Smaller C-block licensees with only a handful of permits say they’re confident of making a profitable business from the properties they have, disregarding naysayers who claim a wireless business must be big to survive.
“There’s an assumption that small bidders are afraid to go it alone, and that we’re yo-yos who don’t know what to do,” said new licensee Vincent McBride. “I don’t think that’s true.”
Licenses for C-block personal communications services spectrum have been costly. That expense, along with the cost of buying new digital equipment, could be tough to handle in the long run for small operators without a large subscriber base from which to generate revenue.
“We find it hard to believe that these tiny, fragmented markets are economically viable,” said CS First Boston’s wireless communications group.
“(We) believe many were purchased as speculative investments by the high bidders, with the full intention of barely meeting the buildout requirement, and eventually selling them off at a profit-they hope-when the transfer restrictions lapse in three years,” said CS First Boston.
Not so, say a couple of small licensees in the Western states.
A mailman’s dream
Vincent McBride has never been to Williston, N.D., a farming community of 13,000 people on the northwestern edge of the state.
He didn’t select the market and cling to it tenaciously for four months during the C-block auction because it was his hometown, or because he operates a rural telephone company there.
“It was the only market I could bid on because of my deposit,” McBride said from his Santa Clara, Calif., home. His upfront payment of $12,380 was the lowest of all the C-block bidders.
“I’m just a mailman, but I have a dream of running a small telephone company. It’s all my money that’s invested. And now I’ve got a piece of the pie.”
And his phone is ringing off the hook with people who want a piece of his piece of pie.
“I’ve got so many people calling that want to give me money, so the money part doesn’t bother me. And I’ve been inundated with resumes. So, I’m putting together an L.L.C. partnership to build a wireless phone company,” McBride said.
His goal is to create a wireless local loop system. McBride expects some competition from Williston’s A and B cellular operators CommNet Cellular Inc. and Western Wireless Corp., but his system primarily will compete with local phone service owned by U S West Inc.
McBride hopes to deploy Code Division Multiple Access technology and buy equipment that has been manufactured in the United States. If small licensees pool their power, they can affect equipment costs, he said.
That’s not a new idea; it’s been promoted for more than a year by several groups, including North American Wireless Inc., which has been busily contacting the new license holders.
“I received a fancy brochure with gold lettering,” McBride said. “But NAWI doesn’t own anything. Do they have any income? They want to buy from me wholesale and sell it to someone I could sell it to.”
McBride believes small operators are more attracted to the “shotgun approach.”
“The 27 small bidders control 2.5 million pops, strategically placed in everyone’s market, in everybody’s way. It’s more economical to form a co-op. We might wholesale directly to MCI, without anyone in the middle. Then we go to Motorola [Inc.] to buy equipment and to Wall Street for private placement,” he said.
Calling from the Coast
Michael Tracy looks out the window of his Nebraska office and sees cows grazing.
He owns four radio stations, a paging system, a two-way radio business and now a license to offer personal communications services in the western town of Scottsbluff, Neb., population 13,700.
“A guy called me to offer help in negotiating my zoning,” Tracy said. “I’m a former member of the city council and I’ve been in business here for a number of years. I know everyone in town. And they’re calling from the Coast to offer me help?”
Like McBride, Tracy has been contacted by opportunists, and has heard industry discussion that small license holders “are on a short-term train wreck with disaster.”
“My engineers live here. We have a built-in customer base and know our system. We made our technological choice a year ago and now are refining the plan. There will be people in trouble, like those who don’t have a plan. But we’re innovative here,” Tracy said.
Tracy said he’s not about to sell his license. He’s got 27 existing tower sites just waiting for another device.
