WASHINGTON-Some familiar heavy hitters have applied for a berth at the Feb. 18 start of the local multipoint distribution service auction, including Wall Street’s Mario Gabelli and Cablevision’s Robert Dolan; former Nextel Communications Inc. executive Jack Markell (now with Comcast Corp.); Haynes Griffin of Vanguard Cellular Communications; a number of rural telcos; James Dwyer; former Private Wireless Bureau chief Ralph Haller; and the really big fish-Craig McCaw, Wayne Perry, Dan Akerson and Dennis Weibling of Nextel/Nextlink. The question is: Will the really big fish swallow the competition, as it did in the recently concluded 800-MHz upper-band auction late last year?
NextBand Communications L.L.C., owned equally by McCaw’s NextLink and Nextel Spectrum Acquisition Corp.-the holding company that bid successfully for the majority of 800-MHz auction licenses-is the big wireless fish, and the McCaw family holds much of the financial interest in the venture.
Principals of NextBand were attending a management meeting in Utah and were unavailable for comment. A Nextel spokeswoman added that her company was not releasing any statements regarding the auction.
These well-known and experienced wireless entities also will be competing against some prominent wireline-affiliated players-Southwestern Bell Video Services Inc., Cincinnati Bell Telephone and U S West Communications Inc.-for 986 licenses that could be used for wireless local loop, high-speed data transfer and some video broadcasting.
Earnest money from accepted applicants was due at Pittsburgh’s Mellon Bank a week ago, but at press time, the FCC had not released a public notice naming the final qualified auction participants. One source close to the process told RCR that 30 percent of initial Form 175 applicants may decide not to make their upfront payments.
One applicant, Steve Zecola of Zip Telecommunications Corp., opted not to submit an upfront payment last week when one of his lead investors, a Japanese financier, dropped its support of Zip because of the monetary crisis in Southeast Asia. Zecola, who was a player in the C-block personal communications services auction, said, “This was a difficult endeavor to raise money for. People were burnt on the C block and the FCC cut out installments, which means I’ve lost to the C block twice. But it was just a piece of paper.”
Chuck Walters, president of Bethesda, Md.-based Walters & Associates Inc., which submitted an application under the name of RF Development L.L.C., did send in his payment, and he is cautiously confident that his group eventually will participate in the LMDS arena. Although Walters would not divulge his partnership’s plans for any licenses gained, he did say, “We put together a team that has a vision for this. We knew some pretty big players were going to be involved in this, and so the market would be built out. Building out a wireless system in rural areas won’t take much time, and costs will come down tremendously. I can smell it.”
High-speed data may play a part in Walters’ plan. “Telcos are selling second lines like crazy,” he said. “And businesses not only need a means of bringing high-speed data in, but they also need to push it out. They need more bandwidth than what they can get with twisted pairs.”
Walters did admit that going up against some of the big players at auction involves “enormous fear,” but he hopes that they will concentrate on the top 100 markets “and leave the rest of us alone.” However, with his 45-percent small-business discount, Walters believes he can make the money go far in second- and third-tier markets, and that the possibility exists to make at least a 13-percent return on investment if he were to sell his systems five years down the road.
Rural telcos, following an information meeting last December sponsored by the National Rural Telephone Association, have applied for the LMDS auction in significant numbers, due in part to the FCC’s allocation of licenses in the smaller basic trading areas. Caressa Bennet, a Washington, D.C., attorney, is acting as the bidding agent for many of them. While the Form 175s make it look like her clients put together a nationwide footprint of licenses, in reality, it was Bennet who told them such a deal may violate anti-collusion laws. However, some agreements already have been signed between a few, and those were disclosed prior to their acceptance as applicants.
Until Feb. 3, the LMDS auction was in some danger of being put on hold. The U.S. Telephone Association has come out in support of a Jan. 27 petition by WebCel Communications Inc. to postpone the Feb. 18 start date for 60 days. According to USTA, what WebCel wants is more time for itself “and other interested parties to secure financing, permit final implementation of the WTO agreements on opening markets to competition, which could influence the development of partnerships and financing, and remove the uncertainty of the pending appeal of the [Federal Communications Commission’s] LMDS order.”
USTA and WebCel both hope that the appeals court may reach a decision in the 60-day time frame to allow local exchange carriers to participate in the auction and to bid on licenses within their service areas. However, the FCC decided that current ownership rules that restrict LECs from owning more than 20 percent of a license in their own area, will stay in place, and LECs that do win local licenses will have to divest 80 percent of their ownership.
