FCC set to auction more PCS licenses

Wireless service providers later this month will begin bidding untold millions of dollars on spectrum that the FCC is set to sell in its third Personal Communication Services auction.

Although this auction is not expected to bring in the billions of dollars past FCC sales have generated, analysts say this spectrum is valuable to carriers looking to beef up capacity in heavily populated areas such as Cleveland, Denver and Los Angeles.

"It's an important auction," says Roger Entner, an analyst at The Yankee Group. Service providers are keeping their plans close to the vest, but Entner says he expects large wireless service providers such as Cingular Wireless and Verizon Wireless to be active in bidding for licenses in the larger cities.

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Wireless service providers later this month will begin bidding untold millions of dollars on spectrum that the FCC is set to sell in its third Personal Communication Services auction.

Although this auction is not expected to bring in the billions of dollars past FCC sales have generated, analysts say this spectrum is valuable to carriers looking to beef up capacity in heavily populated areas such as Cleveland, Denver and Los Angeles.

"It's an important auction," says Roger Entner, an analyst at The Yankee Group. Service providers are keeping their plans close to the vest, but Entner says he expects large wireless service providers such as Cingular Wireless and Verizon Wireless to be active in bidding for licenses in the larger cities.

There are 242 PCS licenses in the 1850- to 1990-MHz band being auctioned. The spectrum is available in chunks of 10 MHz, 15 MHz and 30 MHz.

While some carriers will be able to move into new markets for the first time, the majority will look to improve service in cities where they already offer service, says Bob Egan, president of consulting firm Mobile Competency.

The FCC is in the process of qualifying bidders, which were required to make an upfront payment by Dec. 29. The amount of the payment is determined by a handful of factors, including number of licenses a bidder is interested in winning, geographic region those licenses cover and if the bidder previously defaulted on a federal loan. A 10-MHz license in Boston, for example, would require a higher upfront payment than a 10-MHz license in Worcester, Mass., because the population in Boston is higher.

Next week the FCC is expected to reveal all qualified bidders. Although 49 entities filed applications to participate in the auction, only 22 initially were accepted, primarily because the other applications were missing information. That number could grow if companies refiled their applications before the end of 2004.

It's more difficult to determine which carriers will bid because the FCC is using old auction rules that let only entrepreneurial companies bid on the most sought-after licenses in the most populated cities. This was to prevent capital-rich companies from dominating the auctions. So instead of directly bidding on a license, some of the largest wireless service providers have created or teamed up with smaller companies so they can bid on these Tier 1 assets. "The letter of the law is being observed, but the spirit is not," Entner says.

For example, Sprint is affiliated with Wirefree Partners III and Verizon Wireless is affiliated with Cellco Partnership. The largest wireless service providers aren't the only companies interested in this spectrum. Bidders include resellers such as AirGate PCS, a Sprint affiliate, and small incumbent local exchange carriers such as BPS Telephone Company.