Up in the Air

Next month, a now-unknown number of carriers will bid on a band of spectrum in the 800 frequency that the FCC has set aside for the development of in-flight, air-ground services providing voice and data access over broadband. A sale for this air-ground radiotelephone spectrum has never before taken place in the United States and, at press time, Verizon Airfone Inc., a division of Verizon Communications Inc., was the only provider to file public comments with the FCC on the pending event. The carrier would not comment on its business plans should it win spectrum in the auction.

In the document filed at the end of January, Verizon asked the FCC to eliminate the proposed $5 million reserve price, but keep the $1.5 million and $2.8 million and $200,000 minimum bids proposed for Licenses A and B, Licenses C and F, and Licenses D and E, respectively. Doing so, the company maintains, will “ensure that the market, not the commission, determines the value of these licenses.” The carrier also said that because this type of spectrum has never been auctioned, there is no historical valuation for its value, stating that would be another reason not to impose a reserve price. A reserve price ensures a seller does not auction off an item for less than a certain price, while a minimum bid is the smallest amount an entity can bid on the sale.

In advance of the May 10, 2006, auction, the FCC has stipulated that no one company can obtain a controlling interest, either at auction or by a post-auction transaction, in the licenses for sale. The agency says it wants to promote competition for services in the 800MHz spectrum. As the only incumbent service provider in the 800MHz air-ground band, Verizon Airfone’s FCC license expires in May 2010. If Airfone or one of its affiliates wins one of the air-ground radiotelephone licenses, the FCC will require the company to provide information regarding the transition of its existing subscribers from its narrowband system to a broadband system, and to file additional status reports every six months until its license expires after five years.

The 800MHz band is supposed to prime the winning bidder to offer broadband Internet voice and data services on airplanes. However, Allen Nogee, principal analyst for research firm In-Stat, says the bandwidth on each of the frequencies only ranges from 1MHz to 3MHz. That means “dial-up speeds,” he says, noting it would be hard to imagine a plane full of people effectively sharing the bandwidth.

Providing in-flight voice and data services could prove risky for Verizon, Nogee continues, because the company isn’t known for wireless Internet access other than its EV-DO cellular service. Other carriers that might be more well-suited to the task include T-Mobile USA and Sprint Nextel Corp., he says.