Cyren Call: Don’t blame us for Frontline’s demise

Cyren Call Communications Corp. said it never demanded long-term payments as a condition for a winning bidder of the 700 MHz national commercial/public-safety license, breaking its silence in response to news reports and blog postings that strongly suggested it caused the demise of one-time D-Block aspirant Frontline Wireless L.L.C.
“Anyone stating or implying that I or any member of Cyren Call or the Public Safety Spectrum Trust Corp. ‘demanded’ a spectrum lease payment is lying. Furthermore, anyone suggesting that any spectrum lease payment would be paid to Cyren Call is lying,” said Cyren Call Chairman Morgan O’Brien.
The anti-collusion gag rule imposed on 700 MHz bidders lifted at 6 p.m. Eastern Time today, allowing auction participants to publicly speak out for the first time since early December when short-form applications were due. AT&T Mobility and others detailed their plans for their 700 MHz winnings shortly after the deadline.
“I was pinning a lot of hopes on them [Frontline] coming to that auction,” said O’Brien.
Cyren Call, the official advisor to the PSST, and the PSST itself were not officially subject to the quiet period, but the Federal Communications Commission asked them to honor the rule, which is designed to prevent anticompetitive behavior in the recent auction, which raised nearly $20 billion but did not attract a bidder willing to pay the minimum $1.3 billion for the D-Block license.
Congress and the FCC are investigating the 700 MHz auction results, including Frontline Wireless’ abrupt collapse two weeks before the Jan. 24 start of the auction. The FCC is expected to launch a new rulemaking soon to consider rule changes in hopes of attracting a bidder in a D-Block re-auction later this year.
Cyren Call did acknowledge that during conversations with potential bidders, it presented an estimate of $50 million a year when asked about the spectrum lease payment likely to be requested by the PSST during negotiations over a network-sharing agreement.
Indeed, in an interview with RCR Wireless News, O’Brien said Cyren Call and Frontline Wireless met Nov. 29 at the latter’s request to inquire about what a network-sharing agreement between a D-Block winner and the PSST might financially entail. O’Brien said he did not attend that meeting, though confirmed the $50 million annual payment was put on the table as the starting point.
“They asked for a meeting. We set up a meeting with them, which we did with others, to walk through where we were between PSST bidder document one and getting ready to put out bidder document two. At that meeting, when asked, ‘When you talk about a lease payment, can you give us an idea — an order of magnitude what you’re talking about?’ we said a $50 million annual payment subject to about a half-dozen things, including getting the FCC to approve it in the NSA.”
Frontline didn’t object, according to O’Brien. “They could have said are you are out of your mind — $50 million — but they didn’t.”
O’Brien rejected news and blog accounts that would have made the $50 million necessarily a recurring payment, or $500 million total over the 10-year D-Block license term.
“Neither Cyren Call nor the PSST demanded any kind of payment or suggested that this topic would not be subject to negotiation or could not — as expressly stated in the bidder information document — be affected by a variety of other factors,” the company stated. Cyren Call is funded by venture capital firms, and reportedly has raised at least $4 million to date.
“Anonymous third-party allegations that the prospect of an annual spectrum lease payment ‘killed’ Frontline do not stand up to scrutiny,” Cyren Call stated.
Moreover, O’Brien noted there were other forces at play in the lead-up to the 700 MHz auction.
“You can’t forget what was happening in the capital markets daily as we were heading into this thing. It couldn’t have been worse timing, but the commission didn’t have any choice,” O’Brien stated.
There also has been speculation that possible investors in Frontline failed to make good on their commitments and that a major vendor associated with Frontline might have pulled out at the 11th hour.
O’Brien said the FCC has been in general discussions with PSST, along with Cyren Call, about how the process should move forward. However, he said he believes adjustments need to be made to the D Block’s $1.3 billion reserve price and the penalty provision that would be imposed on the winning bidder if a network-sharing agreement with the PSST fails to materialize.
O’Brien said he does not see AT&T Mobility or Verizon Wireless — the nation’s top cellular carriers and the 700 MHz auction’s biggest winners — making a play in the D Block re-auction. “You’ve got AT&T and Verizon. Did we have a lot of hope for one of them [winning the D Block]? Naturally.”
However, he predicted the FCC could attract serious bidders for the D Block the next go-round if the right rules are put in place.
“I will be surprised if the wireless industry — the peripheral players in the wireless industry — are not going to be taking a very hard look at this terrific opportunity,” said O’Brien. “How the PSST is going to relate in that environment, I think, will be an important question and it’s a work in progress. The FCC is going to give it, I hope, guidance on how they want the PSST to relate. I think the FCC is going to give us more guidance than we had before. Before it was pretty much a blank sheet of paper. I believe they’re not going to do that this time. I think they’re going to give PSST — which is a good thing — instruction on how they want us to behave.”