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

To: Night Writer who wrote (1719)	3/26/1998 3:24:00 PM
From: James Fink	Read Replies (1) \| Respond to of 2063

Wireless Auction Attracts New Players To The Table Investors Business Daily March 26, 1998 Opportunists and doubters alike ruled the U.S. government's largest auction ever of radio spectrum for wireless communications. Started in mid-February, the auction ended Wednesday. Two relative unknowns emerged with the largest chunks of spectrum: WNP Communications Inc. and Nextband Communications LLC, a wireless start-up backed by cellular pioneer Craig McCaw. But bidders paid less than analysts expected. One big reason: Many marquee names in telecommunications stayed on the sidelines. They're waiting to see if the new digital technology that uses the high- frequency spectrum will work. The technology is called local multipoint distribution services, or LMDS. The government sold the wireless licenses to boost local-phone competition. Several venture capital firms pooled their money to form WNP. Earlysville, Va.-based WNP walked away with more than one-third of the available radio spectrum. It can lease or sell the spectrum to other phone companies or build out its own network. LMDS delivers voice, data and other services via cellularlike towers and rooftop receivers. But unlike cellular, LMDS has a wider data pipe. That could lead to much faster Internet access. LMDS can also be used for video and voice transmission. These possibilities give WNP the potential to become a major telecom player. "WNP can form a portfolio of relationships that creates a nice business," said Ed Cantwell, chief executive of wireless equipment supplier Bosch Telecom. "Other companies will look to them to partner." WNP isn't paying much for such a huge national presence, says Taylor Simmons, president of Washington-based market researcher Simmons Associates Inc. The auction raised $578.6 million for the government. Some analysts predicted as much as $4 billion. WNP will pay $187 million for the 40 licenses it won nationwide. But there could be a silver lining to the low bids. "That means there's more money to invest in building the infrastructure for a real network," said Douglas Smith, chief operating officer of Northern Telecom Ltd.'s broadband wireless access division. In contrast, an auction of spectrum for digital cellular services in '97 ran amok. The government raised more than $10 billion. That beat estimates, but it left some bidders unable to pay for their licenses and with too little money to build out networks. To prevent a replay, the Federal Communications Commission didn't allow installment payments this time. Bidders must pay in full before receiving LMDS licenses. So the LMDS auction could play out differently. Wireless equipment makers hope so. Bosch and Nortel aren't alone in seeing potential LMDS sales. In February, Lucent Technologies Inc. said it would buy Hewlett-Packard Co.'s LMDS business unit. But WNP is holding many of the cards. One reason for WNP's success is that it qualified for bidding credits intended to give smaller companies a break. Companies with less than $15 million in annual sales were eligible for 45% credits. So they will pay only $55 on every $100 bid for a LMDS license. "The rules (sought) to create a playing field that allows new entrants to establish themselves," said WNP President Thomas Jones. "How we use the spectrum is wide open. We can make a strong business case for buildout." WNP backers include Royce Holland, former president of MFS Communications Co. WorldCom Inc. bought MFS in '96 for $12.2 billion. WNP itself might be gobbled up by a big telecom company, industry analysts say. "The spectrum will wind up in the hands of companies that can make the most value out of it," said Jack Reagan, an analyst at Legg Mason Wood Walker Inc. Long-distance companies such as AT&T Corp., Sprint Corp. and WorldCom skipped the LMDS auction. But they still may be interested in building LMDS networks, analysts say. WNP will wind up with almost 2 1/2 times as much spectrum as the next-largest bidder, Nextband. It's a joint venture of McClean, Va.- based Nextel Communications Inc. and Nextlink Communications Inc. of Bellevue, Wash. McCaw is an investor in both wireless companies. Both declined comment on the LMDS auction. To spark competition, the FCC didn't allow regional phone companies or cable TV firms to bid for licenses within their operating regions. Many smaller companies, though, struggled to find financing. "About six firms like us didn't make it into the auction room," said David Mallof, president of Washington-based WebCel Communications Inc. Mallof says he couldn't find partners or investors. Similarly, CellularVision USA Inc. in New York, which in January indicated it would bid, didn't take part. That leaves WNP and Nextband leading the charge against existing players. New York-based WinStar Communications Inc. and Vienna, Va.-based Teligent Inc., using mostly other spectrum, are set to compete against the Baby Bells by offering a mix of voice, Internet and other services. Teligent dropped out of the LMDS auction. WinStar did pick up some spectrum. "We planned to be an opportunistic bidder, but the licenses we have are already adequate," said Teligent Chief Executive Alex Mandl. WinStar's wireless network is migrating from an older, analog technology to digital. Teligent is launching its new digital wireless system this year. Teligent and its equipment partner, Nortel, demonstrated the first commercial digital LMDS system last week in Los Angeles. It plans to offer service in 10 cities by year-end. But the success of Teligent or WinStar may be a double-edged sword, sparking new competition from companies waiting to see LMDS results. "There has been no commercial deployment of (digital LMDS)," said Christopher Larson, an analyst at BT Alex Brown in New York. "If it proves viable, others will copy the same idea."