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2007

Microsoft Co-Founder Paul Allen To Bid On U.S. Wireless Airwaves

December 27, 2007 0

Paul Allen will compete against Google, AT&T and Verizon Wireless for a license to build a US wireless broadband network…

Washington — A venture led by the billionaire Microsoft Corp. co-founder Paul Allen has applied to bid in an upcoming U.S. auction of coveted wireless airwaves, according to auction documents released late on Tuesday.

“The list is in and, besides Microsoft co-founder Paul Allen, the auction applicants also included, as expected, Internet leader Google Inc. and U.S. wireless providers AT&T Inc. and Verizon Wireless, a joint venture of Verizon Communications Inc. and Vodafone Group Plc. Also listed was Qualcomm Inc., among many others.”

Allen and Google join 94 other bidders so far approved by the Federal Communications Commission (FCC), the regulator that is running an auction for a portion of the US airwaves expected to raise as much as $15 billion.

“It is a list of the bidders for the 700-MHz spectrum license that these companies could use to build a wireless broadband network that runs across the United States.”

Allen was listed with an entity called “Vulcan Spectrum LLC” among the applicants who filed to bid in the (FCC) auction of 700-megahertz spectrum, which is scheduled to begin on January 24.

“Allen heads an investment company called Vulcan Capital and is also a majority shareholder in U.S. cable operator Charter Communications.”

Other deep-pocketed bid backers include Carlos Slim Helu, the Mexican telecom mogul whose personal fortune was put at $59 billion earlier this year by Fortune, making him the world’s richest man -– just ahead of Microsoft’s other co-founder Bill Gates.

The winner of the auction will gain the right to a portion of the U.S. airwaves around the 700-MHz band that will become available when television moves from analog to digital signals. The FCC expects to raise as much as $15 billion in the auction.

“I’m not sure if it is an auction or a circus at this point. But this is extremely valuable technology, and because it is so valuable, we are seeing all sorts of folks participating,” said Michael Gartenberg, an analyst at Jupiter Research. “The players go well above the usual suspects of whom we would think would be participating.”

However, the most intense competition is likely to come from US mobile incumbents such as AT&T and Verizon Wireless, a joint venture of Verizon Communications and Britain’s Vodafone Group. If outbid both groups face being toppled from their dominant positions in the US mobile industry.

“The radio spectrum being sold off by the FCC is situated around the 700MHz band, an asset described as the “Mayfair and Park Lane” of the airwaves.”

Made available as television goes digital, it can travel long distances and penetrate walls easily. Crucially it has the potential to become, alongside cable and telephone lines, a wireless “third broadband pipe” -– a mobile internet network that would boast speeds comparable to current conventional broadband services.

Whoever wins the FCC’s 700-MHz spectrum auction in January is going to be in control of some “very valuable real estate,” said Gartenberg. Because the 700-MHz spectrum is so valuable, he said, we are seeing all sorts of folks participating.

Some of the bidders are smaller operations, such as GreenFly LLC, Guam Cellular & Paging, and Paul Bunyan Rural Telephone Cooperative. Beyond these telecom operators, the likes of Chevron are also in the mix. Even entrepreneurs such as Mitchell Hoffman, a registered nurse from San Diego, plans to bid on the airwaves.

However, a search of the documents did not reveal any application by EchoStar Communications Corp. There was speculation earlier this month that the satellite television operator might apply to enter the auction. Representatives of EchoStar could not be reached for comment.

The auction is seen as a last opportunity for a new player to enter the wireless market. Google and other Silicon Valley leaders see the wireless spectrum as a way to create more open competition for mobile services and devices than those available on existing networks.

The FCC did say that, if a buyer at the minimum price or better is not found, the open-access provisions in the auction might be dropped. The open-access provisions mean that the auction winner will be required to license part of the spectrum to third parties, essentially making that spectrum open for use by any device or application.

Many industry observers say that if Google wins the spectrum, it will leverage the opportunity to further its advertising reach on mobile networks. Of course, Gartenberg said, Google’s aspirations are likely to be very different than those of a wireless carrier, and those might be very different than what Paul Allen has in mind.

Google has been testing an advanced wireless network at its headquarters in Mountain View, California, that could be used if it won the spectrum and decided to become a national mobile carrier, it said.

“We are just going to have to wait and see who bids it up,” Gartenberg concluded, “what they pay for it and where it goes.”

“The auction is slated to take place on January 24, 2007.”

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