Carriers missed the boat on wireless fire sale

A few weeks ago, the federal government started auctioning off Local Multipoint Distribution System (LMDS) wireless licenses. Some thought the auction would create a gold rush for the modern era . They were wrong.

LMDS uses microwave signals to support integrated voice, video and data transmissions. It should reduce signal interference and fading, which, combined with its capacity advantage, should enable support for high-quality, high-speed interactive services and multimedia applications.

Overall, LMDS sounds like good news. After all, digital subscriber line technology isn't being deployed as rapidly as many would like.

The availability of high-speed Internet connectivity from cable providers is still spotty. Everyone agrees that a capacity constraint is keeping low-cost, leading-edge graphical and interactive applications from being deployed in home and remote offices.

So why did all of the major interexchange carriers (IXC) take a pass on bidding for LMDS licenses? The Federal Communications Commission accepted 138 qualified bidders for 986 LMDS licenses in 493 service regions, and not one of the major IXCs put in a bid.

How could that be? Isn't this a possible solution to all the bellyaching going on about how the RBOCs aren't opening up their nets quickly enough?

Wouldn't LMDS provide a diverse path into homes and businesses and open high-availability network services? Couldn't LMDS solve the bandwidth and bottleneck problems users face today in the local infrastructure?

We would have thought at least some long-distance providers would put a stake in the ground and start prospecting for gold.

A measly few million could buy licenses in most of the top-tier U.S. cities. The big carriers annually pay more than that to the RBOCs for termination fees.

Some of the registered bidders included Bell Video Services, US WEST Communications, WinStar Communications and Nextband Communications.

A company called Cortelyou Communications outbid WNP Communications in four of the top eight markets. WNP is the venture capital consortium that deposited the highest upfront payment, dominated the first round and was not challenged in the second round for licenses in Chicago, Detroit, Dallas and Boston. A lot of the unchallenged bids were for $5 million.

The primary implication of this disappointing showing is that it will probably take a lot longer for LMDS to be used as an access service into current and emerging WAN services. Also, it will probably take longer for businesses to derive benefit from LMDS-based local services.