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Technology Stocks : CellularVision (CVUS): 2-way LMDS wireless cable. -- Ignore unavailable to you. Want to Upgrade?

To: EdR who wrote (1286)	2/24/1998 11:05:00 AM
From: James Fink	Read Replies (1) \| Respond to of 2063

VENTURE MONEY DOMINATES WIRELESS AUCTION WNP Communications, owned by seven venture funds, is the big winner in the LMDS bidding. By Dan Mitchell Red Herring On-Line February 23, 1998 For its current auction of LMDS broadband wireless spectrum, the Federal Communications Commission imposed rules designed to allow small entrepreneurs into the game. But as nearly always happens during spectrum auctions, the big money is getting its way -- and is squeezing out smaller companies. LMDS, or local multipoint distribution service, operates at high frequencies to allow two-way wireless transmission of voice, data, and video signals. It can potentially compete directly with local telephone and cable companies. Or at least, that's what the FCC hopes. Local telcos and cable companies are barred from participating. In an effort to allow smaller companies into the auction, the FCC is giving huge discounts off winning bids to firms based on past revenue figures. The less revenue a company has, the bigger the discount. The result: big corporations and venture capitalists have created new companies to buy licenses. These firms have little or no revenue to report, but have vast resources to draw upon. For instance, the biggest winner in the auctions so far is WNP Communications, which plunked down a $100 million down payment for licenses -- far more than any other firm. WNP is a bidding group composed of seven venture capital funds, including Columbia Capital Corp., Chase Manhattan Venture Fund, Providence Ventures, and Norwest Capital. The firm will get the full 45 percent discount off the bids it is winning in the auction. Meanwhile, firms like Zip Communications and WebCel Communications, which have slogged about in the competitive wireless business for nearly two years, were unable to raise sufficient financing to take part in the auction. As for WNP, "the structure of the company is well thought out to take advantage of the letter of the law," says Larry Winfield, a vice president at Hardin & Associates, a telecom consultancy. "Is it unfair? That's a tough one," he says. "I can see where the smaller companies might consider it unfair." None of the companies involved in the auction would comment. There are 139 firms taking part. After WNP, the bigger ones include Nextband Communications, partly owned by Nextel, which put up $50 million; BCK/Rivgam, backed by mutual fund manager Mario Gabelli and others, which put up $33 million; and People's Choice TV Corp., which put up $20.25 million. Other noteworthy (and well-financed) companies taking part are the publicly traded Teligent Inc. and WinStar Communications. One company that got shut out of the auction -- but doesn't mind at all -- is CellularVision USA of New York. CellularVision set up the nation's first and (so far) only operating LMDS network in Manhattan. And, seeing as how venture capitalists have little expertise designing and building wireless networks, the winning bidders are likely to call on CellularVision for help. And regardless of who wins, "we're happy that LMDS is coming on as an industry nationwide," says CEO Shant Hovnanian. Complaints by other companies about the FCC rules are "sour grapes," Mr. Hovnanian says. "Everybody had the same access to the same funds ... this is the marketplace at work." According to Mr. Winfield, whose firm advises some of the bidders in the auction, LMDS could represent a big competitor for both telcos and cable companies. "LMDS is faster, less expensive and a lot more flexible than trying to lay fiber in the ground," he said. And for that reason, it will likely do best in midsized markets. "Big markets are already saturated with fiber," he said.