U.S. government auctions of wireless spectrum always attract plenty of established telecoms as well as the usual contingent of speculators and telecom wannabes. The latest auction appears to be no exception: When the Federal Communications Commission announced potential participants on Dec. 18, the list included everyone from AT&T to Google (GOOG), long expected to enter the bidding. The big surprise? This time, the list of unexpected players, ranging from a venture backed by Microsoft co-founder Paul Allen to oil giant Chevron USA, appears to be longer than ever.
Some 266 organizations have announced their intention to participate in Auction 73, which will make available the last chunk of the most desirable airwaves for wireless services. While most potential participants—including entities backed by AT&T (T) and Verizon Wireless—still have to correct and beef up their applications to qualify for the auction, the crowd already appears far larger—by more than 70%—than expected, says Richard Doherty, director of consultancy Envisioneering Group. That has the potential to drive up auction prices. "When there was a land rush in the U.S., people who had no business there rushed in," he explains.
Due to limited information provided by the filings, many of the organizations listed are nearly impossible to trace to their owners, often turning out to be foreign-backed companies, investment funds, and law firms. Analysts caution that some of these pioneers may yet be disqualified from the auction: The FCC has strict rules governing foreign investment in U.S. airwaves, for one. As a result, entities backed by the existing national carriers, regional telcos like U.S. Cellular (USM), and well-known companies such as mobile TV provider Qualcomm (QCOM) and cable companies like Advance/Newhouse may end up winning this auction, as they have in the past. None of the companies that have filed are allowed to talk to the press for the duration of the auction, and thus could not comment for this story.
This time around, telcos may be bidding on their own and also backing other parties: Qualcomm has disclosed that it has a joint-bidding agreement with others. That could indicate the company's mobile TV business, MediaFlo, has accepted backing for this auction from an investor—a customer like AT&T or Verizon Wireless.
All eyes are also on Dish Network (DISH), participating in the auction under the name Frontier Wireless. Dish has been rumored to be in merger talks with fellow participant AT&T, but auction rules prohibit any discussions among bidders for the duration of the auction, which could last until late spring. While EchoStar had filed to participate in a previous wireless auction, a year ago, it withdrew partway through, likely because it felt the bidding went too high. As prices in Auction 73 are expected to be even steeper, EchoStar may have trouble getting the funding to buy a chunk of the wireless spectrum that would allow it to provide the wireless service it needs to better compete with telcos and cable companies.
Many Potential Players
Some unexpected auction filers deserve a second look as well. There's Vavasi NexGen, owned by Bellevue (Wash.)-based Indian Connexion, a U.S. company that is, in turn, the property of Vavasi Telegence, an Indian technology company. The parent company is launching high-speed wireless data services in countries around the world. Clearly, the U.S. could be its next target. Indian Connexion has filed a petition with the FCC asking for consent to be foreign-owned.
Then, there's Chevron USA—yes, the oil company. Chevron (CVX), which has hundreds of drilling platforms out in the Gulf, is hoping to build its own communications network allowing workers to talk to one another and to headquarters (currently, the company uses satellite phones for that). But that network may end up being quite ambitious, as the company may also be interested in owning a network for the tracking of its various trucks and containers as they move to their destinations around the country.
Microsoft co-founder Paul Allen's Vulcan Capital has an eye on the spectrum as well. The reasons for Allen's interest could be twofold: Allen, of course, is the chairman of U.S.'s third-largest cable company, Charter Communications (CHTR). And Charter, just like auction participants and cable companies Cox (COX) and Cablevision (CVC), increasingly finds it necessary to offer wireless services along with video and high-speed Internet services. Several cable companies that bid in this auction might eventually band together and offer nationwide coverage.
But Allen, known for his philanthropy, may also be interested in building out a wireless network that offers low-cost wireless connectivity for people who can't afford cell phones today. "This may be a chance to be a benefactor and to be profitable," Doherty says.
Another participant to watch is Guam Cellular & Paging, which provides services in Guam. Since 2006 the company has been owned by the largest Japanese carrier, NTT DoCoMo, which may have bigger plans for the U.S. wireless market than it lets on. DoCoMo may look to provide high-speed wireless data services across the U.S., and Guam may be a starting point for that effort.
Entity Pulse Mobile actually has the backing of TeleGuam, a rural carrier on the island of Guam, where Shamrock Holdings has an investment. Shamrock, headed by Roy Disney, director emeritus of Walt Disney (DIS), also holds a significant investment in Disney, which has dabbled in wireless services, albeit unsuccessfully. Disney Mobile service for kids and their parents closed its doors earlier this year. Perhaps Roy Disney is hoping to figure out how to combine Disney's stellar cartoons, shows, and film content with a mobile service, and is looking to acquire spectrum for that purpose. On the other hand, TeleGuam may simply be looking to improve its coverage. Both TeleGuam and DoCoMo, however, have to find a way around the no-foreign-ownership rule.
Then, of course, there are the potential speculators. Wireless industry veteran Charles Townsend, who sold a chunk of his 700-MHz spectrum to AT&T this summer for about $2.5 billion, is at it again. His Aloha Partners will participate in Auction 73 under the name of Bluewater Wireless. Based on Townsend's track record, he may try to buy a chunk of the spectrum to turn around and sell in a few years. But then, that's what a land grab is all about.