Lucent getting into LMDS equipment business:-)...................
"Lucent said it had agreed to acquire the LMDS wireless business of Hewlett-Packard Co., and that it would launch a new wireless-broadband-networks division in Milpitas, Calif."
multichannel.com
VENDORS STILL BULLISH ON LMDS DESPITE TEPID BIDS IN AUCTION
By FRED DAWSON
The wireless-broadband sector last week remained a study in contrasts, with the LMDS auction getting off to a tepid start amid a surge in vendor support for the new technology that included Lucent Technologies Inc.
All but a handful of the major telecommunications players passed on a chance to acquire licenses to the biggest block of spectrum ever offered by the Federal Communications Commission. It was clear that the growing enthusiasm for the potential of wireless broadband among vendors had not convinced most operating companies that they could peg their future in local broadband communications to LMDS (local multipoint distribution service).
Instead, after the first day's first round of bidding, the overwhelming leader -- with $135.8 million bid on about 110 million "POPs" (units of population) -- was a nonoperating entity backed by major venture-capital firms and former Providence Journal Co. president and chief operating officer Trygve Myrhen, known as WNP Communications Inc.
U S West Communications -- one of two Baby Bells in the running, along with SBC Communications Inc. -- was a distant second, with $7.9 million bid on the 150-megahertz B-block spectrum, covering about 35 million POPs. SBC wasn't in the top 10.
In all, the first round drew bids of $192.6 million, 89 percent of which went for the 1.15-gigahertz A-block segments. Continuing uncertainty about the new technology was reflected in Comcast Corp.'s last-minute decision to pass on the bidding after having initially filed as a potential participant.
"After looking further at the options, we were all pretty well convinced that the technical capabilities were still to be determined," said Joe Waz, vice president of external affairs and public-policy counsel at Comcast.
While it's still early, it was clear that the bidding had a long way to go if it was to live up to various projections suggesting that the spectrum was worth as much as $4 billion.
For example, WNP was the top bidder for the 1.15-GHz A-block in the top eight BTAs (basic trading areas), offering $1.23 per POP. But the company with the most high bids -- Teligent LLC affiliate AUCO Inc. -- was first in 74 markets with total bids of only $2.9 million, representing only seven cents per POP.
While such numbers may not bode well for a big government take, they don't necessarily spell trouble for LMDS, said Dan Ernst, analyst with The Strategis Group. That company has been bullish on LMDS, with projections suggesting that the sector could generate annual revenues of $7 billion by 2007, with cumulative capital spending by that time of about $8 billion.
A press release issued by Strategis in October said total bids for the 493 BTAs "should bring in over $4 billion," with dense urban markets going for as much as $25 to $30 per POP. But Ernst insisted that the company's research had only suggested that the value of the spectrum was $4 billion, and not that $4 billion would be bid.
"The real success of LMDS will depend on whether the markets get built out," Ernst said. "The less that's paid for spectrum, the higher the probability is that this will happen."
Moreover, Ernst noted, the real state of affairs won't be clear until about two months after the auctions are completed and the winners begin to form partnerships. Also, he said, it would take a while to determine the true ownership of some participants, which could well turn out to be shell companies with major backing from large telecommunications players.
This possibility was on the mind of FCC chairman William Kennard. FCC rules bar local-exchange carriers and cable companies from holding more than 20 percent interest in A-block spectrum in their territories. But he's afraid that those companies will find loopholes in the FCC's rules to wield power over how LMDS licensees use the spectrum.
"If, for example, an incumbent [operator] holds 20 percent-ownership interest and, in exchange for financing an LMDS venture, it also holds options to acquire additional equity of up to 80 percent more, the investor's ability to affect the competitive nature of the venture would not be significantly different than if it had direct control," Kennard said.
A United States Telephone Association spokesman said the group was leaning against appealing a federal appeals court decision upholding the ban.
But Mary McDermott, the USTA's vice president of legal and regulatory affairs, noted that the group had circulated a letter among key members of Congress in hopes of generating support for its position that those restrictions are not consistent with the Telecommunications Act of 1996.
"We're resigned to the fact that where LMDS is concerned, we're really out of it," McDermott said. "Our goal now is to prevent this sort of thing from happening in the future."
The emergence of Lucent as a system supplier in LMDS and other wireless-broadband segments should help to ensure that LMDS systems will get built, with or without big telecommunications players, Ernst said, noting that such suppliers traditionally have supplied financing to their customers.
Gary Bonhan, a spokesman for Lucent, said such financing was a possibility, depending on "the particular situation."
Lucent said it had agreed to acquire the LMDS wireless business of Hewlett-Packard Co., and that it would launch a new wireless-broadband-networks division in Milpitas, Calif.
"We're not ready to announce a product at this point, but we expect to be able to meet market needs as they develop this year and beyond," Bonhan said.
Other vendors that have shown enthusiasm for wireless broadband include Nortel, Ericsson Inc., Siemens Telecom Inc. and Bosch Telecom Inc.
Nortel, which recently acquired wireless-broadband technology supplier Broadband Networks Inc., has taken an early lead in the market as the end-to-end supplier for many of Teligent's 700 markets, in a deal valued at $700 million.
Sources said Teligent was seeking a second major supplier, which was said to be a factor in Lucent's decision to jump into the market.
Also joining the supplier lineup last week was Ericsson, which said that it decided to develop its own system, rather than acquiring someone else's. Like the other suppliers, Ericsson said it was tapping the big breakthrough in monolithic-microwave integrated-circuit radio design of the past two years that has allowed developers to make very small solid-state transmitter/receivers for use in transmitting interactive broadband signals on a point-to-multipoint basis over distances of two to three miles.
Lucent -- also using the MMIC technology and, like many others, relying on over-the-air adaptations of ATM (asynchronous transfer mode) as the transport-and-access method -- will be able to quickly integrate the radio-access technology into its other transport-and-switching components, Bonhan said.
"There's nothing that has to be invented here to allow our customers to make use of all of the equipment that you need to build a complete network," he said.
Some smaller vendors were joining the field, as well, including radar-systems supplier BEL-Tronics Ltd. of Mississauga, Ontario, and PCS-wireless-systems (personal communications services) company Wytec Inc. of Santa Clara, Calif. BEL-Tronics, which has been acquired by San Diego-based investment firm Akcess Pacific Group, believes that it has found a way to deliver lower-cost transceivers than other suppliers, said Drew Smith, a consultant to the company, who declined to go into details.
Wytec, unlike most suppliers, is focusing its initial product on one-way delivery of video services, while offering a migration path to two-way later on, said Margarate Ralston, executive director for North American programs. The company is also developing gear for other spectrum tiers all the way to 42 GHz, she said. |
