Vendors vie to become telecom powerhouses

Washington, D.C.

At first glance, it seems as if the Federal Communications Commission's local multipoint distribution service (LMDS) auctions concluded last week without the participation of any telecommunications bigwigs. But don't let little-known companies such as WNP Communications, Inc. and Nextband Communications LLC, which took home most of the LMDS booty, fool you.

WNP, of Earlysville, Va., laid out the most money: $186 million for LMDS licenses in 40 markets. The company has telecommunications veteran Royce Holland as a principal and primary investor.

Holland is former president of MFS Communications and current CEO at Allegiance Telecom, Inc., a competitive local exchange carrier (CLEC). WNP's president, Thomas Jones, also is an industry veteran. Before starting his own business, New Venture Directories, Inc., an industry consulting firm, more than five years ago, Jones was with Netrix Corp. Netrix is a maker of backbone switching products. WNP won LMDS A licenses in prime markets that included New York, Chicago, San Francisco, Philadelphia, Detroit, Dallas-Fort Worth and Boston. WNP also picked up a B license in the Los Angeles market.

WNP is planning to offer broadband services to business customers and other services providers using LMDS spectrum, Jones said. But the start-up is still in the process of acquiring infrastructure equipment, he said.

Nextband Communications, based here, is investing $134 million in licenses that cover 42 markets. Nextband's exact service plans are not set in stone, but industry heavyweights Craig McCaw and Daniel Akerson are creating Nextband's business plan.

Nextband is jointly owned by Nextlink Communications, Inc. and Nextel Spectrum Acquisition Corp., a wholly owned subsidiary of Nextel Communications, Inc. Akerson, who is CEO of Nextel, a specialized radio service provider, holds the same title at Nextband. Nextlink Communications, Inc. is a competitive telecommunications service provider McCaw founded in 1994. He is still the company's primary shareholder. McCaw previously founded McCaw Cellular Communications, Inc., which AT&T bought in 1994 for $12.6 billion.

While more recognizable than some of the other big LMDS bidders, WinStar LMDS LLC is certainly not a household name. But the company dropped $43 million for 15 LMDS licenses.

The parent company of Winstar LMDS, WinStar Communications, Inc., has centered its business in the wireless service arena, and is expected to use LMDS to expand its service offerings. Although big name telecommunications carriers such as AT&T, Sprint Corp. and MCI Communications Corp. were curiously absent at the LMDS auctions, analysts said the new LMDS players could create some future telecom powerhouses. "In reality what we have here is a group of very experienced service providers that did their homework on the values that LMDS will bring to the market," said Bob Egan, research director at Gartner Group, Inc., a Stamford, Conn.-based consulting firm. These top bidders, he predicted, "are the CLECs of the future."

The industry veterans and telecommunications start-ups see LMDS as a quick and less expensive way to expand into new markets. LMDS has the most spectrum - up to 1150 MHz with its A licenses - of any wireless spectrum that has been auctioned off by the FCC.

The first LMDS networks will be in place this year, and by 2002, LMDS will be prevalent in local markets, Egan said.