Friday, April 25, 2008

Hey, Look, More Spectrum!

If your dreams of a Wireless empire were dashed by the results of the FCC's recent 700 MHz spectrum auction, you're not sure how you'd make your fortune with that Public Safety D-Block that's still up for grabs, and scrounging around in the "white spaces" isn't quite your style, take heart. There's soon to be more juicy spectrum slices on the market.

So what happened? Did the FCC find some more available bands hiding in the attic? No, they've pretty much cleared the shelves. What's happening now is what might be termed the secondary market. It's a little like collecting art. Sometimes people will collect unique works of art for decades, only to decide later to auction off the whole collection. In this case NextWave Wireless went to a lot of trouble to collect licenses on rare slices of the microwave spectrum. Now they've decided they really don't want them after all. NextWave is going to concentrate on its hardware business and has hired Deutsche Band and UBS Investment Bank to help them sell off the collection.

NextWave's licensed portfolio is enough to make a cellular carrier or WiMAX startup drool in envy. It consists of 154 licenses in the Advanced Wireless Service (AWS) bands at 1.7 GHz and 2.1 GHz, 30 licenses in the Wireless Communications Service (WCS) band at 2.3 GHz, and 22 licenses in the Educational Broadband Service (EBS) and Broadband Radio Service (BRS) band at 2.5 GHz. That's 206 licenses that cover a population area of 251 million people in the United States.

How much will you have to pay to be a Wireless spectrum baron? That remains to be seen. NextWave is reported to have spent around $500 million to build their license collection. What they'll be able to collect on their spectrum sale will depend on how valuable the big players happen to think these licensed frequencies really are. The 700 MHz feeding frenzy was at least in part due to the highly desirable propagation characteristics of radio waves in the UHF band compared to the higher frequency microwave bands. But who knows? Perhaps Google will take a second shot at getting into the wireless operator business.

My guess is that NextWave's portfolio will command a pretty penny. Wireless communications is still a growth story. Cellular carriers may have mature telephone services, but they're still low on the learning curve when it comes to deploying mobile television and high speed broadband services. How much broadband penetration has there been in the automobile market? How much mobile video service is there really? Not much. Not yet anyway.

Some of this spectrum might be snatched up to support backhaul service for existing tower sites. All the carriers are feeling the pinch of limited bandwidth as they try to upgrade their wireless data services to 3G and 4G capability. Bonded T1 lines will get them so far. After that they need fiber or wireless to support higher transmission speeds. WiMAX will only exacerbate that problem.

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