U.S. senator wants FCC auction to spur competition

By Peter Kaplan

WASHINGTON, June 14 (Reuters) - The head of a key U.S. Senate Committee said on Thursday a coming auction of valuable wireless spectrum should be designed by regulators to spur new competition in wireless services rather than just raise money for the federal government.

Senate Commerce Committee Chairman Daniel Inouye cited "lingering concerns" the auction rules set by the Federal Communications Commission could allow existing wireless carriers to strengthen their grip on the business by buying up the spectrum.

"It is important that the commission recognize the danger of further consolidation and adopt rules that will attract new entrants and promote competition," said Inouye, a Democrat from Hawaii.

The hearing came as the FCC is considering how the auction should be conducted and what kind of services can be offered using the airwaves in the 700 megahertz band.

FCC officials plan to auction airwaves later this year that are being returned by television broadcasters as they move to digital signals early in 2009. The airwaves are prized because they can travel long distances and penetrate thick walls.

A specific date has not yet been set for the sale, which is touted as the last opportunity for new players to enter the wireless market and is expected to raise billions of dollars.

The auctioned spectrum would also go to creating a public safety network that would help emergency workers to better communicate, a significant problem during Hurricane Katrina and 9/11.

Inouye expressed concern proposals to auction the spectrum in big regional blocks covering large geographic areas might make it difficult for new entrants to bid against established carriers such as Verizon Wireless, AT&T Inc. (T.N) and Sprint Nextel Corp.(S.N). Verizon wireless is owned by Verizon Communications (VZ.N) and Vodafone Group Plc(VOD.L).

Inouye's comments were applauded on Thursday by some consumer advocacy groups, who have called for half the airwaves up for auction to be designated as "open access" spectrum. That would allow other companies to buy access on established wireless networks so they can offer their own wireless services.

"We ... very much appreciate the comments of senators, including chairman Inouye, who recognize that according to the law, generating a large amount of money is not the goal of the auction," a coalition of consumer groups, including Consumers Union and the Consumer Federation of America, said in a statement afterward .

The consumer groups also want rules to ensure broadband providers treat all Internet content in the same way.

Some Republicans on the committee were concerned about competition, but also sympathetic to arguments by established wireless carriers, who are seeking bigger blocks of spectrum and oppose open-access requirements.

"We have to find a balance between the number of competitors and the ability of larger networks to provide national and international service," said Sen. Jim DeMint, a Republican from South Carolina.

"It's very important that the way this auction works would allow the larger companies to establish a seamless network."