Before October 27 Auction, a Q&A With Gregory Rose, Author of 'The WiMAX Band'

WASHINGTON, October 23, 2009 – Next Tuesday, October 27, 2009, the Federal Communications Commission is preparing to hold Auction 86, for the use of radio-frequencies being deployed through WiMAX technologies. The presence of two major carriers in the band – Clearwire and Sprint – makes this auction

Editor’s Note: Next Tuesday, October 27, 2009, the Federal Communications Commission is preparing to hold Auction 86, for the use of radio-frequencies being deployed through WiMAX technologies. The presence of two major carriers in the band – Clearwire and Sprint – makes this auction crucial for the success of WiMAX in the United States.

Last week, began offering for sale a major report on “The ‘WiMAX Band’: Characteristics, Technology, Major Spectrum Holders in the BRS-EBS Service and Prospects for Auction 86.” BRS-EBS stands for Broadband Radio Service-Educational Broadband Service. Click here for further information about the report – including an extensive series of detailed and searchable auction tables in spreadsheets. Reporter-Researcher Christina Kirchner interviewed Gregory Rose, the author of the report, to provide a layman’s guide to what’s happening in the auction – and why it matters for the future of broadband. Below are edited excerpts from the interview:

Q: What prompted you to research this information and compile this comprehensive report in anticipation of this auction?

A: I have been working on spectrum issues for many years and I have contacts with the principal players. Also this is available in terms of [press] releases from these companies. They keep websites, they put information about them, all it takes some very digital searching and running into the right information and the right people.

Q: How long you been working on spectrum issues in relation to WiMAX and Clearwire?

A: WiMAX is an up and coming technology which has, in addition to Clearwire, been a particular national player in the provision of 4G [fourth-generation] wireless services. The fact that Comcast, Time Warner and several other companies – together with Sprint and Clearwire – invest heavily in the technology suggest something well worth keeping an eye on.

Q: WiMax is intended principally for wireless networks in metropolitan areas, correct? Will the presence of Clearwire engaging in more widespread spectrum leasing create more competition between existing spectrum license-holders?

A: Well, I think that the intended purpose is to challenge the incumbents in urban areas. Well, I mean the WiMAX technology can be used in rural areas. It has a 50-75 mile transmission zone, so that it is perfectly feasible technology for some rural areas. WiMAX competitors like DigitalBridge and Xanadoo, which have chosen smaller towns and rural areas because they know areas where Clearwire is not deployed, [are focusing] particularly in rural areas.

Q: What do you mean by not deployed? Are they purposely not doing that?

A: I think it is probably the influence of Comcast and Time Warner [which have an ownership stake in Clearwire] on their policy. Roughly 10 percent of America is in rural area, where there is not enough population or where the cost of deployment is relatively high, such that the rate of return that investors receive who deploy there is not terribly high. Given the fact that all major wireless companies are publicly-owned, they are held hostage to the expectations of financial markets. Deploying in these areas would significantly reduce their mean rate of return and they would be punished by investors in the stock market. So they have simply redlined 10 percent of America. And Clearwire seems to be following in that same policy probably for much of the same reasons. Smaller, privately owned companies are, however, beginning to deploy in some of those areas.

Q: In page seven of the report, it says “Spectrum coverage is in such redundant depth in these locales that there has been speculation that Clearwire believes that complete fixed and mobile WiMAX coverage will be more spectrum-intensive than originally projected.” In layman’s term, what is spectrum intensive?

A: Ah, yes, WiMAX is suppose to be non-line-of–sight.Rather, it goes through things rather than have a direct line of sight connection to where it is transmitting. In Portland, the first major WiMAX roll -out deployment, that there have been more line-of-sight problems than the engineers thought there would be. There are WiMAX “dead zones” so they had to put up more towers to retransmit signals than they would have expected to if WiMAX didn’t have at least, in practical terms, some line of sight limitations. And that involves using more spectrum, transmitting at higher power levels, that sort of thing.

Q: So being spectrum intensive is, effectively, a bad thing?

A:Yes, although Clearwire has enough spectrum in redundancy in places where it is planning to deploy, it is confirmatory that there is some problem. [That’s why] they have acquired so much spectrum redundancy in given areas.

Q: How do hills and other physical obstacles have an effect on these transmissions?

Apparently they can. And some weather conditions, too. It is very wet out here [in Portland] much of the year, and I think with the intersection of hills and precipitation surprised Clearwire a bit in how much a difficulty they were going to have covering the entire Portland metropolitan area.

Q: Hence, in hindsight, the cost of deploying WIMAX abilities in rural areas more than they thought it would be. So when a company is coming to auction, how do they properly value what they should bid on particular frequencies?

A: Well, very little of WiMAX spectrum was actually auctioned. The rest or the majority of the spectrum is picked up on the secondary market, which is where they will transfer licenses or long-term leases of their licenses. And those transactions have to be approved of the FCC. Given the fact that there has been encouragement from the FCC to have BRS-EBS licenses-holders agree to use other spectrum, they will have an incentive to go onto the secondary market to either transfer or lease the spectrum they have, while they are migrating to other spectrums of the FCC.

Q: What is going to happen at the buildout deadline set for May 2010, and what kind of action can we expect for this auction on October 27?

A: They have set relatively low build-out expectations and the FCC has a history of giving waivers to those who don’t meet build out requirements. It has been a matter of continuing public interest to the community who vigorously see it as a failure of enforcement of the build-out requirements, which allows incumbents to warehouse their spectrum.

I expect the FCC to enforce the rules, but also at the same time, can see them do one- or two-year long waivers in cases where the spectrum holder has not been able to meet the requirement if they show evidence of serious intention [to deploy].

We have a relatively small number of bidders and I am expecting Clearwire and Digital Bridge to clearly dominate the scene, particularly Clearwire, making a national footprint by holding over half of the BRS-EBS spectrum. There are going to be three active bidders over the Gulf of Mexico region, mainly with communications with oil rigs. Then there will be smaller companies competing for spectrum in their existing footprint, competing for a handful of licenses.

Q: Any other issues?

A: There were some issues from the commenters of the bidding. The FCC has resolved them to the satisfaction of the people who are more likely to bid in the first place. Some of these issues were raised because of the implications that were raised at the other auctions, because once the FCC has decided on the rules of the auction, they will carry those rules over from one auction to another auction to another auction. So there were some commenters concerned about the long term effects on auctions of the certain kinds.

For more information on the purchasing the report, including the FREE Executive Summary, click here.

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