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New & Old Media Firms Desire U.S. Spectrum

The upcoming August 9th auction of U.S. wireless spectrum -- intended to launch a new generation of mobile broadband/video -- is already a magnet for new and old media players with vastly differing agendas.

Among the 252 entities filing applications by the deadline are DirecTV and EchoStar Communications, which ordinarily are arch rivals but have teamed up as a single bidder. Another consortium unites four large cable system operators � including Time Warner � with cell phone carrier Sprint Nextel. Also in the mix are private equity financier Carlyle Group via its ownership of Hawaiian Telcom and, separately, Korean telco SKT, according to auctioneer the Federal Communications Commission.

"With such a diverse group of bidders, there will likely be widely disparate valuations for spectrum," notes Kagan Research senior consultant Sharon Armbrust.

For example, incumbent mobile phone carriers simply want to expand their existing wireless voice services with more spectrum-intensive broadband, meaning extending depth of service. Cable operators � which already offer fixed-wire broadband � see the auction for Advanced Wireless Services (AWS) as a springboard to enter the wireless sector for the first time. The two satellite TV platforms will use AWS to enter two businesses they don't currently offer � broadband data and wireless communications.

The auction will parcel out 1,122 licenses in the 1710-1755 and 2110-2155 MHz bands that are earmarked for AWS. The event is also known as Auction 66, because it is the 66th FCC spectrum auction since 1994. This is the first time in 10 years that a large quantity of nationwide spectrum, consisting of multiple licenses for all U.S. markets, will be available.

Bidders face a sort of multi-dimensional chess game of identifying populations by various metrics, geography attached to those populations, licenses attached to the geography, clustering licenses to achieve economics of mass scale and how much money to bid for selected licenses. One estimate puts the total cost of building out a single large-scale AWS network at $5-6 billion.

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