The D-block poses a different set of opportunities and challenges for potential bidders. The 10MHz block will be awarded to a single national licensee who will build and operate the hybrid commercial/public safety network. On the plus side, whoever wins the license will have the opportunity to build out an additional 12 MHz of spectrum already awarded to the public safety community — and during non-emergency situations, the commercial operator will be able to use the additional spectrum for its customers. In the event of an emergency, however, public safety communications will take priority and, if needed, will be able to use the entire spectrum.

Here, too, Seybold sees a problem for new entrants. Noting that both commercial and public safety traffic rise during an emergency, he said, “In a major regional event, people will get dumped. As a fill-in for an existing network, the idea probably works because in times of emergency, if the commercial network were lost, the operator would still have its other network to fall back on. But if it's a new network and only this spectrum is available, it's too risky.”

Levin, however, questioned traditional wireless operator's interest in the spectrum: “It's difficult for almost anyone to invest in that spectrum because the people who would control many important parts of it don't care about your return on capital.”

Another concern is that, because the hybrid network will have to be ultra-reliable, it will be more costly to build. Yet the public safety community is not expected to contribute to the cost of the network construction.

Despite these concerns, at least one new market entrant is expected to bid in the D-block auction. The highest-profile contender is Frontline, a start-up with a roster of industry heavyweights on staff including chairman Janice Obuchowski, former head of the National Telecommunications and Information Administration.

“Frontline remains focused on this spectrum,” a company spokeswoman said, adding that the spectrum could support several business models if the company were to adopt a wholesale approach. For example, she said the spectrum could be used to interconnect community Wi-Fi networks or to provide nationwide roaming for smaller network operators. “Wholesale continues to be an area of interest that we are pursuing,” she said.

Also focused on the D-block is CyrenCall, another start-up with a heavyweight chairman: Morgan O'Brien, co-founder of Nextel. Although CyrenCall does not plan to bid in the auction, the company hopes to be appointed an agent/adviser to the public safety community and to work with the auction winner on behalf of that community. A CyrenCall spokesman, who sees significant commercial demand for the hybrid network, said, “It will not just be a fourth-generation network but will be hardened.” The spokesman said the network will appeal to “anyone looking for additional security or involved with critical infrastructure — for example, utilities.”

Whether the hybrid network will truly come to pass, however is unclear. In September, Frontline expressed concern that some of the FCC's plans for the auction could imperil the network's future. In a paper submitted to the FCC on behalf of Frontline, two economists argued that minimum bids in the 700 MHz auction had been set too high, which could prevent bidders from winning spectrum in the first round. If spectrum were not won in the first round, the FCC might exercise its option to overhaul plans for the spectrum, possibly scrapping the hybrid network idea, the open-access requirements or both, the economists said.

Seybold disputed the notion that minimum bids, based on prices from the AWS auction, are too high. “I would value the 700 MHz spectrum at 10 times the AWS spectrum,” he said. “It's at a band where you can make it work easily with other devices on other bands. And 700 MHz over time will become a worldwide band, which will help the prices of handsets and devices come down.” Seybold also noted that for every cell site a wireless operator has to build in the 700 MHz block, it would have to build four to five sites on an AWS network to obtain the same kind of coverage. Considering all these different factors, Seybold expects the minimum bids to be met in the very first round, eliminating the possibility that the FCC will revisit its requirements.

Companies that win spectrum in the 700 MHz auction, particularly in the C- or D-blocks, are likely to deploy next-generation broadband wireless technology, industry observers agree. But it won't happen overnight.

Most of the 700 MHz licenses are for spectrum that won't be cleared until 2009, and the LTE and UMB technologies that are most likely to be used there should not be ready for commercial deployment until 2009 or 2010. If incumbent carriers win large portions of the spectrum, they will want to maximize their existing investment; that could further slow future deployment.

“Incumbents will use [4G] where they have heavy demand for traffic, rather than building it out across the network,” Seybold said. Since LTE and UMB are backward-compatible, carriers can start building with current technology and upgrade to newer technology when demand merits the investment, he said.

Broadband deployment could happen most quickly in the D-block, where the license winner is required to meet stringent completion dates for a hybrid network. The FCC, however, left operators considerable leeway in terms of the infrastructure that could be used there, making it difficult to predict the specific technology that will be deployed.