Al, more news regarding Nextel for you to get nervous about.
LMDS Auction Delay Sought
By Caron Carlson
WASHINGTON--Start-up companies seeking local multipoint distribution service licenses filed an 11th-hour request with the FCC Feb. 12 to delay the auction scheduled to open Wednesday.
Upfront payments deposited by 139 applicants upset some long-held expectations regarding the auction's capacity to generate revenue and assign licenses at intrinsic market value. Prospective bidders deposited $359.7 million upfront, but nearly two-thirds of that total came from just five entities, suggesting low-grade competition for high-value markets.
At the same time, several LMDS entrepreneurs, including WebCel Communications Inc., JATO Communications Corp., US WaveLink Telecommunications LP, Zip Telecommunications Corp. and CellularVision USA, were conspicuously absent from the list of qualified bidders. Webcel, US WaveLink and possibly others were preparing a "petition for auction extension" at Wireless Week's deadline.
Several entrepreneurs said they were unable to secure sufficient strategic partners and other financial backing by the upfront payment deadline. They fault a long-uncertain regulatory environment for frightening financiers away. Foreign investors, in particular, require more time to deliberate under assured regulatory conditions than the commission allotted, they say.
Qualified participants with the highest bidding eligibility appear to be largely venture capitalists looking for bargain spectrum. Because the participant list and upfront deposit total are considerably smaller than expected, it is widely believed the auction will raise less than the $4 billion predicted earlier.
Representatives of qualified bidders credit the technological complexity and the risks associated with LMDS business models, not the regulatory environment, for leaving financiers wary. Richard Bergen, president of Hardin & Associates Inc.'s LMDS Group, said investors were reluctant to ally with unproven entities. "Many of the declared participants became non-participants ... and the larger entrants appear to be more speculative. I attribute it to the concerns the investment community has regarding the technology."
The highest upfront payment, $100 million, came from WNP Communications Inc., a venture capital consortium, which applied for a 45 percent license discount given to "very small" businesses. Craig McCaw's new outfit, Nextband Communications LLC, deposited $50 million. BCK/Rivgam LLC, whose principals and affiliates-including Mario Gabelli of Gabelli Funds Inc.-hold C-, D-, E- and F-Block personal communications services licenses and wireless communications services licenses, deposited $33 million. PCTV Gold Inc., a wholly owned subsidiary of People's Choice TV Corp., deposited $20.25 million. Cortelyou Communications Corp., a wholly owned subsidiary of CoreComm Inc., deposited $20 million.
A small number of qualified bidders have offered well-arti-
culated business plans, but these generally are wireless operators using other parts of the spectrum. For example, AUCO Inc., a wholly owned subsidiary of Teligent Inc., deposited $5 million, and WinStar LMDS LLC deposited $13 million. Both Teligent and WinStar received their existing licenses at no cost.
Creative opportunities may emerge after the auction, however, for those with LMDS business plans and management teams but no spectrum. These parties may find themselves in demand to implement the licenses purchased by venture capitalists, some consultants suggest. "We may see many that dropped out [of the auction] re-enter LMDS as leased operators," Bergen said.
Also, Bell Communications Research Inc. released a study declaring LMDS a feasible alternative to wireline. Bellcore claimed the LMDS market will surpass $1 billion by 2012.
Top 10 LMDS Upfront Payments
(in millions)WNP Communications Inc. $100NEXTBAND Communications LLC $50BCK/RIVGAM LLC $33PCTV Gold Inc. $20Cortelyou Communications Corp. $20WinStar LMDS LLC $13Baker Creek Communications LP $10Eclipse Communications Corp. $10Touch America Inc. $6.8ALTA Wireless Inc. $6.2 |
