Onerous Requirements, Not Collusion, Led to D Block Failure

Collusion isn’t to blame for the D Block’s failure to sell at the FCC’s 700MHz spectrum auction, according to a new report from the Inspector General.

Rather, the D Block didn’t sell because of sky-high lease payments and onerous buildout requirements, investigators said.

The findings, published late Friday, vindicated Cyren Call Communications, a firm backed by Nextel co-founder Morgan O’Brien. That’s because allegations arose during the recent auction that Cyren Call played a role in the demise of frontrunner Frontline Wireless, which unexpectedly folded earlier this year. Some media reported that Cyren Call had demanded lease payments be paid to it, a for-profit business and adviser to the Public Safety Spectrum Trust (PSST). The PSST is a non-profit corporation that holds the FCC license for half of the D Block.

The speculations about Cyren Call and collusion were false, the Office of the Inspector General (OIG) found. Instead, Frontline Wireless investors lost confidence in the D Block plan when they examined all of the stipulations attached to it.

The FCC set aside the D Block as a public-private partnership. The winning bidder would have been required to build a national wireless broadband network that, during times of emergency, would be used exclusively by first responders. At all other times, the licensee could have used the spectrum for commercial purposes. Frontline Wireless, backed by former FCC Chairman Reed Hundt, was expected to bid for, and win, the D Block. But it became clear that wouldn’t happen when the company shuttered in early January.

In its report, the OIG explained what went wrong.

First, the lease payments were too high. The amounts were never written down, but Cyren Call told Frontline Wireless the amounts would range between $50 million and $55 million annually for 10 years, although the rates were negotiable, OIG reported.

But that wasn’t all.