Government Airwaves Auction Brings in Less Than Expected

The government’s largest-ever auction of the airwaves ended Wednesday after raising just $578 million, as bidders proved reluctant to wager big dollars on a promising but unproven technology for wireless Internet, telephone and video services.

Several industry analysts had expected bidders to pay as much as $4 billion for government licenses to use the new airwaves for so-called local multi-point distribution service, or LMDS.

But big telephone and cable companies such as SBC Communications Inc. and Time Warner Inc. were barred from bidding for the licenses in their existing markets. As a result, smaller start-ups were able to get licenses at bargain-basement prices.

Proponents still have high hopes for the technology, which, they say, will beam cable TV programming, computer data and telephone calls to businesses and consumers and eventually emerge as a tough new competitor to the entrenched cable and telephone industries.

“LMDS is not only a new technology, it’s a brand-new, unproven market,” said Larry Winfield, a vice president at Hardin & Associates, a consulting firm that specializes in wireless technology. “The equipment and standards for LMDS aren’t resolved, so you have a lot of uncertainty among investors. Although that doesn’t mean the technology won’t ultimately work.”

WNP Communications topped the bidding, pledging $186.9 million for 40 licenses, and NextBand Communications Inc., a joint venture of wireless phone carriers Nextel Communications Inc. and NextLink Communications Inc., came in second, with bids totaling $134.7 million for 42 licenses.