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FCC airwaves auction starts today

Wed, 08/09/2006 - 8:22am

Copyright 2006 AFX News Limited
AFX - Asia
August 8, 2006 Tuesday 10:41 PM GMT
From Lexis Nexis

WASHINGTON (AFX) - The government is auctioning off rights to the largest chunk ever of mobile-phone-friendly airwaves.

The auction, being conducted Wednesday by the Federal Communications Commission, may bring in as much as $15 billion to the U.S. Treasury and lead to an expansion of advanced services for mobile wireless customers, like super-fast Internet access.

Already, the auction has brought in $4.3 billion from 168 bidders who made payments simply to qualify for participation. They are competing for the right to use portions of the radio spectrum -- a publicly-owned, extremely valuable highway in the sky that allows sound, data and pictures to be transmitted from one place to another.

The FCC is responsible for making sure users are not interfering with one another's signals and that they use the spectrum in the public interest. The auction, to be conducted via telephone and online, may go on for weeks.

Companies will be bidding for 1,122 licenses to use the spectrum, good for an initial term of 15 years.

While it is impossible to say who the big winners in the auction will be, the FCC's qualification process, which requires bidders to provide money up front depending on how many licenses they plan to bid on, provides a list of front-runners.

The top qualifier is Wireless DBS LLC, an alliance that includes two competing direct broadcast satellite providers: EchoStar Communications Corp. and the DirecTV Group. The bidders paid $972.5 million.

Second was SpectrumCo, a consortium of Comcast Corp., Time Warner Inc., Sprint Nextel Corp., Cox Communications Inc. and Bright House Networks, with $637.7 million. Third was T-Mobile License LLC, at $583.5 million. T-Mobile is expected to be among the most aggressive bidders.

Analysts say EchoStar and DirecTV are investing in the future. Increasingly, cable television operators and telephone companies are offering bundles of services to customers that include high-speed Internet access, phone service and video while satellite companies have been limited primarily to video.

The new spectrum could allow the satellite companies to offer wireless broadband access to customers along with their usual video services.

'This will allow them to offer a wider range of services,' said telecommunications
industry analyst Jeff Kagan. 'What they're going to use them for, that's the question. Is it going to be for wireless phones, is it going to be for wireless television?'

If EchoStar and DirecTV were to build a new cellular phone network from scratch, it would require billions of dollars and take years. The joint bid has helped to fuel rumors of a potential merger between the two companies.

The cable industry, while it offers a greater menu of consumer services, needs wireless capability to be able to field a full range of services.

Harold Feld, senior vice president of the Media Access Project, said the cable companies may also be getting into the auction simply to drive up the cost to the satellite companies, their primary competitors.

'But if they win, certainly they'll be able to put the spectrum to good use,' he said.

Wednesday's auction is expected to attract bids between $10 billion and $15 billion, according to estimates from the Congressional Budget Office. It is the biggest auction since late 2000 and early 2001, when a spectrum sale attracted $16.9 billion in bids.

The total amount of spectrum for auction is 90 megahertz, more than twice the amount occupied by Verizon Wireless. The amount of spectrum, combined with the fact that the licenses for sale span the nation, means a major new player could emerge.

'If someone wanted to put together a national footprint they could do that in this auction,' said former FCC Commissioner Harold Furchtgott-Roth.

While there is enough spectrum available to create a new network, a more likely result will be an upgrade and expansion of services for wireless customers.

Besides high-speed Internet access, consumers may enjoy clearer reception on voice calls, music downloads, video streaming and other offerings.

'These licenses will support a lot more intensive use than the traditional cell phone (market),' Feld said.

T-Mobile probably is the most motivated bidder in the auction. Compared to other wireless companies, T-Mobile is spectrum starved. Other wireless carriers, like No. 1 Cingular Wireless and No. 2 Verizon Wireless Inc. have also made large upfront payments and are expected to be active.

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