Breaking down NextWave's licenses

The operator-turned-vendor has a lot to sell, but who are the potential buyers?

For the second time in its history, NextWave Wireless is engaging in a massive spectrum sale, clearing out its stores of broadband wireless and mobile licenses in the U.S. Some of the spectrum it's offering up has commanded high prices in recent auctions — notably its Advanced Wireless Service properties — but other pieces may not be so valuable.

In 2006, NextWave paid $115.5 million for its 154 AWS licenses, covering 62 million people in a variety of large and small markets ranging from Anchorage to Puerto Rico. AT&T and Verizon Wireless picked up large key markets in the AWS auction to add additional capacity to their networks, but even if either had bought all of NextWave's AWS spectrum, they would have massive holes in their footprint.

“Isn't that why they bought 700 MHz? To get a nationwide footprint?” said Peter Jarich, wireless infrastructure analyst for Current Analysis. As both operators have shifted their wireless broadband plans to 700 MHz, neither one is likely planning a major network expansion at AWS, Jarich said. To do so, one would have to acquire the other's AWS properties as well as NextWave's licenses. That's very unlikely to happen, Jarich said — operators don't help competitors gain coast-to-coast footprints.

That leaves a handful of regional providers. Leap Wireless targets many of the same mid- to large-sized markets where NextWave owns spectrum, and both Leap and MetroPCS are building out CDMA networks in the AWS band today. As neither has a nationwide footprint, the pockmarked nature of NextWave's holdings wouldn't concern them. Another potential bidder might be SpectrumCo, the joint venture between Sprint and the cable companies that won 137 AWS licenses in 2006. SpectrumCo has yet to do anything with those assets, however, and Sprint's partnership with the cable industry appears to be crumbling, as evidenced by the final collapse of Pivot last month. (See “The Bundled Advantage” on page 6.)

NextWave's largest holding, 30 Wireless Communications Service (WCS) licenses covering two-thirds of the population, has its own problems. Satellite interference issues at the 2.3 GHz band have limited the spectrum's usefulness, and its current major owners — AT&T, Comcast and Verizon — have launched little more than small broadband wireless trials in the band. Still, the spectrum could hold a lot of value, said Emmy Johnson, principal analyst for Skylight Research.

“It all depends on how the satellite issue plays out,” Johnson said. “It can be worked around.” For companies such as T-Mobile or the cable companies, WCS may be the last opportunity to acquire nationwide spectrum for a broadband wireless network.

Finally, NextWave owns a limited number of 2.5?GHz licenses, the same spectrum Clearwire and Sprint are using for their WiMAX rollouts. “EBS and BRS are tailor-made for WiMAX, but Sprint and Clearwire have plenty of spectrum — more than they know what to do with right now,” said Chris King, senior telecom services analyst for Stifel Nicolaus.

But NextWave doesn't just own 2.5 GHz spectrum; it owns 2.5 GHz in New York City, the most populated and spectrally pricey market in the U.S. If Clearwire and Sprint fail to form a new joint venture, Clearwire may seek to compete with Sprint there. If not, broadband wireless ISPs such as Towerstream may be interested. Towerstream is already launching WiMAX at unlicensed frequencies, and CEO Jeff Thompson has said he would be interested in acquiring licensed WiMAX spectrum at the right price. Towerstream participated in the 700 MHz auction but failed to win any licenses.