Guess all it took was a little more digging.
New wireless auction draws McCaw
Mother of all airwave public sales attracts attention
of one of the industry's savviest leaders
By David Bowermaster
MSNBC
Feb. 17 - Craig McCaw knows how to make a buck on promising wireless
technologies. In the 1980s, he built McCaw Cellular into a mobile phone superpower
before selling the company to AT&T for $11.5 billion in 1994. On Wednesday,
McCaw and a loyal coterie of battle-tested allies will put their telecommunications
savvy to use again when the federal government begins its latest round of airwaves
auctions
THE CHUNK of the radio spectrum up for grabs in the latest Federal
Communications Commission flea market is the largest, and it is reserved for a
powerful new flavor of communications service.
Named Local Multipoint Distribution System, or LMDS, the new technology can
simultaneously provide phone, video and Internet access service. At its top speeds,
LMDS can transmit data at rates of 45 megabits per second - or more than 1,500
times today's standard PC modems.
Those strengths are a big reason why the Strategis Group, a Washington, D.C.
telecommunications consulting firm, estimates the LMDS licenses are worth around $4
billion. The bidding could attract much less than that, however, particularly since rules
preventing the Baby Bells and cable companies from obtaining licenses within their
current service territories have caused many of those companies to stay out of the
bidding.
Still, LMDS received a major endorsement on the eve of the auction when Lucent
Technologies, the highly regarded telecommunications equipment vendor, purchased
Hewlett-Packard's LMDS division for an undisclosed sum. The company cited a
Strategis Group projection that the market for LMDS infrastructure will grow to at
least $8 billion in 10 years
A new McCaw entity made the second-largest down payment ($50 million) to
secure a place at the LMDS auctions, and observers expect the wireless pioneer to
have an important presence - indirectly, at least. McCaw has created a company
called Nextband LLC, headed by some of his most talented and loyal lieutenants, to
do his LMDS bidding. Nextband is jointly owned by Nextel, a wireless phone
company in which McCaw and his brothers have invested well more than $1 billion;
and NextLink, a McCaw-owned competitive local phone company.
Helping to lead Nextband are Daniel Akerson, chief executive of Nextel; and
Wayne Perry and Steve Hooper, who led AT&T Wireless before departing last May
to rejoin McCaw at NextLink. Perry and Hooper spent long years building McCaw
Cellular and continued to lead the business after it was swallowed up by AT&T. Perry
masterminded AT&T's bidding strategy in the early rounds of the government's
previous wireless auctions.
McCaw and his cohorts are publicly downplaying their interest in LMDS. "What
we did was put our oar in the water to ensure we are able to participate should they
hold an auction and nobody showed up," says McCaw spokesman Bob Ratliffe. "We
haven't built a big business plan around LMDS."
But analysts and industry insiders believe that McCaw could blend Nextband's
LMDS properties, Nextel and Nextlink to create a powerful full-service
telecommunications company in the business calling market.
Nextel has become a major force in the wireless phone business by targeting
companies with legions of mobile workers. The company has more than 1.2 million
phones in service and is growing fast.
How much money will the LMDS auctions raise?
* 23 responses
Less than $1 billion
9%
$1-3 billion
26%
$3-4 billion
22%
$4-5 billion
17%
More than $5 billion
26%
Survey results tallied
every 60 seconds
NextLink, created by McCaw in 1994 and with a presence in 30 markets in 11
states, is much smaller than Nextel but is similarly focused on the business market.
NextLink's mission is to lay loops of fiber-optic lines and install phone switches in cities
around the country to give businesses an alternative to the Baby Bells for their local
phone and data services. Such companies are in big demand: AT&T last month said it
plans to buy Teleport Communications Group, the largest competitive local carrier, for
$11.3 billion, and WorldCom Inc. previously snapped up local carriers Brooks Fiber
Properties and MFS Communications.
Yet unlike Teleport, which targets large, Fortune 500-type companies, NextLink
is aiming at small- and medium-sized businesses. That is where LMDS comes in.
"[LMDS] is going to be primarily a business, local telecom concern" says Daniel Ernst,
a consultant with the Strategis Group, with voice and data/Internet connectivity the
leading applications.
LMDS is a "point-to-multipoint" technology that sends signals from hub
transmitters to stationary 6-inch square antennas at each subscriber's home or office.
The signals only travel 1.5 to 3 miles, and antennas must be within a hub's "line of sight"
to pick them up, so LMDS is most likely to thrive in crowded urban areas rather than
in rural markets.
The potential advantage of LMDS for NextLink is that the company would not
have to dig up the street and lay costly fiber to reach new customers in buildings it
doesn't already serve; instead, it could just pop an antenna on the customer's roof.
Thus LMDS can "extend the reach of fiber rings to a much broader customer base"
than Teleport or other fiber-dependent competitive carriers, says Jack Reagan, vice
president of equity research at Legg Mason Wood Walker in Baltimore, Md.
Yet skeptics note that McCaw and Nextband would not be alone in exploring
so-called "fixed wireless" alternatives for phone and data services. Having mastered
cellular, the first major wireless technology, Craig McCaw seems to have his eye on
LMDS.
Among the combatants is WinStar Communications, which uses a different portion
of the airwaves for a similar service that is already up and running in 20 markets with
plans to extend to every major city in the country. Winstar plans to add more spectrum
by acquiring licenses in the LMDS auction.
Teligent, the fixed wireless start-up headed by former AT&T President Alex
Mandl and backed by Japan's telecommunications giant NTT Corp., is also building
out a fixed wireless solution and will be looking for additional airwave real estate in the
LMDS bidding.
Then there are the wired alternatives, most notably digital subscriber line (DSL)
from the Bells - which recently won an important endorsement from Intel, Compaq and
Microsoft.
But McCaw spokesman Ratliffe says Nextband has little to lose, since the
company is primarily shopping for LMDS bargains: "We could easily be outbid if the
bidding gets expensive."
Yet also important are the 800-pound gorillas that are not present: Long-distance
giants AT&T, MCI and Sprint were all thought to have an interest in LMDS as a way
to enter the local phone and data business, but all three are staying away from the
auction.
That could present a great opportunity for McCaw to leverage the assets of
Nextband and Nextlink to strike a deal with a long-distance partner. AT&T would be
a natural fit, given the ties of Perry, Hooper and McCaw back to the company, plus
new AT&T chief executive C. Michael Armstrong's vow to explore all technologies to
get AT&T into the local phone business. Yet McCaw spokesman Ratliffe says there is
nothing in the works right now with AT&T.
However, the LMDS bidding turns out - and the auctions could drag on for
weeks - McCaw is not likely to come out on the losing end. In 1996, when prices in
the so-called C-block auctions for personal communications services went through the
roof, McCaw bailed out early and avoided the financial strains afflicting the winners.
"My guess is he wants to be signed up and take a look at what the pricing does,"
says one former AT&T Wireless executive and McCaw associate. "I think Craig's
[mission] is to build the value of the asset, and then turn it to all comers." |
