February 18, 1998
Government Prepares to Auction
Big Slice of Wireless Bandwidth
Associated Press
WASHINGTON -- A government auction of mammoth
slices of airwaves is drawing companies that seek new
fortunes in nascent wireless technology for telephone,
television and Internet services.
The Federal Communications Commission begins auctioning
licenses today for the new technology called local multipoint distribution service, or LMDS, and 139 companies are vying for them. The auction is expected to raise hundreds of millions of dollars.
The commission hopes companies using the new
wireless technology will provide services that compete
with local phone and cable companies.
The new service's delivery is akin to cellular phone
service. But to receive phone, television or data services,
customers need a small receiver dish in or near a
window.
On the block are 986 licenses. Half would give an
owner the right to occupy a large swath of airwaves --
1,150 megahertz -- letting a company simultaneously
provide 16,000 phone calls and 200 video channels.
That's the biggest slices of airwaves ever auctioned by
the government.
The rest of the licenses are for a smaller slice -- 150
megahertz.
One big license and one small license will be auctioned in
each of 493 separate markets, every one roughly the
size of a metropolitan area.
Webcell Communications Inc., a Washington, D.C.
company that wanted to bid, but couldn't arrange
financing in time for the scheduled auction, filed a
last-minute petition to a federal appeals court here
Tuesday, asking it to stop the auction. The FCC, which
previously delayed the auction at the company's request,
argued that the petition should be denied.
Participating companies range from established
telecommunications players such as Southwestern Bell
and US West to upstarts such as Teligent Inc. and
WinStar Communications Inc., to newcomers.
Before the auction, all companies were required to give
the FCC upfront payments. The more money a company
put down, the more markets it can bid on.
By this measure, the biggest potential bidder is WNP
Communications Inc., which gave the FCC a $100
million down payment. Backers include venture capital
funds Norwest Capital and Chase Manhattan Venture
Fund.
The second-biggest potential bidder is Nextband
Communications, backed by Nextlink and Nextel
Communications Inc., with a $50 million down payment.
The third-biggest potential bidder with a $33 million
down payment is BCK-RIVGAM, a group backed by
Mario Gabelli, one of the biggest mutual fund managers.
To help companies attract financing and to compensate
them for the FCC's decision not to let companies pay off
winning bids in installments, the FCC is offering
discounts for smaller companies. The discounts, ranging
from 25% to 45%, are taken off a company's total
winning bids after the auction closes. The company pays
the balance to the government.
The less gross revenue a company has, the larger the
discount. Companies with $15 million or less in gross
revenue get 45% off, companies with $16 million to $39
million get 35% off and companies with $40 million to
$75 million get 25% off.
A recent analysis by The Washington Post showed these
bidding discounts will benefit mainly wealthy venture
capitalists and those already in the business, rather than
newcomers.
FCC documents indicate WNP Communications and
BCK-RIVGAM, for instance, would get 45% credits.
Teligent and WinStar, both public companies that are
well-financed, would get credits of 35% and 25 percent,
respectively. The nation's fourth-largest wireless cable
company, Bidder PCTV Gold, backed by People's
Choice TV Corp., would get 35% off. |
