By Peter Kaplan

WASHINGTON (Reuters) - Bidding remained stalled Tuesday on a key piece of spectrum in the U.S. government's wireless airwaves auction, prompting concern regulators will have to modify rules requiring some of it be shared with public safety agencies.

After 12 rounds of bidding over four days, the Federal Communications Commission still has received only one bid for a portion of the 700-megahertz airwaves known as the "D" block, that could also be used by police, firefighters and other public safety officials.

Top bids for all five spectrum blocks on offer reached nearly $8.66 billion on Tuesday. The auction is widely expected to net the federal government at least $10 billion.

The lone $472 million bid for the D block spectrum, which came in the first round of the auction last Thursday, is far below the $1.3 billion minimum price set by the FCC.

Rep. Edward Markey, chairman of the House Subcommittee on the Internet and Telecommunications, told a hearing on Tuesday that the lagging interest in the D block was "discouraging."

A lack of bidders for the D block could be a reflection of the credit crunch that has hurt the ability of companies to raise capital, according to industry analysts.

Under rules adopted by the FCC, the winner of the D block airwaves will be required to negotiate an agreement with public safety agencies, build out a nationwide network and then give those agencies priority use during emergencies.

If no bidder meets the minimum price for the D block, the FCC can re-auction that piece of the spectrum and possibly modify the requirements.

If that happens, the subcommittee will "actively review the parameters of that auction," including the minimum price and other conditions, said Markey, a Massachusetts Democrat.

Another member of the panel, California Democratic Rep. Jane Harman, urged the FCC not to pull back or delay the plan for a shared network, saying it presented a unique chance to enhance public safety.

A key potential bidder for the D block airwaves, Frontline Wireless, dropped out earlier this month. Frontline declined to say why, but analysts blame it on a shortage of financing.

Companies qualified to bid include major carriers AT&T Inc and Verizon Wireless, and possible new competitors like Internet company Google Inc , EchoStar Communications Corp and Cablevision Systems Corp .

Verizon Wireless is a joint venture of Verizon Communications Inc and Vodafone Group Plc .

Bidding could take weeks, or even months, to complete. Under FCC rules, identities of bidders will be kept secret until the entire auction ends.

Analysts say major carriers could use the new spectrum to offer consumers more advanced services such as broadband access via mobile phones and wireless broadband to laptop computers.

In addition to the D block, the airwaves up for auction are divided into a "C" block, which will have to be open to any device and software application as long as the $4.7 billion minimum price on it is met.

Bids on the C block topped $3.78 billion Tuesday.

Other spectrum up for auction includes local chunks set aside in blocks designated "A" and "B." The final "E" block is considered less useful because it is limited to one-way data transmission.

The 700-megahertz signals are valuable because they can go long distances and penetrate thick walls. The airwaves are being returned by television broadcasters as they move to digital from analog signals in early 2009.

(Editing by Tim Dobbyn)
© Copyright 2007 Reuters.

Photo:
Federal Communications Commission (FCC) Chairman Kevin Martin in Las Vegas, Nevada January 8, 2008. After 12 rounds of bidding over four days, the FCC still has received only one bid for a portion of the 700-megahertz airwaves known as the "D" block on Tuesday. REUTERS/Steve Marcus