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700 MHz spectrum: Surprise! AT & T and Verizon win

Fri, 03/21/2008 - 9:27am
Brian Santo

As expected, AT&T and Verizon were the two biggest spenders in the FCC’s 700 MHz spectrum auction, together bidding about $16 billion of the $19.5 billion auction total.

Among cable interests, winning bidders included Cox CommunicationsBresnan Communications and Vulcan Spectrum, which is controlled by Charter Communications Chairman Paul Allen.

Given that AT&T and Verizon each won a different, nearly entire spectrum block, it appears that they rarely, if ever, competed head to head.

AT&T won rights to the vast majority of the Block B licenses, by some accounts spending more than $6.6 billion. The company’s reach is expanded through its partnership with Aloha Partners, which also won some licenses.

AT&T said its 700 MHz spectrum will cover 100 percent of the Top 200 markets. Combined with the spectrum purchased in the previous AWS auction, AT&T will be able to cover 95 percent of the U.S. population.

Verizon, through Cellco Partnership, bid more than $9.4 billion to get almost the entire C block.

Cox’s, Bresnan’s and Vulcan Spectrum’s bids were all for spectrum in the A Block. Cablevision registered to bid but won no licenses. Some of the winning bids are as follows: 

Cox Wireless:
• Las Vegas – $30.9M
• Phoenix – $53M
• San Diego – $84M
• Tucson, Ariz. – $5.5M
• Fayetteville, Ark. – $6.1M
• Baton Rouge, La. – $9.5M
• New Orleans – $15.1M
• Omaha, Neb. – $5.6M
• Wichita, Kan. – $7.8M
• Topeka, Kan. – $1.7M
• Tulsa, Okla. – $15.6M

Bresnan Communications:
• Billings, Mont. – $1.4M
• Great Falls, Mont. – $317,000

Vulcan Spectrum:
• Portland-Salem, Ore. – $43.6M
• Seattle-Tacoma, Wash. – $61.1M

Some of the other winners of block A licenses were Cellco Partnership (Verizon), CenturyTel Broadband Wireless, Cavalier Wireless and King Street Wireless. 

Noteworthy was that Google did not win a single license. On the other hand, it secured its victory before the auction even started when it convinced the FCC to declare the entire C Block open to any device. This frees any enterprise, including Google, to offer mobile wireless devices that will work on the network that Verizon builds.

Another big bidder was King Street Wireless, a holding company associated with U.S. Cellular. The company took slices of the A, B and C blocks.

There were 99 bidders other than the nationwide wireless incumbents, according to the FCC.

There are some important distinctions among the five blocks of spectrum.

The FCC made a finer dice of the geographic regions covered by the licenses for the A, B and E blocks, with the aim of giving smaller operations the ability to successfully compete for licenses. This seemed to work best in the A block, and not at all in the E block.

The C Block, as noted, has the open access provision.

The D block was to be dual-use spectrum. Precedence would be given to use by public safety organizations; winning bidders would have been able to use the spectrum, however, when unused by the safety organizations. This block failed to attract the minimum bid amount and will have to be re-auctioned.

The spectrum in the E Block is considered to be better for broadcast than for two-way communications. EchoStar, through its Frontier Wireless holding company, took the majority of the E Block, though Qualcomm won several licenses in this block, too.

If the E Block is better for broadcast, the auction produced minimal hope for a third, national wireless broadband network to compete with AT&T’s and Verizon’s. Regional competitors are possible, however.

FCC Chairman Kevin Martin pointed out that a bidder other than a nationwide incumbent won a license in every market. As a result, he said, there is the potential for a wireless third-pipe competitor to emerge in every market across the nation.

There are strict build-out requirements, to ensure that winning bidders actually build wireless networks rather than sit on the spectrum to prevent competition.

The auction may become a bonanza for equipment vendors such as Ericsson, Alcatel-Lucent, Nortel Networks, Nokia, Siemens, Motorola, Huawei Technologies and ZTE, among others.

Payments for licenses are due April 17.

More Broadband Direct:

• 700 MHz spectrum: Surprise! AT&T and Verizon win 

• Charter closes on second-lien notes sale, term loans 

• Cox promotes five execs 

• Chinese cable op chooses Tandberg for VOD, nPVR rollouts 

• Broadband Briefs for 3/21/08

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