By Michal Lev-Ram

Couch potatoes, listen up: If you’re still using an analog TV, you might find static instead of “American Idol” on your screen come Feb. 18, 2009. That’s when the Federal Communications Commission plans to end a half-century of analog broadcasting.

This is the final step in switching to digital television broadcasting, which takes up less bandwidth and allows for high-definition pictures. With the government’s auction of the old analog TV spectrum now completed — companies like Verizon Wireless (VZ) and AT&T (T) bid billions of dollars those airwaves, which are well-suited for mobile broadband — attention is focusing on the 11.4 million U.S. households that Nielsen estimates are not ready for the big switch to digital television.

The only way consumers can keep their old televisions is by paying for cable or satellite service or buying a converter box, which receives and converts digital signals into a format that analog TVs can display. To make sure these analog-only households aren’t stuck without programming next February, the government has launched a coupon program to make the transition to digital smoother. Qualifying families can apply for up to two, $40 coupons to be used toward purchasing converter boxes.

Todd Sedmak, a spokesman for the National Telecommunications and Information Administration, the government group overseeing the coupons program, says companies in the broadcasting, cable and consumer electronics industries have committed to spending over $1 billion to educate consumers about the upcoming change.

“Many resources are being tapped to inform the public,” says Sedmak, who adds that more than 4.5 million households have already requested about 8.5 million coupons. To date though, the government has only mailed about 2 million coupons.

Critics say despite the efforts to educate, getting the word out to over 11 million people — many of them living in rural locations — will be difficult. They also argue that converter boxes are not readily available and that that the coupons are good for only three months. Best Buy (BBY) carries only one model, retailing for $60, that is covered by the coupon.

What’s more, the upcoming switch could affect some groups more than others. According to a recent Nielsen study, adults over 55 are better prepared than younger households, while Hispanics and African-American households will be more affected than whites and Asians.

Eric Rossi, head of Nielsen’s digital transition preparedness team, said in a recent report: “The change to all-digital broadcasting is the most significant change in the history of television.”

By Michal Lev-Ram

The Federal Communications Commission said Wednesday that Verizon Wireless was the biggest winner in the recently-closed government auction of 700MHz wireless spectrum.

FCC records show that Verizon bid an estimated $9.5 billion for the airwaves, which will become available next year and are well-suited for broadband services.

The company won the majority of large licenses in the coveted C block of the spectrum, in addition to a significant number of smaller licenses in the A and B blocks. A total of five blocks of spectrum were up for bid and the FCC took in $19.6 billion in the auction.

In a statement issued Thursday, Verizon (VZ) said it was “very pleased” with the results of the auction and that the new spectrum would help “grow our business and data revenues.”

AT&T (T) won 227 small licenses and said that, combined with airwaves the company purchased earlier this year from a Providence, Rhode Island-based company called Aloha Partners, its 700MHz spectrum will now cover 200 top U.S. markets.

Google (GOOG), however, didn’t win any licenses. Last year the search giant said it would put up the minimum bid for the C block portion of spectrum to ensure the success of a FCC requirement that the new network be open to any mobile device and not just those sanctioned by the carrier.

But one newcomer did manage to make the cut — satellite television provider Dish Network (DISH) won enough licenses to provide a nearly nationwide network. According to Citigroup analyst Jason Bazinet, it’s likely the company will use the spectrum to roll out a mobile video service.

By Michal Lev-Ram

After nearly eight weeks and 261 rounds of bidding, the government’s spectrum auction finally ended Tuesday.

In January,  the Federal Communications Commission began auctioning off the coveted 700MHz spectrum, which is particularly suited for broadband services and is the last major chunk of nationwide spectrum.  The FCC had hoped to raise at least $10 billion from the auction, but as the last bid came in late Tuesday the total reached $19.6 billion. The auction attracted companies such as Verizon (VZ), Google (GOOG), AT&T (T) and Qualcomm (QCOM).  The spectrum is currently used for television, which will give up the airwaves in 2009 when TV broadcasting goes digital.

As this was a “blind” auction, the bidders’ identities were kept secret.  But the winners won’t be revealed until all five blocks of spectrum up for auction are accounted for — the so-called D block, which was set aside for a nationwide public safety network, failed to raise the minimum price set by the FCC. Analysts say it’s likely the government will separate the D block from the rest of the auction and put it up for sale again  so they can collect the money for the other blocks.

By Michal Lev-Ram

The race to be the most “open” wireless carrier is heating up. On Wednesday, Verizon (VZ) will release a set of technical specifications that will enable non-Verizon branded cell phones to work on its network for the first time. Not to be outdone, early Tuesday AT&T (T) unveiled a new website which includes resources for consumers who want to use phones they’ve purchased outside of the carrier’s stores on its network.

Unlike Internet service providers — which are required to allow any laptop, browser or website to run on their networks — most U.S. carriers have historically blocked devices or applications that aren’t directly distributed by them. But more recently, U.S. mobile operators have adopted an “if you can’t beat them, join them” attitude.

Google (GOOG) takes at least some of the credit for the shift.

After it began lobbying for more open networks last year and launched its Android open mobile platform for developers, “AT&T and Verizon started to fight over which one seemed more open,” said Rich Miner, Google’s VP of mobile, at a recent conference.

But Verizon’s decision to open up was also a preemptive response to a government push for giving consumers more control over how they use their cell phones. The carrier’s announcement was strategically timed ahead of the Federal Communications Commission’s high-profile spectrum auction, which set aside a valuable portion of airwaves to be used for a new, open network. Verizon is believed to be the most likely winner of that block of spectrum, though we won’t know for sure until the auction closes — probably sometime in the next few days.

“Verizon Wireless’ Open Development initiative is driven by the company’s desire to encourage innovation, give customers new wireless choices, and quickly address opportunities to expand the wireless market,” the company said in a recent statement. Its open network will be available by end of 2008.

AT&T, of course, maintains that it will win the race.

“The driving force of our business is our commitment to be open to innovation and to offer our customers more choices than any other wireless company,” Ralph de la Vega, president and CEO of the company’s wireless unit, said in a statement.

But critics are skeptical that either carrier will become truly open, making it both simple and affordable for consumers to use outside devices and easy for developers to meet the specifications for getting their applications up and running on the networks.

By Michal Lev-Ram

The federal government’s high-profile wireless spectrum auction will likely end in the next few days. That means we could soon find out who won the last major chunks of spectrum available in the United States, which have attracted nearly $20 billion in bids.

Analysts say it will likely take about a week after the auction concludes for the Federal Communications Commission to compile and release the list of winners for five “blocks” of the 700MHz spectrum that are particularly suited for mobile broadband services. But the announcement could be delayed because the “D Block” of spectrum — a portion set aside for a nationwide public safety network — has failed to raise the minimum amount set by the FCC. According to the auction rules, the identity of the winning bidders won’t be released until bidding is completed on all blocks of spectrum. But it’s possible the government will set aside the D Block so that it can finish (and collect money) on the rest of the auction.

The 700 MHz auction has garnered attention for the number of non-traditional companies that registered to bid, including Google (GOOG).

But many in the industry believe the search giant was bidding just to ensure the $4.6 billion reserve price on the coveted C Block was met and thus the requirement that it remain open to any mobile device assured. Analysts say the likely winner will be a traditional mobile operator like AT&T (T) or Verizon Wireless (VZ).

Bidding has already dragged on for about seven weeks but auction activity slowed last week and the FCC upped the number of daily rounds in an attempt to accelerate the process. The rules of the auction state that it will end only when no new bids are placed. Only seven bids were placed in the latest round early Monday.

The spectrum up for grabs was originally allocated for analog television, which go off the air in January 2009. Analysts are calling this the last big chunk of “beachfront property” in the wireless spectrum.

“Everyone knows there’s nothing else of great significance coming down the pipe,” says Stifel Nicolaus analyst Rebecca Arbogas. “There’s a finite amount of spectrum that’s considered desirable, and there’s no way to squeeze more out.”

But Arbogas adds that the wireless industry has all the spectrum it needs for quite a while. For nontraditional or smaller players, though, getting their foot in the door will be a challenge.

By Michal Lev-Ram

Despite worries that economic uncertainty would hamper bidding, the Federal Communication Commission’s wireless spectrum auction has raised nearly $20 billion to date, well over the agency’s minimum goal of $10 billion.

Out of five available portions of spectrum, the so-called C block — whose airwaves are considered particularly suited for broadband Internet because they can travel long distances and penetrate walls — has raised the most cash. A $4.7 billion bid, meeting the minimum price set by the FCC, was placed last week. But another portion up for auction, the D block, is still far from raising the reserve amount set by the FCC. The identity of winning bidders won’t be disclosed until the auction of all blocks of spectrum are completed. Analysts say Verizon Wireless (VZ) is a likely winner, though Google (GOOG) had publicly stated its commitment to meeting the reserve price.

Analysts note the C block has the potential to dramatically change the U.S. wireless landscape because whoever wins it will have to keep the new network open to all devices, a provision Google secured after lobbying the FCC.

“Google’s interest in the C block influenced Verizon’s decision to open up access to its network  just as Apple’s introduction of the iPhone stirred up the cellphone market,” ABI Research analyst Nadine Manjaro said in a statement. Google’s entry into the market as a mobile operator, while unlikely, could also bring a big change to the industry, now controlled by a small handful of telcos.

For now, though, it’s all a waiting game. The only deadline the FCC has set is that all bidding must be concluded by June 30.

By Michal Lev-Ram

Somewhere in the Googleplex, Sergey Brin, Larry Page and Eric Schmidt are celebrating right about now.

That’s because the Internet search giant Thursday scored its first big win in the mobile business: The minimum $4.6 billion bid has been met in the Federal Communications Commission’s auction of the so-called C block of the 700 MHZ wireless spectrum, and that means that the eventual winner of those airwaves will have to make their new network open to all mobile devices, a provision Google (GOOG) lobbied hard for last year. The FCC should be happy too — so far more than $13 billion in bids for the five blocks of spectrum have come in, exceeding the agency’s goal of taking in $10 billion.

The FCC had previously said that if its reserve price wasn’t met it would begin a new auction without Google’s open access requirement. The bidding race had stalled earlier this week, and until Thursday it wasn’t clear whether Google would get its way.  But Thursday morning, in the auction’s 17th round, a $4.7 billion bid rolled in.

What we still don’t know — and might not know for a while — is who will end up winning the C block, as the FCC is not identifying the bidders until the auction of the separate blocks of spectrum is completed. Google has said it would make a play for the C block airwaves, which are currently used for analog TV, but the company may have participated in the auction just to make sure the reserve price would be met. According to analysts, it’s likely AT&T (T) and Verizon Wireless (VZ) have their eyes on the C block as well, and at least one of them has been bidding, either against each other or Google.

“We think from this point on, Google can either exit the auction (i.e. stop bidding assuming it’s not the highest bidder currently) to hand it over to another bidder, or Google can  vie to win (but would unlikely be ’stuck’ with the spectrum),” Bear Stearns analyst Robert Peck wrote in a note Thursday.

Why does Google care so much about this slice of spectrum? Because its wireless success depends on widespread use of its services on cell phones, and having a more open network would give it greater freedom to spread its mobile goods. Google currently faces resistance from U.S. carriers, who have traditionally had a tight grip on the type of devices and services allowed on their networks. Google’s new Android platform — a new mobile operating system open to all developers — has yet to prove its viability,  and having a more open, nationwide network in the United States could make it easier for Google — and other companies — to get more of its offerings on more devices.

By Michal Lev-Ram

This is not exactly the best week to kick off a multi-billion dollar wireless spectrum auction, what with the markets melting down and tech stocks like Google, Sprint, Motorola and Apple taking big hits.

But on Thursday the Federal Communications Commission’s 700 MHz spectrum auction begins, and analysts worry that the current economic climate could make it harder for newcomers to come up with the cash needed for opening bids.

The 700 MHz spectrum originally was used for analog television and when the FCC mandated that TV go all-digital by next year, it put the rights to the spectrum on the auction block. The spectrum is highly coveted for broadband because signals can travel long distances and penetrate walls. That attracted the attention of Google, which pledged to meet the minimum $4.6 billion bid requirement and successfully pressed the FCC to require the winner of the auction to allow any mobile device to work on the network rather than just those the wireless carrier chooses. Google subsequently unveiled its Android initiative to develop open operating standards and applications for cell phones.

The FCC has set a minimum bid it wants to receive for the various blocks of spectrum. In total, it hopes to raise at least $10 billion. If that is not met, then the agency will begin a new round of auctions by dropping some restrictions — such as the requirement that portions of the spectrum be open to any mobile device – in the hope of attracting additional bidders.

Already, startup Frontline Wireless backed out of the bidding race last week, reportedly due to a lack of financing.

Still, the auction begins with 214 qualified bidders, including AT&T (T), Verizon Wireless (VZ), Google (GOOG), EchoStar Communications (DISH), Qualcomm (QCOM) and even Microsoft co-founder Paul Allen.

As this will be a blind auction, we will know the amount of each bid but not the identity of the bidder until bidding on all spectrum licenses has stopped.

It could be anywhere from a few weeks to several months before the auction ends and the winners are revealed. Who knows, maybe by then the market downturn will be long over.

By Michal Lev-Ram

Surprise, surprise: Google (GOOG) is now a qualified bidder in the upcoming Federal Communications Commission spectrum auction, joining the likes of Verizon Wireless (VZ), AT&T (T) and satellite television provider EchoStar (DISH). In total, 214 bidders have made it to the final round, the FCC announced late Monday. So who’s out of the running? Over 50 companies and individuals, including early entrants like Faithfone Wireless, the Navajo Department of Information Technology and some guy named Mitchell Hoffman.

Until now, much of the focus in the auction for the coveted 700MHz wireless spectrum — whose airwaves are considered particularly suited for broadband because they can travel long distances and penetrate walls – has been on the large number of nontraditional bidders like chipmaker Qualcomm (QCOM), various cable operators and even Microsoft (MSFT) co-founder Paul Allen. Then, of course, there’s Google. As early as last summer, the search giant said it would meet the minimum requirement for bidding (a cool $4.6 billion) if the FCC allowed all four of the company’s license conditions, including stipulations that the new airwaves be kept open to all downloadable applications and devices. In the end, the FCC met just one of Google’s “open” requirements, stating that one of the blocks of the upcoming spectrum be kept accessible to all mobile devices.

Google stayed in the game anyway, though many in the industry have questioned whether the company is bidding to win or just to give the appearance that it’s putting its money where its mouth is. After all, it makes more sense for Google to lobby for openness in order to speed up the spread of its wireless applications than it does for the Mountain View, Calif.-based company to turn itself into a wireless provider. Plus, Google knows it’s up against spectrum-hungry mobile operators like Verizon and AT&T, which will likely bid aggressively.

There is a small chance Google’s “open access” plan will not come to fruition: If the FCC doesn’t meet its reserve price for the spectrum it is auctioning off, there will be a rebidding process with loosened restrictions. In that case, Google’s “open to all devices” requirement could be the first rule out the door.

In the short term, there will be a “mock auction” (the FCC’s version of a dress rehearsal) on Jan. 22 to get participants familiarized with the online bidding system, but the official auction starts Jan. 24. Unlike most spectrum auctions, this one will be “blind,” meaning that the identity of the bidders behind each bid won’t be released until the auction has ended and the winners are determined.

According to Christina Burrow, an expert on telecommunications regulation with Washington, D.C.-based law firm Dow Lohnes, only certain details like the amount of the highest bids will be made available to the public.

“But what we’re not going to see are any of the identities of the bidders behind the bids,” Burrow said during a Bear Stearns conference call about the auction earlier this week. “If blind bidding works and we don’t have leaks then it should be radio silence from now on.”

Either way, Burrow says the auction must be over (and the winning bids paid up) by June 30 of this year. The spectrum — currently used for analog television — won’t be available until early 2009.

By Michal Lev-Ram

Still using an analog cell phone? Better upgrade fast because on Feb. 19 those U.S. carriers still offering analog service will shut down their outdated networks.

Until this year, the Federal Communications Commission had required wireless carriers to maintain analog networks despite the fact that the numbers of subscribers using the aging service has been dwindling since the early 2000s.

If not for the FCC mandate, carriers would have probably turned off their analog signals several years ago, when the vast majority of the country switched to digital phones. Unlike analog phones, which transmit a direct representation of sound waves, digital devices convert sounds into 0’s and 1’s and thus can send and receive text messages and enable a host of other data-rich mobile features.

So why should anyone care about the analog shutdown? Well, in addition to several million mostly rural AT&T (T), Alltel and Verizon Wireless (VZ) customers, owners of some older cars will lose communication systems like OnStar when they go digital. (Sprint Nextel (S) and T-Mobile (DT), two relatively new carriers, don’t have analog networks). Wireless companies hope the shutdown will drive their analog customers to go digital but there is a risk that they will defect to other carriers or just let their service expire.

That’s why both AT&T and Verizon say they’ve been reaching out to those customers for more than a year, trying to lure them into digital plans with a combination of calls and letters.

“Over the past year or so we’ve been reaching out to those customers and encouraging them to upgrade and even offering them free handsets,” says Verizon spokeswoman Debra Lewis. “Hopefully people won’t be caught without service come Feb. 19.”

Since many consumers don’t even know whether their current handset is analog or digital, the FCC has issued an advisory with some tips on how to tell which one you have: For example, if your wireless phone uses a SIM card or has advanced features like text or instant messaging, it is digital.

Still, it’s likely some unsuspecting customers will be unpleasantly surprised when they wake up on Feb. 19 and realize their phone has become a true brick. But the move is a necessary step for the wireless industry, which will now be able to use the small portion of spectrum that will become available for more lucrative digital services.

Verizon says that the amount of analog traffic on its network is well under 0.5 percent and has been declining over the past few years. According to research firm M:Metrics, those who will be affected by the shutdown of analog networks number fewer than four million out of more than 250 million total wireless subscribers in the United States. Most importantly, none of those analog customers are eat up a lot of minutes or subscribe to data plans. In other words, they’re not big moneymakers for the carriers.

“The majority of folks with these phones are 65 plus and are the ‘keep your phone in the glove box’ kind of people,” says Jaimee Minney, a director at M:Metrics.