Editor's Corner


What happened? It was supposed to be the most exciting auction for wireless airwaves we've ever seen, with non-traditional players like satellite TV companies DirecTV and EchoStar expected to go big. The two, who bid in partnership, plunked down the largest upfront payment of all bidders at nearly $1 billion. Another bidding entity, backed by Charles Dolan, chairman of Cablevision System Corp., bowed out too. Two cable companies remain in the action, the JV between Sprint Nextel and its four cable partners and regional cable provider Cable One.

Instead, we are seeing familiar faces dominate Auction 66. Verizon Wireless on Friday was the highest bidder on 20-megahertz licenses in four big regions, committing to pay some $2.8 billion. Meanwhile T-Mobile, whose survival literally depends on getting more spectrum, had high bids on 125 licenses totaling $3.8 billion.

While industry pundits have been jabbering about operator incumbents possibly facing three or more new nationwide wireless competitors after the auction, it really was suicide for companies like DirecTV and Echostar, whose core businesses revolve around delivering satellite services, to emerge as the highest bidder. Incumbents will always have an advantage when it comes to new spectrum allocations. They can leverage their existing sites, back-end systems and customer service organizations and thus justify spending billions on new spectrum.

The question is, has the window closed on new licensed entrants into this industry? It doesn't look like entities are going to get a good deal on spectrum in the future (700 MHz spectrum is a highly valuable commodity because of its propagation advantages). When the PCS auctions occurred in the mid-1990s, all operators were regional with only two competitors in each market and a significantly low penetration of services. There was room then for operators like Sprint and T-Mobile to obtain an equal footing with incumbents. Now players are nationwide, with a significant amount of scope and scale in a maturing market. One could argue that this time around, the wireless broadband market is under-penetrated, leaving room for competitors to deploy low-cost WiMAX. But we have yet to see a business case based on wireless broadband services succeed.

It will be interesting to see how NextWave and Clearwire can compete using WiMAX. NextWave is still bidding in the auction. News Corp. and its majority-owned DirecTV business are rumored to be talking to Clearwire to set up a nationwide WiMAX network. Get partners to throw in enough money and it just might work. I'm sure they can run to Intel Capital. Didn't it say it has an endless amount of money to invest in WiMAX?

On another interesting note, China Mobile, with its massive subscriber base, surpassed Vodafone as the highest valued company. As of Aug. 17, China Mobile's market cap was $136 billion compared with Vodafone's $133 billion. 

ALSO: Join Brian tomorrow as he hosts a webinar on protecting wireless networks from ever-increasing interference. Learn about solutions to this growing problem, and hear about best practices from ISCO, a leading wireless equipment manufacturer. For more information or to register, click here. - Lynnette

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