WASHINGTON-The re-auction of personal communications services licenses for the C, D, E and F blocks closed last week with participants bidding $412.8 million in 78 rounds, or about $3.60 per pop, according to BIA Consulting of Chantilly, Va.
The Federal Communications Commission celebrated the end of the auction late Thursday. “Hundreds of licenses have been put into the marketplace. Licenses have been added to large markets like Dallas, Chicago and Phoenix, but also to smaller markets like Carlsbad, [N.M.], Alphena, [Mich.], and Fairmont, W. Va.,” said FCC Chairman William Kennard.
“With 48 small bidders winning 277 of the available licenses, the results also illustrate that there is definitely still a place for entrepreneurs in the PCS market,” said Personal Communications Industry Association President Jay Kitchen.
PCS carriers operating Global System for Mobile communications networks were the big beneficiaries of the PCS re-auction. With the exception of New Orleans, all of the major market holes in the nationwide GSM system are likely to have a GSM service provider within the next couple of years.
Indeed, Cook Inlet/Voice Stream PCS, which is backed by Western Wireless Corp., probably will turn on its systems in Chicago and Dallas-provided that all goes well with the licensing-in the next couple of years, said James J. Healy, chief operating officer for Cook Inlet. “We tend to not forecast service until [we turn it on] but systems of this size typically take 18 months,” Healy said.
Cook Inlet was the highest bidder, making 28 high bids totaling $192.3 million. A majority of this was the $117.9 million bid for Chicago and $62.4 million for Dallas.
Omnipoint Corp., another GSM operator, announced its bidding entity won 34 licenses, including Detroit and St. Louis. “We were able both to add new markets and to expand our footprint within our existing operating regions. Perhaps most important, companies committed to GSM will have licenses covering 99 percent of the U.S. population, and all of the major markets. The national GSM story will now be able to emerge,” said Omnipoint Chief Executive Officer Douglas Smith. Omnipoint’s bidding entity was OPCS Three L.L.C.
Leap Wireless International Inc. paid an average of $1.66 per pop for 36 licenses covering markets such as Salt Lake City and Little Rock, Ark. “The low price per potential customer is expected to facilitate Leap’s deployment of its unique Cricket service, which brings wireless to an untapped consumer market by offering unlimited local wireless calls for a low, flat monthly rate,” said the company.
Leap, a spinoff of Qualcomm Inc., is participating in the auction believing the FCC will rule it is not too big for the small company licenses it bid on.
ABC Wireless L.L.C., which reportedly has an agreement with AT&T Wireless Services Inc., was the most active participant in the re-auction. ABC Wireless made 64 bids totaling $30.2 million. Examples of the markets won by ABC include Chattanooga, Tenn., Des Moines, Iowa, and Ithaca, N.Y.
Sixteen bidders won only one license in the re-auction.
One of these bidders was Craig McCaw’s entity, ConnectBid L.L.C., which bid $2.57 million for Hartford, Conn.
Some have speculated McCaw did not intend to actually purchase Hartford but got it because no one bid against him. Indeed, a newsletter from the investment firm Donaldson, Lufkin and Jenrette Securities Corp. charged, “There is a high probability that [ConnectBid] exists solely as a self-righteous vehicle, much like it did in the original C-block auction to ensure the government receives fair value for licenses in what might otherwise be a non-competitive bidding process. If this is the case, McCaw wins no licenses but causes the eventual winning bidders … to pay more than the desired amount.”
ConnectBid had been an early participant in the fight for Chicago and Dallas.
The exact price per pop is difficult to compare with the price paid in the original auction because the amount of spectrum measured in megahertz is different for the various blocks and the events surrounding the various blocks are different, said Gerome Folkes of BIA Consulting. For example, original C-block licenses were for 30 megahertz of spectrum, but original winners were allowed to disaggregate it and return 15 megahertz to the FCC, meaning only 15 megahertz was available for re-auction.
BIA said it weighted the price per pop on the market size while others calculated it by megahertz. BIA’s estimate was $3.60 per pop, but others said it was approximately 15 to 18 cents per pop. “The average price per pop for the larger markets is going to be something different than it would be for a 30 megahertz [license] in Boise [Idaho] or Fredericksburg, Va., … To really get a feel for what people are paying for the pop you have to weigh according to the population,” Folkes said.
How the price per pop is calculated is important in showing how much less the bidders last week paid compared with participants in the original auctions held more than two years ago.
The price per pop may not only be an issue with budget crunchers.
The FCC could find itself questioning its reaction to the C-block debacle that led to the re-auction of the licenses in the first place.
The reaction of two FCC commissioners to a recent FCC decision to effectively cut off PCS service in rural Kentucky by refusing to give Southeast Telephone Inc. more time to make an installment payment for six licenses bought in the original auction, shows the FCC may be split on how the C-block debacle should have been handled.
FCC Commissioners Gloria Tristani and Harold Furchtgott-Roth blasted Kennard and Commissioners Susan Ness and Michael Powell for affirming a 1998 order rejecting waiver requests by Southeast and Wireless Ventures Inc. for more time to make installment payments on C-block PCS licenses.
“It is unfortunate that the [FCC’s] zeal to enforce a self-created deadline has hampered its ability to fairly address petitions for waiver and reconsideration and has frustrated its mandate from Congress to provide communications service to the public, including those in rural areas,” the two commissioners said in an April 2 dissenting statement.
In the end, the FCC was left holding one of the Southeast Telephone licenses when no one bid on Paducah, Ky. ABC Wireless won the other four Kentucky licenses for approximately 5 percent of the amount Southeast had agreed to pay. The final Southeast license for Williamson, W.Va., was won by Comscape Communications Inc.
The winning bidders should make their first payments and submit financial forms within the next few weeks so licenses can be awarded.
