WASHINGTON-Next month’s advanced wireless services auction, anticipated for years due to the infusion of an additional 90 megahertz of spectrum into the U.S. wireless industry, may come to be remembered by who didn’t show for the big dance.
In the no-surprise category, Cingular Wireless L.L.C., Verizon Wireless, Sprint Next Corp. (with its cable TV partners) and T-Mobile USA Inc. signed up to bid on some of the 1,122 licenses in the 1710-1755 MHz and 2110-2155 MHz band up for sale by the Federal Communications Commission scheduled for Aug. 9.
“We’d expect T-Mobile to be a very active bidder since they need more spectrum to roll out 3G (third generation) services and we’d expect the Sprint group to be an active bidder only if gets cheap prices since our new wall chart shows Sprint has the largest spectrum position in the U.S.,” Raymond James said in an investment note.
Bidder upfront payments, due July 17, will offer a more accurate picture of the AWS applicant pool and provide an indication of the bidders’ license aspirations. The deposits also will determine whether the AWS auction will play out largely in the dark, an FCC-favored approach that keeps round-by-round identities of lead bidders secret until sometime after the auction closes.
Raymond James predicted bidding would be most robust the first two weeks and then leveling out, before ending in a month or two. The firm said it expects AWS licenses to go for 33 cents to 50 cents per megahertz per pop (the cost of each megahertz sold divided by the population in a given license area).
Regional and small wireless firms-including U.S. Cellular Corp., Cincinnati Bell Wireless L.L.C., Centennial Communications Corp., American Cellular Corp. (a subsidiary of Dobson Communications Corp.), Leap Wireless International Inc., Metro PCS Inc. and Next Wave Wireless L.L.C.-are on track to bid for AWS licenses.
Raymond James said it expected Leap and Metro to be “very active, but discipline bidders.”
Meantime, rural telephone companies are lined up for as far as the eye can see for the AWS permits.
Of the 252 initial applications received by the FCC to date, 166 filed as small business, or a “designated entity,” a classification making them eligible for bidding credits up to 25 percent. Yet, it is unclear whether DEs have been able to attract the kind of serious capital necessary to compete with national mobile-phone carriers, cable TV and satellite TV heavyweights. Two likely reasons: new, controversial DE eligibility rules that are under attack in the 3rd U.S. Circuit Court of Appeals and a court-approved $130 million settlement of a DE auction fraud suit against Wall Street money manager Mario Gabelli and 38 affiliated companies.
But the lawsuit did not deter the maverick Wall Street financier. Gabelli and his telecom unit Lynch Interactive Corp., which was stuck with a $34 million bill as its share of the settlement with the Justice Department, are poised to have a prominent presence in AWS bidding having filed numerous applications. FCC member Jonathan Adelestein’s said the Justice Department should have kept Gabelli and his companies out of next month’s auction and future ones, as well as disqualified them for life from DE eligibility. Gabelli and Lynch denied any wrongdoing and liability in the settlement.
Nowhere in sight are Google Inc., Yahoo Inc., Intel Corp. or other dot-com types that were at the center of so much AWS auction speculation in recent months. Moreover, Craig McCaw and his wireless broadband firm, Clearwire Corp., will not be around to make bidding interesting as the billionaire cellular pioneer did in prior auctions.
But it may be only a temporary state of affairs. Observers said McCaw, Internet companies and others taking passes on the AWS auction may be holding out for the 700 MHz auction, which must be conducted by early 2008. It makes perfect sense. The propagation characteristics of the 700 MHz band, combined with Congress’ mandate that TV broadcasters vacate it by February 2009, make the 700 MHz auction far more attractive than the AWS auction for wireless broadband technologies like WiMAX both in terms of signal reach and infrastructure costs.
The best chance of seeing new blood come into the wireless establishment may be through AWS bidding by cable and satellite media giants and a broadband powerline company.
Sprint Nextel let it be known in May its cable TV partners-Time Warner, Comcast Corp., Cox Communications and Advance/Newhouse Communications-had designs on AWS spectrum. Last November, Sprint Nextel and the four cable operators announced plans to sell wireless service as part of the cable companies’ bundles. Sprint Nextel and its affiliates serve more than 45 million wireless customers, while the four cable TV companies combined provide service to more than 41 million subscribers.
Cable TV operators appear anxious to add wireless service to their bundled offerings to remain competitive with large Bell telephone companies. The telephone giants, which dominate the U.S. mobile-phone market, have a different agenda that they are pressing on Capitol Hill. The Bells want to add video to their package of high-speed Internet, telephone and wireless services.
So it should not come as a surprise that Cable One, a unit of The Washington Post Co., also applied for the AWS auction. Another cable TV operator, Charter Communications Inc., is in the mix as well, according to Raymond James. Charles Dolan, chairman of Cablevision Systems Inc., also filed an AWS application. A Cablevision spokesman said the Dolan family application is independent of the cable TV company.
In addition to battling the nation’s top carriers, cable TV companies may face competition from the two largest U.S. direct broadcast satellite companies. Direct TV, a piece of Rupert Murdoch’s media empire, and EchoStar Communications Corp. are normally fierce competitors in the DBS space. In the AWS auction, they are set to team up, with backing from Liberty Media Corp.
Another face expected at the auction-one at once new and old-is POP Wireless L.L.C. POP is backed by Current Communications Group L.L.C., a broadband over powerline company. Current was founded by Liberty Associated Partners L.P., an investment partnership managed by David and William Berkman. The Berkmans, like McCaw, were major first-generation players in the cell-phone industry.
