome just by “leveling the playing field.”

Finally, one last question remains: Why didn’t Qualcom drop their bid on D Block? Why did they tie up all that eligibility, instead of using it to go after more E Block licenses? For us spectrum geeks, this is the equivalent of asking Why did the Minbari surrender at the Battle of the Line (best answer from a friend of mine: “turns out Echostar bidders have Qualcom souls”). Did Qualcom hope they could keep the D Block for such a low price? Did they wish to avoid a penalty for dropped bids by the time they realized no one would bid on D Block? Hopefully, we will find out.

Stay tuned . . . .

700 MHz: Although Apparently The FCC Decided to Give Headlines . . .

No sooner did the FCC clarify that they would lift anonymity after they collected the money when Martin held a press conference and the FCC released the results. Here are the headlines:

1) Verizon won C Block and a boatload of licenses;

2) AT&T took a boatload of licenses;

3) Google didn’t win anything (stupid oak leaves!).

I will have more details as I can track them down, and more analysis later. I also metaphorically owe Commissioner McDowell a dollar, for his prediction that the new entrants wouldn’t bite on the big C.

Stay tuned . . .

Yo Google! Your Lawyers Are So Stupid, They Copy AT&T!

I had an unfortunate head desk moment this morning on reading that Google Ads (such as the ones to the right on your screen) reserves the right to pull their service if you engage in “any action or practice that reflects poorly on Google or otherwise disparages or devalues Google’s reputation or goodwill.” This looks suspiciously like the terms of service my fellow travelers on net neutrality slagged AT&T for using.

In both cases, I expect that the intent is not to yank people who say nasty things about the parent company, but to reserve the right to yank the service when someone does something revolting. “Look, NAMBLA uses Google Ads, Google supports pederasts.” or “Look, the worlds worst spammers have AT&T connections, they support spam.” By why can’t my lawyer colleagues just say so, instead of writing something so broad that it covers even general criticism? Yes, “tarnish” is one of those words of art that all us legal folks understand has a very specific meaning. But it doesn’t do a damn bit of good when folks who are trying to understand the terms of service are not lawyers, which — outside of DC — covers most of the user population.

I have no doubt that the usual suspects will be out baying for blood and denunciations like the staff of the Clinton and Obama campaigns after a rival campaign staffer sneezes funny. So even though I did not give a rat’s patootie on the AT&T terms of service (being a lawyer and understanding what it meant), I shall now both condemn Google for being so stupid and test their policy by making several derogatory comments about GoogleAds.

[Begin OUTRAGEOUS accent]
Hey, GoogleAds! I fart in your general direction! I wave my very naughty bits at you! You are so lame, you copy terms of service from AT&T!

Now change your TOS to something sensible or I shall taunt you some more.
[end OUTRAGEOUS accent]

Did the ads on the screen disappear? No. Good. Can we consider this settled and actually get back to real policy?

Keep this up and I shall need to make a major speech about “Terms of Service In America” and invite us all together for some major healing.

Stay tuned . . . .

John McCain & Vicki Iseman: So FCC policy *is* sexy? Who knew!

Thanks to an innuendo-laden story by the New York Times last Thursday, everybody who follows USian politics at all knows that Vicki Iseman is a quasi-hot telecom/media lobbyist who for a while eight years ago had a pretty close friendship with Senator John McCain, and that he threw some of his political weight around on behalf of some of her clients. (I tried to find a flattering photo of Ms. Iseman to grace this here blog entry, but all I could find were an elongated pic of her in an evening gown, too big for my purposes, and a horribly unflattering portrait from her company’s website. Oh well, by now you’ve either seen those photos or this story likely ain’t for you anyway.)

What few suspect, however, that this whole story was a cleverly planted plot designed to boost the google rank of Wetmachine into the stratosphere!

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700 MHz: The C Block Minuet

The fact that the C Block has dangled on the precipice of reaching its reserve price from round 13 to the close of today’s bidding action in round 16 has led to speculation that Google never intended to go seriously for the spectrum, but was merely trying to goad Verizon or ATT into committing on the Block. I grant that we have almost no intelligence on who the C Block bidders are, and it is very, very early to speculate on the auction’s ultimate outcome. However, I have a theory, grounded in an understanding of game theory and the auction rules, which calls this latest conventional wisdom into question.

There are at least two, and possibly three, current bidders for the bulk of C Block. Two have been trading off the lead for the 50 state package (REAGs 1-8), let’s call them A and B: A in the first round (1 new bid), B in the second (1 new bid), A in the third (1 new bid), B in the fourth (1 new bid), A in the fifth (1 new bid), B in the seventh (1 new bid), A in the eighth (1 new bid), B in the tenth (1 new bid), A in the twelfth (1 new bid), B in the thirteenth (1 new bid). B has been the high bidder since the thirteen round with no need to raise its bid. In the sixth round there were also mid-range bids placed individually on REAGs 1-8. Either the individual bids on REAGs 1-8 in round six were B’s response to A’s bid on the package in round 5 or another bidder, C, forayed at that point.

B can sit indefinitely on its current bid, waiting for the minimum acceptable bid (MAB) to converge on the reserve price of the Block without requiring activity waivers (the FCC historically reduces MABs in the presence of bidding inactivity). That would allow B to obtain the package for almost $122 million less than the current MAB for round 17. A must bid on REAGs 1-8 either on the package or individually in round 17 or lose eligibility, since it has had to expend three activity waivers to avoid bidding in rounds 14, 15, and 16. That is what we know.

I hypothesize that B is Google, that it is sitting just below the reserve price, and will continue to do so unless another actor bids, until just before the close of the auction, when it will bid the reserve price and save roughly $122 million. I grant that it is also possible that B is Verizon or ATT or some other bidder which I don’t know and haven’t mentioned. But game theory and the auction rules explain why B is sitting pat. A has to bid in round 17 (the MAB for the 50 state package in round 17 is over the reserve price of the Block, and the sum of MABs for REAGs 1-8 individually in round 17 is equal to the MAB for the 50 state package), or B’s strategy is likely to win.

Not Giving Up On The Great Google Prophecy

You can read a far more brilliant analysis by Greg Rose on why the punditry on the trickle of data from the 700 MHz auction is all wrong here. Briefly, Greg maintains that this slow convergence on the reserve price over several weeks of bidding is what to expect from a serious auction, and that the failure of parties to bid heavily on C or D Block in the early rounds with so much activity going on in the smaller blocks is a sign of a strong auction to come. Little players on the side are active for the specific licenses that they want, while the large bidders slowly stalk each other up to the reserve price on the major block.

For me, having stacked much on the Great Google Prophecy, I will cheerfully admit to being too close to things to judge objectively. But here are two tidbits of food for thought.

1) Google CEO Eric Schmidt made the evolution of the wireless net a centerpiece of his speech at Davos. How likely is it that Google CEO would hype the importance of wireless if they were not planing to win licenses?

2) Most analysts predicted Google would come in, bid the reserve price for C Block, and leave. They haven’t. So far, no one has bid the reserve price for C Block. Instead, the price has crept up gradually. Now it could be that Google will only bid high if it must, for fear of getting stuck with licenses it doesn’t want. But if that is the case, why show up at all? “To save face with the FCC?” Yes, but we will know after the auction when the identities of bidders and round by round information is revealed if Google never bid. So the “save face” excuse doesn’t really hold water. Rather, it seems likely that they are bidding like everyone else, i.e., like bidders that want to win.

Straws in the wind, perhaps. But no worse than the straws of data everyone else is trying to spin into gold.

Stay tuned . . . .

Anybody want to set up a torrent of my books?

According to this story, which I came to by way of slashdot,

Author Paulo ‘Pirate’ Coelho leapt out of obscurity and onto the best-seller list by giving away his books on the Net. The best-selling author of ‘The Alchemist’ will even help you pirate his books via his blog.

Well shit, sez I. I’ve been giving away my books Acts of the Apostles and Cheap Complex Devices on my blog since early 2003, and Lord knows I have not “leapt out of obscurity”. What gives? I’m willing to admit that it’s possible this guy’s books are better than mine, but frankly, I doubt it. I just think he’s got better marketing than I do: whereas my books are available (PDF) from Wetmachine, his are all over the damn place on bittorrent. So good for him; I congratulate him. Well done! Especially since Coelho did this action on his own, according to the articles, and against the wishes of his publisher.

I should like to emulate him. But while I understand how torrent P2P stuff works abstractly, I confess that when, last week, I finally got around to trying to set up a torrent myself, I got confused and gave it up. Would you, dear reader more familiar with bittorrenting, perchance care to torrent my books for me? If so I should be greatly in your debt.

In the more-than-likely case that you have no idea what my books are like, you might start by checking out Rusty Foster’s reviews. Rusty is the founder of Kuro5hin and the original creator of Scoop software, which drives Daily Kos and a bajillion similar sites. In other words, he’s a geek of unimpeachable geek credentials. He says Acts of the Apostles may well be the ultimate hacker book, and that Cheap Complex Devices is astonishing, on just about every level a book can be astonishing. And of course Google can find you many dozens of other reviews of both books.

My books are under the Creative Commons noncommercial, no derivatives license. Basically, all I care about is that no big corporations rip them off for movie or books without working a deal with me. But I don’t care if any private persons print or translate them. Be my guest.All I ask is that if you do put my books out there in the wild on P2P nets, that you give me proper attribution. I realized that there’s no way to control what others will do with them down the line.

Beyond spreading the wonderfulness or my fictional creations with the world, I hope to make a few dollars from selling the printed books through wetmachine. Wouldn’t it be nice if I “leapt out of obscurity and onto the best-seller list”? It would make a charming story, especially given recent developments in the erstwhile day job.

Come on, guys and gals, let’s make geeky me-too history together. What’s the alternative? That I figure out how to set it up myself? Oh well, I will if I have to, but that would deprive you of a chance to participate in creating the next publishing phenomenon.

Intel, OLPC, and Croquet

It is interesting to compare Intel’s participation in Croquet vs. the One Laptop Per Child project (OLPC).

Intel is a corporate member of the Croquet consortium, along with HP and Qwaq. Intel’s CEO Justin Rattner demonstrated Croquet-based Qwaq Forums during his keynote at the big Intel Developers Forum, and they are building a joint product with Qwaq. This all makes complete sense for Intel. For example, this week the market research pundits at Forrester released a report that says the 3D Internet will be ubiquitous in business in the next few years and that Information & Knowledge specialists should get started now with Qwaq. But there’s an even deeper fit specifically for Intel, which does not apply to OLPC.

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We Interrupt This CES Convention For A Breaking 700 MHz News Item

I’m out here at the Consumer electronic Show with actual blogger credentials (primarily so I can get the free back pack and use the blogger lounge). So, of course, we get major 700 MHz Auction news today before I can even start to do CES blogging.

As reported by my fellow PISC-ER Gregory Rose and elsewhere, Frontline Wireless has dropped out of the bidding. That’s kind of a surprise, given how Frontline fought to get a designated entity credit and still pursue wholesale as a real business model. It’s also impossible to say (at the moment at least) why Frontline self-destructed at the last minute.

Leaving aside the Frontline specifics, the big question is “how will this impact the auction” and “will we see wholesale emerge at all as a model.” Unsurprisingly, most analysts are going conventional and saying (a) D block (which Frontline had targeted) may not attract bids to meet the reserve price, and (c) This makes it even less likely we will see a new entrant, let alone a wholesale new entrant.

Also as usual, I will play the contrarian here. D Block is still very attractive to the conventional carriers looking to get national footprint or others looking for national footprint and willing to work with public safety. If AT&T and Verizon are both serious about this auction (and indications are that they are), both may push hard for D Block — especially if C Block is competitive.

On the new entrant side, it still remains to be seen what Vulcan and Google will do. Even if — as I suspect — Google wants to win the network but not build out, it may find D Block attractive. As holder of D Block, Google could still negotiate with third pary carriers (such as Alltel, US Cellular or even Sprint or T-Mobile) to build the network on its terms and to the satisfaction of public safety. The much lower price of D Block would offset the the aggravation of working with public safety and ensuring that their needs come first.

Finally, there’s Towerstream and the other wild cards like Qualcom. Who knows what they intend, especially given the likely competitiveness for C Block.

So while I’m sorry to see Frontline go, I don’t think it hurts the odds for a very competitive auction or a new entrant. It does potentially make a wholesale network more of a stretch, because Frontline was really the only bidder gung-ho on the model (Google being traditionally in favor of wholesale but making no promises at this point beyond “open”). That’s a shame, but not devestating or fatal to a new entrant.

Stay tuned . . . .