PacTel Unit Bids Total of $21 Million for Wireless Cable
With the hope that it can start delivering video to California homes by year-end, a Pacific Telesis unit emerged as the second-highest bidder in the government’s first auction of licenses for wireless cable TV, which ended Thursday.
Pacific Telesis Enterprises, a subsidiary of Pacific Telesis Group, offered $21 million for 11 licenses, including ones covering Los Angeles and San Francisco, the Federal Communications Commission announced. Its bid total includes an astounding $11 million for the Los Angeles wireless license alone.
The auction brought in $216.3 million overall, twice as much as most analysts had forecast. The largest bidder was CAI Wireless Systems Inc., an Albany, N.Y., company in which Nynex Corp. and Bell Atlantic Corp. are large investors. It bid $49 million for 32 licenses for such markets as New York, Washington, Philadelphia, Boston and Atlanta.
“This shows how well-valued [radio] spectrum is, particularly for wireless and other advanced services,” said Andrew Kreig, vice president of the Wireless Cable Assn. International, a Washington-based trade group. “It is a significant milestone . . . and offers consumers a new video alternative.”
PacTel officials have said they intend to deploy wireless cable by year-end, marketing it as more affordable than the direct broadcast satellite, or DBS, services offered by companies such as DirecTv because there won’t be any upfront equipment costs and consumers will pay only a monthly fee of about $30 to $35. That price is comparable to DBS, but wireless cable can deliver local over-the-air channels, which DBS cannot.
In Los Angeles, PacTel will have the only license for wireless cable, but regulators figure that DBS and wired cable will provide more than enough competition.
Although some fast-growing new video transmission technologies, such as direct broadcast satellite, have stolen some of the luster from wireless cable, the 67 winning bidders in the FCC’s auction are expected to move aggressively to deploy the service. Wireless cable, which has been available in some communities for several years, uses a foot-long antenna to receive over-the-air video programming.
The big appeal of wireless cable is that, unlike regular cable TV, it does not require the deployment of hundreds of work crews to tear up streets and string coaxial cable throughout a neighborhood. Wireless cable uses microwave signals to beam programs to any antenna within the line of sight of a microwave transmission tower. The cost to reach each home is about $500, between one-third and one-quarter the cost to reach a home by coaxial cable, experts say.
The catch is that the licenses auctioned by the FCC currently authorize the transmission of only about two dozen analog channels.
For that reason, several Baby Bells, such as US West Inc. and Ameritech Corp., have taken a wait-and-see attitude about the format. They have chosen instead to build wired cable systems from scratch or to make small investments in existing cable operators. Investors, too, have been spooked by wireless cable out of fear that the technology that could increase its channel capacity is unproven.
Nevertheless, wireless cable operators have petitioned the FCC to approve digital compression technology that will enable wireless cable operators to transmit as many as 150 channels of digital programming. However, it is uncertain whether the FCC will approve the request before the current systems are built.
It is also not certain whether manufacturers of digital receivers such as Thompson Consumer Electronics can deliver within the yearlong time frame that winning bidders are required to meet to begin construction of their wireless cable systems.
Bidders declined to comment Thursday on their plans ahead of the FCC news conference scheduled for today to disclose the auction results.
“We are pleased at the apparent results,” said Bill Brittingham, a spokesman in PacTel’s Washington office, “but we really can’t comment until tomorrow.”
