TELECOM Digest OnLine - Sorted: FCC Starts Auctioning Rights to Airwaves

FCC Starts Auctioning Rights to Airwaves

John Dunbar, AP (
Tue, 08 Aug 2006 18:06:21 -0500

By JOHN DUNBAR, Associated Press Writer

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

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

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

"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

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.

On the Net:

FCC summary:

Copyright 2006 The Associated Press.

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