FCC auction draws repeat entrepreneurs

A handful of people who bid in the disastrous C-Block PCS auction in 1996 plan to participate in the upcoming 700MHz contest despite warning signs indicating the potential for similar troubles.

Like the earlier auction, the 700MHz auction is set to occur in a faltering economy, presenting challenges to license hopefuls needing cash. Yet, just like that ill-fated auction more than 10 years ago, an oddball collection of participants plan to bid, this time including the Missouri Farmers' Union, the Roman Catholic Diocese of Brooklyn, and Disney.

The C-Block PCS auction was infamous because it was designed not just for companies with access to billions of dollars but for entrepreneurs interested in getting into the wireless industry. Postal carriers, lawyers, and doctors quit their day jobs and invested their savings, confident that U.S. Federal Communications Commission (FCC) incentives would help them make it big.

But the auction turned into a debacle. Of the original 255 bidders, 89 emerged with licenses, and only a handful of them actually started businesses. The rest went bankrupt, sold their licenses for pennies on the dollar, or returned them to the FCC in an amnesty program.

Take Vince McBride, an approved bidder for the upcoming 700MHz auction who lives in San Diego and has won and lost in several auctions. "There are ups and downs, but I keep trying," he said.

McBride was a postal carrier who sunk his life savings into the PCS auction in 1996. A series of lawsuits delayed the auction and then the award of licenses. During that time, Wall Street soured on the wireless market and license winners, who bid prices sky high based on attractive payment terms set by the FCC, struggled to finance their wins. McBride got lucky and returned his licenses to the FCC for little loss.

Then the FCC reauctioned licenses and McBride won a new one, which he managed to sell for a nice profit. But in a subsequent reauction, he won another license that was later repossessed by the FCC, which was forced to give it back to the original winner after a series of lawsuits.

McBride's sometime partner Scott Reiter, an emergency room physician who splits his time between Santa Monica and the Philippines, has had a similar series of wins and losses in FCC auctions. He too plans to bid in the upcoming auction. Reiter won a few licenses back in 1996 and shortly after got a few good offers from operators interested in buying them.

"I got greedy, basically," he said. He held out for better offers, which didn't come, and eventually had to sell his licenses at a loss.

Reiter was undeterred, though. He entered the 2002 auctions for 700MHz licenses -- back before there was a solid deadline for when TV broadcasters had to vacate the spectrum. He bought licenses in three markets, later selling the spectrum for a nice profit to AT&T.

"When I bought that spectrum, it went up in value like crazy," Reiter said. McBride also won 700MHz licenses then, later selling them to AT&T. They both agreed with AT&T not to disclose the purchase price.