FCC Sells Air

ByBy Bret Hovell

Aug. 9 —, 2006 -- The federal government began auctioning off one of the country's most valuable natural resources on Wednesday, and the bidding's gone high.

But none of what was auctioned can even be seen by the companies purchasing it, some of which have spent hundreds of millions of dollars for the privilege.

The Federal Communications Commission is selling licenses to use parts of the radio spectrum -- an extremely valuable pipeline for all kinds of communication -- to the highest bidders. Radio and television stations and cell phone providers all use pieces of the radio spectrum, and today's auction will make more of it available to them.

More available spectrum, also called bandwidth, means that companies that provide wireless services, such as cell phones, can offer more features than simple telephone service.

"If you've got a wider street, traffic can go more quickly," said Marina Amoroso, an analyst who studies wireless services at the Yankee Group.

The money that the government makes from the sale of the licenses will go directly into the federal treasury. The Congressional Budget Office estimates that the revenue from the auction -- which could go on for weeks -- could be around $15 billion.

Bidders in the auction include cell phone and cable and satellite television companies, all of them wanting to possess a piece of a valuable way to transmit video, music and data to consumers. With an easy and fast way to distribute content, new technologies can develop to receive that content.

"It may not change the cell phone in your pocket," said Rob Enderle, an emerging technologies analyst. "But it could make a difference in regards to what you carry in your pocket at some future date."

More bandwidth will allow personal entertainment to become an important part of wireless service plans. Advanced services, such as downloading movies into a cell phone, are difficult to provide with the current available bandwidth.

"This is about creating entirely new kinds of experiences," said Paul Saffo, a Silicon Valley technology forecaster. "Handheld real time video phones and all sorts of funky stuff."

Saffo said that with the new bandwidth, wireless service providers can start to offer superfast wireless Internet, Internet fast and reliable enough to play online video games aboard a moving train.

And, as with any commodity, the more spectrum space available, the cheaper it and the services it carries become. Saffo predicts that the "bottom will drop out" of prices of traditional services, leading to price decreases in monthly cell phone bills.

"This is insanely cheap," said Saffo. "And it will get insanely cheaper."

New spectrum space, which allows for the transmission of large amounts of data quickly, also has the potential to reach rural areas that still live without cable television.

"There are areas where the density of residents is so low that it will never make economic sense to pull cable there," said Saffo. "This is great news for folks like that."

With new technologies that can point high-speed Internet signals precisely, and the bandwidth on which to point them, neighborhoods that have never had access to the Internet could conceivably get it with relative ease.

But Saffo sees a flip side to data access anywhere: being unreachable by choice might get a whole lot more difficult. No one is going to believe that you're "out of range.

"That's going to be one of those excuses that's going to work less and less," he said.

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