The Wall Street Journal-20080116-FCC-s Chief Defends Coming Airwave Sale

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FCC's Chief Defends Coming Airwave Sale

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WASHINGTON -- Federal Communications Commission Chairman Kevin Martin defended the agency's coming auction, saying he hopes a company will step up to bid on one slice of the airwaves that would be shared with emergency services.

During a news conference, Mr. Martin also provided guidance on when the agency might decide on the proposed acquisition of XM Satellite Radio Holdings Inc. by rival Sirius Satellite Radio Inc., saying he hopes it will be completed in the first quarter.

"The commission hasn't completely finished its analysis and had some follow-up questions," Mr. Martin said. He said he has no reason to believe his agency would complete its review before the Justice Department announces whether the deal passes antitrust muster. Last week, agency staff met with the companies about "some questions about the underlying data that had been provided," Mr. Martin said.

A review of the deal, which was announced last February, was expected to be done by the end of 2007, but it remains unclear how much longer the Justice Department will take to announce its decision.

With just a year left before a new administration takes over and he is likely to leave, Mr. Martin talked about a variety of issues he hopes the FCC will tackle this year, including the country's transition from analog to digital television. He acknowledged that turmoil in the credit markets might result in lower bids in the auction but said the agency has no choice but to move forward with the Jan. 24 auction under the law.

"Is this an ideal time to be conducting an auction? I'm not so sure," Mr. Martin said, "but Congress has required us to go forward with that auction."

If bidding on all of the airwaves reaches the minimum set by the FCC, revenues would be at least $10 billion, Mr. Martin said, noting that is more than that of recent auctions. He dismissed concerns that one block of airwaves being auctioned -- which comes with conditions requiring the winner to build a national wireless data network to be shared with emergency responders -- might not fetch as much money now that the one company expected to make a serious bid, Frontline Wireless LLC, has folded.

Mr. Martin took issue with suggestions the FCC tailored some of its bidding rules to favor Frontline, which recently shut down after failing to raise enough capital. "None of the rules we adopted for the spectrum was put into place to facilitate entry by any company," Mr. Martin said.

With Frontline out, however, it isn't clear who might bid for that chunk of airwaves, which also comes with a requirement that the winner build its network promptly. If no serious bids emerge, the FCC may be faced with a variety of options, including dropping some of the conditions or awarding the airwaves to the highest bidder willing to work with public-safety groups to build a network.

"It's premature to speculate what the commission might end up doing," Mr. Martin said. "We're still focused on this auction and still optimistic that someone will be willing to take on that burden to serve public safety."

The airwaves for sale are among the most valuable because they are so strong that signals can travel for miles and penetrate buildings. Those airwaves are now used by television broadcasters, which have been forced to give up the spectrum. The federal government thinks the airwaves could be better used to build new wireless broadband networks.

Bidding in the auction is anonymous, so it will be impossible to know which companies will bid on which sections of airwaves up for sale until after the auction is complete.

Much of the attention on the auction will be focused on a chunk of airwaves that Google Inc. is expected to bid on. The Internet search company has qualified for the auction and has expressed interest in one section of airwaves. The winner of that block would be required to open its network to outside applications and devices as long as bids reach at least $4.6 billion.

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