WASHINGTON-With an upfront payment of more than $12.7 million, enhanced specialized mobile radio provider Nextel Communications Inc. stands to walk away with the lion’s share of licenses when the auction of 800 MHz SMR economic area licenses, scheduled to begin tomorrow, concludes in what some industry insiders say will be a week.
What this means for other auction participants is unknown at this time, but a few may have dropped out of the bidding once they discovered who their competitors were going to be and the prices they were willing to pay. Others say openly that the handwriting is on the wall.
“Frankly, this auction has been tailored to Nextel, from the upfront payments to the rulings,” said Wilfred Miranda of North Sight Communications Inc. in Puerto Rico. “I think they will win it all, unless some other big companies like Southern Co. can fight for their regions.” While Miranda still plans to approach the auction full steam ahead, he added, “Small businesses will be wiped out one way or the other. If any group goes after Nextel for antitrust or monopoly, I’ll be the first to join.”
“Everyone thought this might be a one-company auction,” commented Richard Nielson of Bay Electronics Inc. in Wisconsin, which forwarded an upfront payment of $38,283 for a chance to bid on all licenses. “But someone has to compete with Nextel.” This auction is Nielson’s first, and he admitted that some of the minimum bids for licenses with which he is familiar “are a little high, knowing what I know about the area.”
Nielson also mentioned that a local cellular company also plans to compete for spectrum in his operating area, hoping to extend its footprint into the southern part of the state. He’s just not sure how the company will use the spectrum if its bids are successful.
Following behind Nextel in the high-payment order was Southern, with an upfront payment of $1.01 million for the same number of bidding credits; ZipWave L.L.C. with $800,000; Mobex Communications Inc. with $510,480; and Racom Corp. with $366,000. Platte Valley Communications of Kearney submitted the lowest upfront payment-$2,500.
The Federal Communications Commission accepted 61 bidders to participate in this sale of 525 licenses, and it rejected 35 applicants.
A mock auction, which took place last Thursday, simulated the beginning of Stage One to familiarize the players with the routine. Actual bidding will begin at 9 a.m., Tuesday with two rounds scheduled for opening day. Beginning Oct. 29, bidders will juggle four rounds per day-two in the morning and two in the afternoon-until the FCC decides to ratchet up the pace, something its “click box” bidding software allows it to do quickly.
In its public notice released late Oct. 17, the commission again reminded bidders that it will not “entertain requests to lower minimum opening bids.” While the commission does have the power to raise or lower minimum bids at will, “the agency will exercise its discretion, if at all, independent of any communications from bidders.”
However, the commission may not even be asked to amend its price projections, if the auction moves in Nextel’s direction. There still are a few incumbent SMRs that are bitter that an auction even is taking place. “Nextel will probably end up being our landlord,” said Greg Miller of Racom Inc. in Iowa. “I blame this all on the FCC for wanting to sell encumbered frequencies. If I owned a deli for years on the same corner, and the city said it wanted to widen the street and it was moving me to another location, in that case, it would be okay. But if the city told me that Wal-Mart wanted my corner and the three others as well, so I have to move, that’s not right. It is not only wrong, it’s damned un-American.”
On a related note, the commission has asked for comment regarding minimum bids for the upcoming local multipoint distribution service auction, set to begin Dec. 10; the FCC wants to set minimum bids for this sale as well to comply with congressional balanced-budget mandates. The FCC’s Auctions and Industry Analysis Division proposes that LMDS A-block minimum payments range from $0.75 x population to $2.24 x population, depending on how large the license area is. Minimum bids for the LMDS B block would be 10 percent of those for related A-block licenses.