LMDS auctions close with a thud: Lower revenues generated, but winners claim victory

The FCC drew a quick close to the auction of local multipoint distribution services licenses after 128 rounds, leaving many top bidders with more spectrum than they anticipated and incumbent telcos with more complaints.

Bidding for A and B licenses in each of 493 basic trading areas was slow throughout most of the auction. Of the 986 licenses on the block, 181 were won with a single bid, and 109 received no bids.

The auction raised $578,663,029 total in net bids, a far cry from the $3 billion pre-auction estimate. The lower-than-expected totals prompted claims from the U.S. Telephone Association that the auction, which prohibited local telcos from bidding on in-region A band licenses, was a failure. In a letter to regulators, USTA President Roy Neel said the exclusion of non-rural local exchange carriers from the auction "sent the wrong signals to potential bidders and, most importantly, to the investment community upon which rapid deployment of LMDS depends."

Winning bidders naturally disagreed, saying the auction put more spectrum into new players' hands.

"The FCC has been pretty clear on this," said Thomas Jones, president of WNP Communications, which was the auction's biggest spender, bidding $186.9 million for 40 licenses. "Their principal goal was to promote the use and create an environment where the spectrum could be used to provide new services to the public and encourage new entrants."

Few could accuse the FCC of missing the second goal. With local telcos and cable operators locked out and long-distance carriers uninterested, the auction attracted mostly smaller companies, although some had deep-pocketed financial backing. Of the 864 licenses sold, rural telcos won 142, women-owned companies won 30 and minority-owned companies won nine.

The biggest question facing the market now involves winners' use of the spectrum. Some, such as WNP Communications and WinStar, say they will build out networks. Others likely will wait three years until LECs are allowed to buy in-region spectrum.

U S West, the lone Bell regional holding company participant, came away with eight B band licenses, which cover 150 MHz in the 31 GHz band. The carrier will use those licenses, which cost almost $10 million, to augment existing wireline services.

With 1150 MHz in the A band, or about 40 times the capacity of a PCS license, winning bidders can provide multiple high-bandwidth services and have spectrum to spare, said Ed Cantwell, president of Bosch Telecom. "The amount of the spectrum that has been issued creates revolutionary capability. There's enough spectrum to serve many masters."

Indeed, Bosch last week launched an LMDS demonstration network in Dallas, where it has partnered with several other vendors and operators to showcase the spectrum's capabilities.