Bidding for Wireless Licenses Starts Today
The federal government will begin auctioning an estimated $4 billion in licenses today for a new wireless technology that can transmit voices, TV pictures and computer data.
The sale by the Federal Communications Commission will cover the largest portion of the airwaves ever offered for sale.
The technology promises to increase competition and bring to market new communications capabilities, first to business and eventually to consumers.
Initially, the prime customers for the technology--known as local multi-point distribution services, or LMDS--will be small and medium-size companies with fewer than 500 workers, according to T. Lauriston Hardin, an independent telecommunications consultant in Virginia Beach, Va.
Such companies will be able to use the service to replace their existing telephone provider or Internet supplier. With the fast data transmission capability of LMDS, they will also be able to establish the internal corporate computer links known as intranets.
After months of uncertainty about how the auction would be conducted, 139 bidders signed up to participate and paid $357 million upfront for bidding rights. The FCC has 986 licenses up for grabs.
Although the agency is not saying how much it expects to raise in the auction, telecommunications experts said it could bring in as much as $4 billion.
The FCC hopes to avoid the embarrassment it suffered in 1996 and ’97 when it conducted spectrum auctions for a wireless technology called personal communications services, or PCS. It had expected to collect more than $9 billion, but many of the winners were very small companies or individual entrepreneurs who could not make good on their bids.
The FCC decided last year to stop collecting payments for six years and allowed bidders to return their licenses without penalty. As a result, it is unclear how much the auction netted.
When LMDS finally gets established, it could be used in any densely populated market, such as a condominium complex with 200 units, Hardin said. Residents could depend on the LMDS vendor to provide TV, phone and computer services.
Local telephone companies and cable companies offering service in a particular market would be restricted in participating in the auction. There are two licenses in each market, one for a bandwidth covering 1,150 megahertz, the other for a band of 150 megahertz. The cable and phone companies are allowed to bid only for a 150-megahertz license.
LMDS works through line-of-sight transmission, making it vulnerable to interference from trees, utility poles and buildings. Transmitters must be mounted atop buildings or at other high places.
The system would be similar to cellular phone networks, with each fixed transmission site serving a geographic “cell” with a limited radius.
The system offers the advantage of a clear high-speed signal. And it can be economically attractive, with customers paying only for use when they actually receive and transmit data. There would be no fixed monthly charge, as with a telephone. With LMDS, “you pay for just what you are using,” Hardin said.
The technology appears uneconomical for rural areas because of the need to build a large and comparatively costly network of transmitters in regions where customers are few and far between.
Currently, LMDS systems operate on a limited basis in such densely populated urban areas as New York; Caracas, Venezuela; and Bangkok, Thailand, where they transmit television signals.
The new service in the U.S., however, would be digital, offering high-speed data as well as voice and video capabilities.
Today’s auction session will be the first in an open-ended process. With the use of special software from the FCC, bidders can transmit their bids by computer.
Some FCC auctions have taken weeks and others have gone on for months. The agency did not set a deadline for this bidding, saying it will keep the process open while it receives and evaluates bids. The reason, it said, is that it intends to give bidders maximum flexibility to select different markets and to change their minds.
The agency will increase the number of bidding rounds as time goes by, going from the initial two a day to up to 16. The auction will end when the FCC announces a round and receives no bid.
* LMDS, HUH?: Just what are these local multi-point distribution services? D10
