Auctioning Airwaves

July 26, 1994|By New York Times News Service

WASHINGTON -- The Federal Communications Commission held the nation's first auction for the right to use the public airwaves yesterday, and the opening multimillion-dollar bids -- five times higher than what analysts had expected -- drew gasps from the audience and astounded perhaps everyone but the bidders themselves.

The auction for 10 nationwide licenses, which are expected to be used for advanced two-way paging services, is expected to continue at least through today here at the Omni Shoreham Hotel. The auction will end only when each of the 29 companies doing the bidding has either dropped out or won one or more licenses. The limit for any single bidder is three licenses, and based on yesterday's action, at least half of the licenses will sell for at least $30 million.

Representatives of the participating companies entered their bids from computer terminals behind drawn curtains like voters at a polling place. It will not be known which companies submitted which bids until winners are eventually named.

The companies taking part included big players in the paging business, Adelphia Communications, Airtouch Paging, BellSouth Wireless, Mobilemedia Communications, the Nationwide Wireless Network and U S West Communications.

"Everybody is surprised about the amount of money that's showing up," said Mark J. Golden, vice president of the Personal Communications Industry Association, a trade organization for paging companies. "The sky is the limit."

For the federal Treasury, the bidding represents a windfall -- and a sign of perhaps even richer auctions to come. The bidding is seen as something of a dress rehearsal for auctions to begin late this year for a set of potentially even more valuable licenses for the next generation of cellular communications, known as personal communications services, or PCS.

The Clinton administration had estimated that the auctions later this year might bring in $10 billion. But if the competition is as intense then as during yesterday's bidding, the figure could go much higher.

But for small companies, women and members of minority groups, which were to have been given an edge in the auction by having to pay only 75 percent of the amount of their bid if they won a license, the richness of yesterday's action seemed to make the promise of a discount a potentially moot point.

Thomas A. Hart Jr., a lawyer with the Washington firm of McManimon & Scotland, who is representing a black-owned company called Essence Television Inc. in the bidding, said that minority bidders had been "frozen out."

Until now, the FCC has always simply given away licenses to use the public airwaves, whether for radio and television broadcasting or wireless services such as paging or cellular telephones. But last year, Congress passed a law mandating that many types of nonbroadcast licenses be awarded to the highest bidder.

When Rep. Edward J. Markey, a Massachusetts Democrat and chairman of the House Telecommunications and Finance subcommittee, announced the results of the first round of bidding yesterday, many of those assembled in the large bidding room audibly registered their surprise with gasps. One company had bid $20 million each for two different licenses, which was twice the next-highest bid.

By the sixth and final round for the day, the FCC had been guaranteed to reap almost $200 million. The licenses cover swaths of the radio spectrum that are to be used for nationwide networks that will enable subscribers to not only receive paging signals but also respond to them with either text messages or voice mail.

In what the FCC billed as the first-ever simultaneous electronic auction, 29 companies registered to bid on the licenses by paying the FCC a $350,000 deposit for each of the 10 licenses they wished to bid on. They can buy only three, but are permitted to bid on all 10 as a way to increase their odds of winning.

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