WASHINGTON-The Federal Communications Commission garnered approximately $750 million in upfront fees from the 153 qualified bidders it accepted for the next round of personal communications services auctions scheduled to begin today.
Fifty original applicants did not make the cut, possibly because of botched applications, lack of funds or just a change in plans. Three bidders-AT&T Wireless PCS Inc., OPCSE-Galloway Consortium and SprintCom Inc.-each qualified for more than 1 billion bidding units.
Surprisingly, Cox Communications Inc., GWI PCS Inc., Mountain Solutions L.L.C. and Windkeeper Communications Inc. decided to pass this sale of 1,479 10-megahertz licenses by. Windkeeper spokesman Jay Ireland said boss Zoe Hazen was “busy building out her Virgin Islands market,” and that the company decided not to divide its attention between bidding and buildout. Hazen also is waiting to see what becomes of the current disaggregation and partitioning notice of proposed rulemaking as a possible means of picking up strategic pieces of PCS licenses and markets.
Other initial applicants that decided not to participate include Advanced Telecommunications Technology Inc., Anishnabe Communications Enterprise Inc., Atlantic Wireless L.L.C., CMAP Communications Inc., Caribbean Personal Communications Inc., Central Alabama Partnership L.P. 132, Chee-Call Company, DESD Inc., Data Link One Inc., EPCOM Ltd., Future Proof Communications Inc., Gold Horse Group Ltd., Independent Seven PCS Partnership, Inter-Tel Wireless Inc., Staci E. Johnson, Liberty Enterprises Inc., MMRS Inc., Madrona PCS L.L.C., Vincent D. McBride, Miccom Associates Ltd., MicroCel Inc., Midwest PCS One Inc., NEFF PCS Ventures Inc., National Telecom PCS Partners L.P., Oklahoma Western Telephone Company, OneSource Communications Inc., PCS America Limited Partnership II, PCS Communications Inc., PCS Solutions Inc., Personal Technology Services Inc., PersonalConnect Communications Inc., Pisces Communications Licensees Corp., River Run PCS Limited Partnership, Gloria Ruggles, Sheridan Ruggles, SGM Enterprises Inc., Silver Palm Communications Inc., Southern Communications Systems Inc., Springfield PCS Inc., T Group Communications, Telepacific Network Inc., U.S. Wireless Communications Inc., USA Micro-Cellular Inc., WCG II Inc. and Wireless Ventures Inc.
During this auction, the 11th in a series, the FCC will introduce two major changes in the day-to-day management of the bidding. While the Auctions Division plans to run only one round per day for the first few days, new activity rules will mandate higher-than-usual levels right off the bat. During stage one, a bidder must wager at least 80 percent, instead of 60 percent, of current eligibility; if a bidder fails to maintain such a level, eligibility will be reduced in the next round unless a waiver has been exercised. Reduced eligibility will be calculated by multiplying the current round’s activity by five-fourths.
When the auction moves to stage two-and officials predict this will happen quickly just to keep the pace up-bidders must remain active on 90 percent of eligibility. Reductions will be calculated by multiplying current-round activity by ten ninths. During stage-three bidding, bidders must commit 98 percent of their eligibility.
The commission also plans to custom-tailor bid increments in markets that appear to be hot prospects. According to Jay Markley of the Wireless Telecommunications Bureau, in a desirable market, bid increments could rise 10 percent to 15 percent per round until no new bids are tendered “just to move markets along.” In slower markets, bid increments would stay at normal auction levels. All changes in increments will be available immediately to bidders via the commission’s updated electronic-bidding software, and players will be prompted regarding minimum bid amounts.
Markley said that keeping track of three auction blocks with variable bid increments should not cause any confusion for bidders who have not had to keep this many balls in the air during past auctions. Many players have worked with the electronic-filing system in previous auctions, and other new bidders-particularly cellular companies-already are computer-literate enough to deal with the complexities of the system. New safeguards built into the bidding software also will help bidders refrain from “fat-finger” extra-zero mistakes that have proved to be costly for some auction participants.
According to WTB chief Michele Farquhar, Wall Street and certain licensees have been calling the commission to delay final distribution of C-block licenses until late September, saying the capital market is too weak to support the financing that will be needed by winners to begin construction and to make second payments to the FCC. Farquhar said such requests have not been made before, but that the commission would consider such requests as a matter of “self-preservation. We don’t want to lose anyone else to default.”
Farquhar also said that the recent default by CH PCS Inc. of the Phoenix license it won in the re-auction of 18 C-block licenses probably will result in a second re-auction of that license at a future date. Apparently, CH PCS wants that to happen in hopes of reducing the monetary penalties for which it currently is liable. With the second payment on C-block licenses due soon and with money so tight for many licensees, there could be other markets added to the Phoenix property for a future re-auction.
Just to prove how serious it is about being in the $9 billion corporate financing arena, the FCC will issue promissory notes to entrepreneur’s-block winners who will be paying for their licenses on the installment plan as a way of “memorializing” the loan agreement. “We have worked with the Justice Department, the Federal Deposit Insurance Corp. and the Treasury to come up with the right paperwork,” Farquhar added.
