Thursday, January 10, 2008

Bye bye Frontline

Yesterday I noticed an interesting tidbit regarding the US 700 MHz spectrum auctions that begins on Jan. 24. This is the largest auction of land mobile spectrum in more than a decade, and the one where Google has pressed (with some success) to get open access provisions instituted.

Deposits (of $130-280 million) were due last week. Frontline Wireless, which last month said it was going to bid, did not place a deposit. In fact, IDG reports, it’s gone out of business:

Frontline spokeswoman Mary Greczyn said Wednesday the company would have no further comment beyond saying Frontline is "closed for business at this time."
Frontline was always a political animal, with Reed Hunt (Clinton’s activist FCC chairman) as frontman and backing from James Barksdale (FedEx, McCaw, Netscape) and John Doerr (Kleiner Perkins partner), the former head of NTIA and ex-director Louis Freeh.

So was it because they couldn’t raise money — a sure sign (if you have KPCB partner on your board) that the business model made no sense. Or was this always just a stalking horse pushing open access — a credible threat — to force the big telcos to worry about open access?

Frontline’s plan was always to bid on the spectrum which had a mandate to help build public safety communications — a sure way to reduce the price of the spectrum, both because of the costs associated with meeting that commitment, and also by eliminating bidders who wanted unrestricted spectrum. Of course, this would be a cross-subsidy from the Feds (getting less money for spectrum) to misc state and local public safety agencies (who get a big investment in their communications by the bidder).

Now that Frontline is gone, there’s a worry that no one will bid on the spectrum. Or a firm could buy the spectrum cheap, and then walk away if it doesn’t like the terms.

To me, this is yet another example of why the US fails when it attempts to emulate the statist industrial policy of other countries. Our policies should encourage (and protect) competition, to reward efficiency and allocate resources based on market demand. If the government wants to do something, it should pay for it as a line item rather than mandating that private firms do it for them.

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