Many small companies look to bid in 700MHz auction

The upcoming 700MHz spectrum auctions by the U.S. Federal Communications Commission (FCC) have drawn bid applications from giant companies including Google and AT&T. But a number of small companies and individuals have submitted bid applications as well.

Late Tuesday, the FCC announced that it had accepted bids from 96 applicants and has another 170 applications that are incomplete for the auction of highly coveted spectrum that can be used for voice or wireless broadband service.

Some of those applicants may not complete their applications. In the FCC's advanced wireless services auction in 2006, 252 organizations submitted applications, and there were 168 qualified bidders.

It's typical that several initial applicants will bow out before they have to submit deposit payments, said analyst Jack Gold of J. Gold Associates. "When it comes to putting down earnest money, many [applicants] back away or can't get the money," he said.

Applicants have until Jan. 4 to pay their deposits or resubmit their applications for the auction, which begins Jan. 24.

The FCC designed the auction in an effort to attract small bidders. Up for sale is 62MHz of spectrum in the 700MHz band, now occupied by U.S. television stations. In late 2005, Congress passed legislation requiring U.S. TV stations to move to all-digital broadcasts and abandon analog spectrum between channels 52 and 69. The deadline for TV stations to end broadcasts in the 700MHz band is February 2009.

The spectrum is broken up into five blocks, with three of the five blocks divided into small geographic areas. A 12MHz block of spectrum called the A block is divided up into 176 small geographic areas, called economic areas, as is the 6MHz E block. The 12MHz B block is broken up into 734 local areas called cellular market areas. Bidders can win multiple regional or local licenses.

But the chances of small companies winning significant amounts of spectrum is "pretty slim," Gold said. "Any areas with significant population densities will bring in the big boys, who seek revenues from a mass market," he said. "I suppose some smallish rural areas may be of less interest to AT&T [or] Verizon, but these guys want true countrywide networks, so they will likely bid there anyway."

Several unfamiliar names are among the prospective bidders who submitted incomplete applications:

-- Office of Spectral Ecology, listed as an unincorporated association, with one board member, based in Montreal.
-- Dragon Arch, listed as a corporation based in New York City.
-- FaithFone Wireless, a Phoenix wireless carrier launched in September 2006. FaithFone is a self-described "purpose-driven Christian mobile phone company, offering a cell phone service combining faith and family content." FaithFone's wireless service offers daily devotionals, Bible passages and a prayer of the day through text messaging.
-- The Navajo Department of Information Technology.
-- Part-15.org, a nonprofit organization for users of unlicensed wireless spectrum.

Smaller companies with annual revenue of less than $15 million that have submitted complete applications include:

-- Grain Spectrum, based in Sarasota, Florida, a minority-owned company focused on building wireless networks for government users.
-- GreenFly, a mobile services provider founded in 2006 and based in Scottsbluff, Nebraska.
-- Xpressweb Internet Services, an Internet service provider based in Kanab, Utah.

The auction, expected to raise more than $10 billion, is likely to last several weeks. Many spectrum experts call the 700MHz band "beachfront" property because it can carry wireless broadband signals three to four times farther than some other spectrum bands.

Since early December, applicants have been in an FCC-mandated quiet period. The FCC spectrum auction rules prohibit collusion on bidding plans.