Big Guns In Little Holsters Shooting Up FCC Auction

Communications Today, Dec 20, 2000

By Malcolm Spicer, mspicer@phillips.com

The ranking of the top 15 bidders in the FCC's C- and F-block spectrum auction changes from round to round, but the representation of large telcos using small affiliates to bid for spectrum open only to small firms dominates the list in each round.

Through 13 rounds of bidding in the auction's seventh day today, Verizon Wireless was the high bidder with $1.6 billion bid for 41 licenses. Verizon Wireless, the joint venture of Verizon Communications [VZ] and Vodafone [VOD], isn't bidding with entrepreneur status, which the commission grants to companies by having gross revenues of less than $125 million in each of the last two years and total assets of less than $500 million

However, Cingular Wireless, the joint venture of BellSouth [BLS] and SBC Communications [SBC], is enjoying entrepreneur status by bidding through its Salmon PCS affiliate. Salmon PCS was the busiest bidder in the 13th round, placing bids totaling $938.6 million to lead for 105 licenses.

Alaska Native Wireless, the entrepreneur front for AT&T Wireless [AWE], made high bids for 41 licenses totaling $330 million in the 13th round.

Other entrepreneur bidders backed by major telcos that were among the top 15 bidders in the latest round were Connectbid, backed by investors in specialized mobile radio giant Nextel Communications [NXTL], and SVC BidCo, linked to Sprint [FON]. Connectbid led for five licenses with $532 million in bids, and SVC led for one license - covering the New York City area - with a $481 million bid.

Nextel also is bidding through its Nextel Spectrum Acquisition affiliate, which is not an entrepreneur bidder. Nextel Spectrum bid $561 million to lead for two licenses - New York City and Cleveland - in the 13th round. Sprint also led bidding for two licenses - in Chicago and Salt Lake City - through its nonentrepreneur affiliate, SprintCom.

Other major telco-backed entrepreneurs active in the latest round included Black Crow Wireless, backed by U.S. Cellular [USM], and Cook Inlet/VS GSM, backed by VoiceStream Wireless [VSTR]. Independent entrepreneur bidders also among the top 15 bidders were 3DL Wireless, 3G PCS and Theta Communications.

While Cook Inlet/VS GSM led bidding for five licenses at $63.8 million, VoiceStream itself was among the top 15 bidders with high bids for six licenses totaling $98 million. U.S. Cellular is not bidding on its own.

The FCC doesn't limit the amount of money companies can provide to their entrepreneur affiliates for license bids. A bidder's status as an entrepreneur is determined by the assets of the controlling partner, not by the assets of other companies funding the bidder.

The auction will continue through Thursday, when activities will be suspended until Jan. 4. The commission is auctioning 312 10-MHz and 43 15-MHz licenses in the C block and 67 10-MHz F-block licenses.

The Bottom Line

The FCC by now must realize the end of bidding won't signal the end of the auction. The number of challenges to license winners bidding as entrepreneurs may rival the actual number of bids made in the auction.