WASHINGTON-He’s baaack!
Craig McCaw, founder of the cellular empire that AT&T Corp. bought for $11.5 billion, will bid for broadband personal communications services licenses Dec. 5.
The wireless entrepreneur is one of 74 applicants seeking 99 licenses to operate next-generation pocket telephone systems across the country. There will be two licenses issued in each of 51 major trading areas, or MTAs, large geographic areas that in some cases bleed into multiple states.
By the time next month’s auction in Washington, D.C., rolls around, however, applicants may choose not to bid on licenses in every area they’ve designated.
McCaw applied for PCS licenses in markets where AT&T is ineligible, or everywhere AT&T has cellular systems. AT&T, the largest long-distance telephone company, completed its purchase of McCaw Cellular Communications Inc., the nation’s top cellular operator, on Sept. 19.
However, both AT&T and Craig McCaw filed for licenses in Buffalo, N.Y. One explanation is McCaw may have mistakenly believed AT&T could not bid on that market because of rules restricting companies from bidding on large blocks of spectrum in markets where they own cellular systems.
Because bidders competing for common markets cannot collude during the auction, McCaw and AT&T are prohibited from talking strategy. It was suggested McCaw did not feel comfortable bidding against AT&T so soon after closing the merger between AT&T and McCaw Cellular. But if he’s successful at next month’s auction, McCaw will be an alternative provider of pocket telephone service in AT&T cellular markets.
McCaw vacillated between whether or not to bid on PCS licenses before deciding to proceed at the last minute, according to a former associate. No explanation was given for his indecision.
Craig McCaw was expected to join AT&T’s board, but announced a week before the application filing deadline that he would not do so because of potential conflicts. In addition to his PCS interest, McCaw heads Teledesic Corp., which is seeking permission to operate a global satellite telephone system.
Others bidding in one form or another include the seven Baby Bells, AirTouch Communications, GTE Corp., two of the three largest long-distance carriers, the nation’s top cable television operators, Electronic Data Systems Corp., Telephone and Data Systems Inc., Associated Communications Corp. and Vanguard Cellular Systems Inc.
John DeFeo, who recently resigned as head of U S West NewVector Group Inc., filed for 40 markets. Another wireless pioneer, John Stanton, who helped McCaw build his cellular dynasty during the 1980s before leaving to buy up rural wireless systems, is seeking licenses in 12 of the smaller MTAs.
“The roster just proves what we have said all along: If we bid it, they will come,” said Reed Hundt, chairman of the Federal Communications Commission.
Applicants bidding next month will be competing in the land of giants.
Sprint Corp., the third largest long-distance carrier, is teaming with cable television giants Tele-Communications Inc., Comcast Corp. and Cox Enterprises Inc. to bid on PCS licenses in almost every market.
MCI Communications Corp., AT&T’s chief rival in the long-distance arena, decided against bidding on PCS licenses after weeks of negotiating with Baby Bells and others. But MCI still plans to take part in PCS. “MCI will be a major player in this market, providing a nationwide branded wireless service,” the firm stated.
Under FCC rules, MCI, Time Warner Inc. and others not bidding directly on PCS licenses can form partnerships with bidders before or after the auction so long as control in the applicant does not change.
Bell Atlantic Corp., Nynex Corp, U S West Inc. and AirTouch Communications applied in 26 MTAs. BellSouth Corp. is seeking licenses in the Southeast as head of a consortium that includes American Personal Communications, DukeNet Communications Inc. (a power utility subsidiary) and 35 independent telephone companies.
GTE filed for PCS licenses in many areas of the country, and separately agreed to reciprocal wireless roaming in Texas with SBC Communications Inc., formerly Southwestern Bell Corp.
A number of individuals and companies not household names in the telecommunications industry also submitted PCS applications.
A third of the 74 applicants filed incomplete applications, but were given a week to correct them. Bidders must make up-front payments, equal to 60 cents per potential subscriber, by the middle of this month. For example, Pacific Telesis Group, which applied in all 51 MTAs, has to put down $150 million.
Licenses auctioned Dec. 5 contain 30 megahertz, or five times the amount of frequencies in a television channel. Next spring, the FCC will open bidding for designated entity PCS licenses in smaller markets-called basic trading areas-to women, minorities, small businesses and rural telephone companies.
The federal government expects to raise at least $10 billion from auctions. Bidding to date on licenses for advanced paging systems, known as narrowband PCS, has generated $1 billion for the U.S. Treasury.
PCS licenses in New York, Washington, D.C. and San Diego have already been awarded to firms deemed pioneers, who must pay a discounted auction price.
An average of 26.5 applications were filed in each MTA, according to the FCC.
“The wireless phone competitors appear to have one goal in common: They want to be our phone company-or one of your phone companies in the next century,” observed the FCC’s Hundt.