Not Quite Perfect
Unfortunately, it's not always smooth sailing. Given the money at stake, some participants gamed the system by using code bidding to pass messages (don't bid on my spectrum and I won't bid on yours, for example), artificially reducing bids. The FCC fixed this problem, but there have been others.
One of the most visible was the commission's battle with NextWave Telecom, which won a $4.7 billion PCS spectrum auction in 1996 but filed for bankruptcy before paying the government. The FCC's decision to reauction the spectrum was overturned by the U.S. Supreme Court, prompting a settlement earlier this year.
Elsewhere, the commission's inability to free up spectrum for emerging 3G services illustrates the zero-sum equation faced by regulators. The most desirable spectrum was allocated years ago, much of it for services like broadcast video that seemed more strategic than they do today. There's no way to avoid political fallout from entrenched interests when the rules are modernized, but that's the only way to address emerging needs like competitive broadband access.
Another big problem is interference, which can't easily be prevented when the goal is to waste as little spectrum as possible. The FCC's July decision to relocate Nextel out of the 800-MHz band, where it was causing interference to police and fire communication systems, was well reasoned but drew widespread criticism. Emergency services groups resented the fact that they would need to move some of their gear, and Nextel's competitors objected to its receiving highly desirable spectrum in the 1.9-GHz range. The debate will inevitably end up in court.