<font color=magenta>Forbes article about NextWave / FCC spectrum games.
(Ramsey -- now that I have discovered this wonderful color stuff -- see
Subject 36425
for more details ... will you add a new rule for posting on your thread ?)
*************************
September 04, 2000
Treachery In Cell Phones
By John C. Dvorak
The Japanese use their i-Mode cellular phones to surf the web in
high-resolution color and find friends around town with positioning maps
on the display. By year-end there will be 10 million of these nifty phones
in Japan. In Europe the video version of web-enabled phones is in trials.
With a small camera on the phone, you can take pictures of yourself as
you talk.
All hot stuff, but we're seeing nothing like it in the U.S. Why are we
always on the bottom of the world's totem pole when it comes to new
phone technologies? The U.S. Federal Communications Commission is
holding one of the biggest-ever wireless spectrum auctions in
September, offering the promise of a new generation of phone service.
I've heard that before.
Americans were supposed to experience a great leap forward in 1995
when a piece of wireless spectrum known as the C Block (in the vicinity
of 1.9 gigahertz) was auctioned off. The idea was to encourage small
entrepreneurs with innovative technologies to keep the U.S. close to
the forefront of global wireless developments.
What a fiasco that became. The FCC held a spectrum auction from
December 1995 to May 1996. It brought in $10 billion in bids to be paid
over ten years. The winners began to line up additional financing to
build their networks. As they were looking for capital, the FCC stalled in
delivering the licenses by as much as a year. This ruined most business
plans right off.
Congress, meanwhile, decided that it could make more money selling off
more spectrum. The D, E and F Block auctions (slices of bandwith not far
from C) were hastily organized. The sudden glut spooked Wall Street,
and money stopped flowing to the C Block entrepreneurs.
The FCC was in a pickle because bidders stopped their payments. So it
grabbed back what spectrum it could. If any company failed to make a
payment on time, the FCC kept the money already paid and planned to
re-auction the spectrum. Says Daniel Flick, now managing director of the
telecom advisory firm DSJ Consulting, "If a business had done what the
FCC did to these little companies, it would be indicted for fraud."
One especially disappointing failure was 21st Century Telesis, which
was going to roll out an inexpensive flat-rate service using a variation of
Japan's i-Mode phones. But the company could not get financing after
the 1997 spectrum dump and says that the FCC eventually stole its
licenses back by FedExing a quarterly bill to the company after the
payment was due. The company looks to lose its 19 licenses and more
than $21 million, put up mostly by small investors.
Then there's Nextwave Telecom in New York. It went into Chapter 11
bankruptcy in June 1998. As part of its reorganization, Nextwave offered
in December 1999 to pay its entire bill of $4.3 billion to keep its licenses.
But with spectrum once again valuable, the FCC refused the payment; it
plans to keep Nextwave's payments to date (totaling $505 million) and
re-auction its spectrum this year.
A big chunk of spectrum is scheduled to be auctioned later this year,
including the 1996-97 licenses. Will we see those jazzy new phones
popping up all over the country? Hardly. Only established traditional
telcos are likely to bid. Andrew Seybold, editor in chief of the new
Forbes/Andrew Seybold's Wireless Outlook, says the government is to
blame for the near absence of true wireless competition. "Now there is
no longer any chance of a new player emerging in the wireless market,"
he says. "It has become impossible." |
