Jaws Drop Along With Gavel as FCC’s Pager Auction Ends : Communications: The $617 million bid for licenses is beyond all predictions. Interactive video draws another $196 million.
A gangbusters auction by the Federal Communications Commission for 10 nationwide paging licenses defied all predictions by the time the gavel dropped Friday afternoon, collecting $617 million from major investors that will go to the U.S. Treasury.
In addition to the pager licenses, the FCC auctioned 518 licenses for interactive video and data services that raised $196 million as of late Friday afternoon, as bidding came to a close. The two auctions raised a total of more than $800 million.
The auctions, the first in a series of landmark sales of the radio spectrum, began Monday and lasted several days longer than originally planned, as major corporations dug in their heels and kept upping the stakes.
By Friday, bidders joked that the affair had become a “hostage crisis,” and one wag hung a sign over a coffee pot, advising, “If you go over $1 billion, the refills are free.”
The whopping bids for the pager licenses reflect the fact that major corporations see a significantly higher value in the developing industry than anybody had expected. Winners exuded confidence Friday that they had not laid down a single penny too much.
“The bullishness in the auction has to be a harbinger of the bullishness in the business community for personal communications services,” said FCC Chairman Reed Hundt, who noted that it was not “lawyers and lobbyists” setting up back-room deals for licenses but “businessmen bringing cash into an auction room.”
The 10 licenses all went to major corporations, whose winning bids ranged from $38 million for a one-way license--permitting communications in only one direction--to $80 million for each of four two-way licenses that allow back-and-forth communication. The large allocation of new spectrum will permit innovative new two-way paging systems that will usher in a variety of new communications services.
Paging Network of Virginia, the nation’s largest provider of paging services, won the maximum allowable three paging licenses. Meanwhile, Pagemart II Inc. put down the smallest bid, at $38 million, for its license for one-way paging.
Prior to the auction, the communications industry had estimated that the winning bids would range from $5 million to $40 million, less than half what was ultimately put on the table. At least some of the bidders were clearly surprised by the high-stakes action.
“Every company would get on the phone at night to their headquarters and say, ‘We need more money, we need more money,’ ” said Kathleen Q. Abernathy, vice president for federal regulatory matters for AirTouch Paging. “Back at headquarters, people were crunching the numbers.”
Despite the extra money that AirTouch, a unit of AirTouch Communications of San Francisco, put down for its license, Abernathy said the company achieved its goal of getting a license that will expand its market coverage and increase the numbers of subscribers. AirTouch, a spinoff of Pacific Telesis, won the cheapest two-way license, at $47 million.
Judith St. Ledger-Roty, outside counsel to Paging Network, a Plano, Tex.-based firm, said many of the low expectations about the auction came from people who had no clue how the industry would ultimately value the licenses.
“They were operating in a vacuum, but there was nothing we could do about that without compromising our competitive strategy,” she said.
Paging Network plans to use its three licenses to develop a new system that will allow users to receive voice messages through small pagers at substantially lower cost than current cellular telephones, she said.
In addition, KDM Messaging Co., a unit of Seattle-based McCaw Cellular Communications, won two licenses; Nationwide Wireless Network Corp., a unit of Mobile Telecommunications Technologies of Jackson, Miss., won two, and BellSouth Wireless, a unit of BellSouth Corp. of Atlanta, won one.
This week’s auction covered licenses for nationwide services, but the FCC has another 3,534 licenses to auction later this year for regional paging systems. Hundt and industry officials said it is impossible to know how much money those will yield.
The FCC also has 1,371 broad-band licenses for two-way wireless telephone services that will be auctioned later this year, an auction event that the Office of Management and Budget has estimated might raise $10 billion.
An FCC spokeswoman said both the interactive video and the pager auctions cost $2 million to conduct, which she characterized as “a real bargain.”
Although none of the 10 pager licenses went to small or minority businesses, 32% of the interactive video licenses went to minority-owned businesses, Hundt said, thereby increasing the ranks of minority broadcasters by 50%.
Wireless Winners
Here are the winners in the federal government’s auction of 10 new nationwide paging licenses and their bids:
Company: Bid (in millions)
Paging Network of Virginia: $80.0
Paging Network of Virginia: 80.0
KDM Messaging: 80.0
KDM Messaging: 80.0
Nationwide Wireless Network: 80.0
BellSouth Wireless: 47.5
Nationwide Wireless Network: 47.5
AirTouch Paging: 47.0
Pagemart II: 38.0
Paging Network of Virginia: 37.0
