The US Federal Communications Commission is set to free several major operators from their commitments to pay up for spectrum licences. Several mobile companies in the US had bid a total USD 16 billion for the spectrum licences owned by bankrupt mobile company NextWave.

The FCC will reportedly propose that the carriers be allowed to opt out of the auction and thereby cut themselves free from the obligation to pay the government. The 63 spectrum licences were reclaimed by the FCC from the bankrupt NextWave in January 2001. The regulatory body then resold them at auction, receiving bids totalling some USD 16 billion for the various licences, including a sum of USD 8 billion bid by Vodafone’s joint venture with Verizon Communications, Verizon Wireless.

Insight

Regulatory authorities are slowly starting to take action to improve conditions for network operators (see also yesterday’s BWCS article ‘EC announces preliminary decision on sharing‘). There is a growing sense in the regulatory community that the strict frameworks in the US and Western Europe may, perversely, end up harming rather than promoting competition.

High auction prices and stringent rollout conditions are all very well, but these costs will ultimately be met by the consumer, and could stifle competition if they force smaller operators out of business. True 3G services (i.e. those which will require additional spectrum to deliver speeds of 300 Kbs and up) are still some years away in the US and the FCC would be adding insult to injury if it held operators to the original auction prices.

This further underlines the potential in North America for EDGE, which can deliver 3G rates in existing GSM spectrum, and CDMA2000 1xRTT. As an aside, the FCC’s handling of spectrum allocation has at times bordered on farce – continual delays in making spectrum available, the legal action associated with the NextWave bankruptcy and now, at last, an acknowledgement that the whole processs may have been fundamentally flawed.