Fcc Gets $192m In Round One Of Spectrum Auction

The Federal Communications Commission opened bidding Wednesday on rights to a broad swath of the airwaves, with high bids totaling $192 million in the first round.

The Local Multipoint Distribution Service (LMDS) band of spectrum being auctioned uses microwaves to send high volumes of information between fixed points. The winner of one high-capacity license could transmit 16,000 phone calls or 200 television channels, creating new competition with local phone and cable monopolies.

WNP Communications, a private firm backed by half a dozen venture capital funds, by far placed the largest total amount of bids at $135.8 million.

No other firm placed bids totaling more than $8 million, with U.S. West in second place with bids totaling $7.9 million.

 

But the bids could rise substantially as the 139 participating companies review the first-round results and place new bids Thursday. The auction runs indefinitely until no company wants to increase its bid.

The FCC is auctioning a large- and small-capacity license in each of 493 geographic markets. Government budget analysts have estimated total proceeds from the auction of $500 million.

The highest single bid was WNPs $18 million offer for the large-capacity license in Los Angeles. US West bid $3.3 million for the small-capacity Los Angeles license.

For the New York City license, WNP topped all offers at $11.8 million for the high-capacity permit. No bids were placed for the small-capacity license.

WNP was also the leading bidder after round one for the high-capacity licenses in Chicago, San Francisco, Philadelphia, Detroit, Dallas and Boston, the FCC said.

Deregulation of the cable and telephone industries has so far failed to stimulate much competition to provide residential services, so the FCC is increasingly looking to new mechanisms for breaking the grip of local monopolies.

Licensees could potentially be competitors to cable television systems, one FCC staff member said. A lot depends on how the technology develops, but were confident that the licenses will be put to good use.

To ensure competition gets off the ground, the FCC prohibited local telephone and cable companies from owning LMDS licenses in their current service areas for three years. The companies are permitted to hold less than a 20 percent stake in a company that owns a license or to own licenses outside their areas.

The local telephone carriers could still end up dominating the new services through resale agreements, according to Richard Bergen, a consultant with Hardin & Associates advising several of the bidders.

The real revenue streams from LMDS will be in resale, Bergen said. The incumbent local exchange carriers may be the largest users of the spectrum at the end of the day.

The estimates might be higher, but the FCC revised its bidding rules for the LMDS auction after several high-profile winners in the $10.3 billion 1996 personal communications services auction declared bankruptcy.

The commission will no longer allow winning bidders to pay for licenses on an installment plan. New and smaller companies will get discounts of 25 percent to 45 percent, but everyone will have to pay right away.

In part to avoid the specter of more bankrupt license holders, companies in the LMDS auction had to make substantial upfront payments to qualify for bidding.

WNP put up $100 million by far the largest upfront sum.

Nextband Communications, owned in part by Nextel Communications, put up $50 million and BCK/Rivgam LLC, a private group including mutual fund manager Mario Gabelli, paid $33 million. Peoples Choice TV Corp. and CoreComm Inc. put up about $20 million each.

Other qualifed bidders included SBC Communications Corp.s video serices unit, US West and Winstar Communications.