U.S. Watchdog Groups Query Part of Wireless Auction

WASHINGTON(Reuters) – U.S. consumer groups are asking regulators to investigatewhy a major auction of airwaves failed to draw enough bids tokick-start plans for a new private wireless network to be shared withpublic safety agencies.

A coalition of nine watchdog groups sent a letter to the chairman ofthe Federal Communications Commission asking the agency to look intoallegations that the auction of the "D" block portion of the spectrumhad been thwarted by demands made on behalf of public safety agencies.

The groups, including the Consumer Federation of America, ConsumersUnion and the Media Access Project, said they also had asked the FCC tostudy whether plans for a shared public-private network were stillworkable.

A spokesman for FCC Chairman Kevin Martin said the chairman hasasked the agency’s inspector general to look into complaints about theD block auction, but declined to be more specific.

Bidding in the landmark 700-megahertz auction ended on Tuesday withthe auction raising a record $19.59 billion, but investors wereunwilling to meet the government’s minimum price for the D blockspectrum.

The lone bid on the D block spectrum was a fraction of the $1.3 billion minimum price set by the FCC.

The 700-MHz signals are considered valuable because they can go longdistances and penetrate thick walls. The airwaves are being returned bytelevision broadcasters as they move to digital from analog signals inearly 2009.

Under rules set by the FCC, the winning bidder for the D blockspectrum was required to enter a partnership with police, firefightersand other public safety groups.

The winner would have to negotiate an agreement with the publicsafety groups’ representative, a company called Cyren Call, givingpublic safety priority use during an emergency.

Plans for the public-safety network ran into trouble early. Evenbefore the auction started, potential bidder Frontline Wireless closedits operations for unspecified reasons.

The auction failure has raised questions about whether the minimumprice for the spectrum was too high, whether rules for negotiationswith emergency responders were too onerous, and if penalties forfailing to reach a pact were too severe.

In their letter to the FCC, the public advocacy groups singled out ameeting between Frontline and the chairman of Cyren Call. They askedwhether discussions during the meeting "may have had the effect ofpreventing Frontline from attracting needed capital and discouragingother bidders."

The FCC should find out "whether concerns over the possiblefinancial exposure of the D Block winner and/or the role of Cyren Callas an intermediary played a role in the failure of D Block to attractbidders," the groups said.

Cyren Call has declined to comment on the meeting and the allegations, citing FCC anti-collusion rules.

FCC Chairman Martin has said the agency will have to re-examine therules governing the D block auction. But he has also stressed that theneeds of police and firefighters should be kept at the forefront as theFCC considers what to do next about the D Block auction.

(Reporting by Peter Kaplan; Editing by Tim Dobbyn)