Greensboro Firm Faces Mixed Competition in FCC Airwaves Auction

Posted December 19, 2007 4:58 p.m. EST
Updated December 20, 2007 6:24 a.m. EST

— The billions of dollars worth of airwaves being auctioned off next month have drawn a peculiar pool of bidders, including Chevron, Microsoft co-founder Paul Allen and the world's third richest man.

The Federal Communications Commission on Tuesday released the names of 266 potential auction bidders for a choice swath of spectrum that's being freed as part of the switch to digital television in February 2009.

Among them is a group of investors in Greensboro and Washington, D.C. that has lined up some heavy hitters from Silicon Valley and a familiar face from Internet history.

Frontline Wireless backers include James Barksdale, one of the founders of Netscape, and L. John Doerr of venture firm Kleiner Perkins Caufield Byers.

The airwaves are considered especially valuable because the frequencies travel long distances and can easily pass through walls. The auction, scheduled to begin January 24, could raise as much as $15 billion for the U.S. Treasury.

While Google Inc., AT&T Inc. and Verizon Wireless, a joint venture between Verizon Communications Inc. and Vodafone Group PLC, won't drop any jaws for throwing their hats in the ring, scores more are hardly household names, such as GreenFly LLC, Paul Bunyan Rural Telephone Cooperative Inc. and Guam Cellular & Paging.

Many potential bidders are rural telecommunications carriers, but others are eyebrow raisers, at least in terms of their connection or lack thereof to the industry. Chevron USA, Inc. is one such peculiarity.

A Chevron spokesman did not immediately comment on the company's participation in the auction.

Russell Fox, a Washington attorney specializing in telecommunications, said Wednesday that although Chevron's intentions are difficult to predict, other petrochemical and industrial companies have licensed spectrum for decades and use it for internal communications.

"This is not certainly unheard of," he said.

The deep pockets and entrepreneurial zeal of multibillionaire and Microsoft Inc. co-founder Paul Allen make him a viable contender in the auction. He applied to bid through his venture capital firm Vulcan Inc., confirmed spokesman Michael Nank, who declined to comment about the firm's intentions.

Rebecca Arbogast, an analyst with Stifel Nicolaus, said Wednesday that Allen already holds some airwaves in the spectrum, which he picked up in a prior government auction a few years ago. He also controls cable television provider Charter Communications Inc.

"He may be in there hoping to get a good deal somewhere or do something interesting with the cable holdings," she said. He may also turn around and make a deal with AT&T, which holds the largest chunk of airwaves in that spectrum band.

The world's third richest man, Mexican financier Carlos Slim Helu, is also listed as an affiliate with the Puerto Rico Telephone Co. Inc., another potential bidder. But Arbogast said she's guessing that his participation is modest and related to that holding.

But the auction is also attracting Americans with fewer means and resources.

Mitchell Hoffman, who described himself as a registered nurse from San Diego with an entrepreneurial streak, said Wednesday that he's pooling his resources with others to bid on some airwaves. He wouldn't comment on how much he intends to bid, but said the airwaves are a "potentially strong investment."

If they win a sliver of the airwaves, Hoffman's group could potentially lease it to another company to build a network. Hoffman described his chances as "adequate."

Another potential bidder is Middletown, Rhode Island-based Towerstream Corp., which provides high-speed Internet service to businesses in eight major cities, including New York, Chicago and Los Angeles.

Jeff Thompson, the company's chief executive and president, said the spectrum would help Towerstream expand services to its business customers and into other geographical areas.

He did not rule out partnering or leasing airwaves to another company that can also provide Internet service to consumers, but wouldn't speculate on the company's chances.

"You just basically got to have your game plan and hope that your assumptions are correct and hopefully good things will come from that game plan," he said.