Verizon wireless purchased 10 MHz of spectrum in the San Francisco Basic Trading Area Wed. from regional provider MetroPCS for $230 million, a company spokeswoman confirmed. MetroPCS also signed a nationwide roaming agreement with Verizon Wireless that will allow the smaller company to expand its regional coverage. The sale will be structured to reduce tax liabilities related to MetroPCS’ plans to acquire spectrum from Cingular Wireless in the Detroit and Dallas regions for $230 million.
Wireless Spectrum Auctions
The FCC manages and licenses the electromagnetic spectrum used by wireless, broadcast, satellite and other telecommunications services for government and commercial users. This activity includes organizing specific telecommunications modes to only use specific frequencies and maintaining the licensing systems for each frequency such that communications services and devices using different bands receive as little interference as possible.
What are spectrum auctions?
The FCC will periodically hold auctions of unused or newly available spectrum frequencies, in which potential licensees can bid to acquire the rights to use a specific frequency for a specific purpose. As an example, over the last few years the U.S. government has conducted periodic auctions of different GHz bands to support the growth of 5G services.
TIA said Thurs. it supports congressional efforts to establish a date-certain deadline for DTV conversion. TIA said it would support the Dec. 31, 2006, deadline backed by House Commerce Committee Chmn. Barton (R-Tex.). Barton has said he will soon introduce DTV transition legislation, but it’s unclear if the bill’s deadline will be that early. One House source told us the bill isn’t expected to be introduced until May. Though TIA doesn’t represent broadcast entities, it does have interest in the 108 MHz of spectrum in the 700 MHz band currently occupied by analog broadcasting. “The propagation characteristics of this particular spectrum band make it extremely desirable for new, innovative broadband applications and state-of-the-art first-responder communications,” TIA said. Some licensees of spectrum auctioned by the FCC “cannot deploy new wireless services on it until the DTV transition ends,” TIA said: “Additional auctions of this spectrum for licensed commercial services are on hold, and consumers in rural America must continue to wait for broadband access.” By setting a date certain for transition, TIA said, high-tech firms can begin to plan for the potential use of the spectrum band. The deadline would also help drive the market for digital products, TIA said. Grant Seiffert, TIA vp-external affairs, said a deadline would help force action by broadcasters and manufacturers to accelerate the transition. Seiffert also praised Barton’s efforts to push the deadline. “He’s leading, that’s what’s important,” Seiffert said. TIA isn’t the only association to support the deadline in hopes of using the spectrum. The Information Technology Industry Council (ITI) also supports a hard-date deadline for broadcasters, primarily for the return of spectrum. Nick Kolovos, govt. affairs dir.-telecom issues, said its manufacturers need to know this year if there will be a deadline for return of the 700 MHz spectrum band, so they can plan on installing hardware and chips that can operate in the spectrum band. Without such a deadline, Kolovos said, it could be years before consumers reap the benefits of the spectrum. A deadline “is something needed this year for the return of this spectrum to benefit consumers,” Kolovos said.
Bidders as a whole seemed to get a good deal from PCS Auction 58, which wrapped up last week with prices significantly lower than the rash of sales leading up to the auction, Fitch said in a report. “When compared to the average per megahertz person of population (MHz POP) price of approximately $1.70 for large block transactions during the past year, the spectrum purchased during this auction ($0.99 per MHz POP) represents a good value to wireless service providers and closely compares to Verizon Wireless’ acquisition of Qwest spectrum (estimated at $1.00--$1.20 per MHz POP) in 2004,” Fitch said. To calculate the Qwest spectrum, the firm subtracted the value of the $50 million-$100 million in network assets Verizon also got under the agreement. Fitch observed that Auction 58 prices also were lower than the per-MHz POP paid by Verizon last year for NextWave’s licenses in 23 markets, at $2.85, or $1.76, assuming a high price for the 20 MHz N.Y. license. The prices are also lower than the $1.68 per MHz POP deal cut between Cingular and NextWave for spectrum in 34 markets in Aug. 2003. The report seems to raise questions about whether Nextel is overpaying for the nationwide 1.9 GHz license it will get as part of the FCC’s 800 MHz rebanding order. Nextel will pay $1.70 MHz POP, the same amount it will get back for the 800 MHz spectrum it will surrender under the plan.
Auction 58, which has officially ended after almost 3 weeks, raised $2.043 billion, substantially less than the $3 billion to $4 billion estimated by analysts, and only a fraction of the $16.8 billion bid in auction 35, the original attempt to sell NextWave’s former licenses in late 2000-early 2001. Gross bids before subtraction of bidding credits stood at $2.254 billion. The auction ended after 91 rounds of bidding.
The FCC at its meeting Thurs. proposed to eliminate unnecessary regulatory restrictions in the 900 MHz spectrum band and allow more flexible use of “white spaces” there. Specifically, the FCC proposed to amend Part 90 of its rules to provide more flexible use of the 199 channels allocated to the business and industrial land transportation (BILT) pools in the 896-901/935-940 MHz. “We believe that these unused spectrum and channels can and should be auctioned to the carriers that can put them to the highest-valued use,” said FCC Wireless Bureau Mobility Div. Attorney Advisor Michael Connelly in presenting the item.
The FCC revised its auction attribution rules, saying the determination of a bona fide co-op shouldn’t be based on the co-op’s tax exempt status. It also allowed rural telecom co-ops to demonstrate their co-op status either under Sec. 501(c)(12) of the IRS Code or by adhering to the co-op principles enumerated in Puget Sound Plywood v. Comr. of Internal Revenue. The FCC action was in response to an NTCA petition seeking to clarify a rule that determined how co-ops were granted a limited exemption from the auction attribution rules. The FCC had revised its rules so affiliates of a co-op’s officers and directors wouldn’t count against the co-op to determine whether it was eligible for auction bidding credits. But the exemption was only available to co-ops that satisfied all components of a “3-part test,” including procession of tax-exempt status. “The problem with that is that cooperatives can provide service to non-members [and] can also set up subsidiaries,” NTCA Senior Regulatory Counsel Jill Canfield told us: “Those things don’t really affect the cooperative, but… could make the cooperative no longer tax-exempt.” In its Jan. 31 order, the FCC granted a petition for reconsideration filed by NTCA and other rural carriers, admitting that the tax-exempt element of its 3-part test could prevent legitimate telephone co-ops from taking advantage of bidding credits. NTCA applauded the decision, which it said eliminated “an anomaly” in its competitive bidding rules that “threatened the ability of rural telephone cooperatives to provide new and advanced wireless telecommunications services to rural areas.” It said the ruling would help ensure NTCA member co-ops have access to bidding credits at future spectrum auctions. FCC Comr. Adelstein said in a statement he was “very pleased” with the decision, which he said would “promote the interests of cooperatives in expanding the scope of their telecommunications services while still ensuring that the benefits of this important exemption are limited to bona fide cooperatives.”
The FCC Wireless Bureau announced the auction of 5 licenses in the lower 700 MHz band C block (710-716/740- 746 MHz) to begin July 20. The licenses are relatively small -- those that remained unsold after Auction 49 in 2003. The biggest is for Mayaguez, P.R. Auction 60 will be the first to use the FCC’s Integrated Spectrum Auction System, a redesigned auction application and bidding systems.
Verizon Wireless and investor Mario Gabelli are among those signaling they plan to play a big role in PCS Auction 58, starting Jan. 26, based on information released by the FCC late Tues. Early indications, meanwhile, were that the FCC could see an active, competitive auction. As expected, 4 of the 5 national carriers will participate. Also, 2 formerly bankrupt carriers, Leap and MetroPCS, made major upfront bids. Altogether, 35 companies put in $325.3 million - less than 10% of what the auction is likely to fetch.
LAS VEGAS -- Verizon Wireless announced Fri. plans to launch the first U.S. 3G multimedia network starting next month at the Consumer Electronics Show in Las Vegas, a service that it is branding as Vcast. CEO Dennis Strigl said Verizon likely can take the service national with spectrum it now controls, and with a few additions the company will have enough spectrum to meet its needs beyond 2010.
LAS VEGAS -- Congress will “push” this year to “get more certainty” in the DTV transition and the turn-off of analog broadcast signals, predicted Pete Filon, minority counsel of the House Commerce Committee. Speaking here at the CES, he said Congress will consider subsidizing converter boxes to display DTV on analog sets.