SPECTRUM AUCTIONS
Three years ago, the broadband PCS auctions for small businesses began with grand, gavel-banging flair. Today they have all the panache of a playground flea market. On March 23, the FCC will once again attempt to unload PCS radio spectrum - used mainly for digital phone services - left behind from the original auctions.
Congress originally bet that federal budget woes could be offset by allowing businesses to bid on prime radio real estate. After bringing in more than $10 billion in bids, the auction was deemed a wild success. Then the process began to sour. Several winning bidders ran into serious financial problems, leaving them unable to pay for the spectrum they had purchased. Now, 42 PCS licenses once held by Pocket Communications, since bankrupt, will go up for bid, along with another 314, most of which are from other companies that could not cover their bets. Among the licenses up for grabs again are those that service Chicago, Dallas, and Phoenix. The auction should raise at least $158 million, but it won't likely reach the $3.1 billion the spectrum raised in 1996. On the other hand, it's a bundle more than the $13.6 million the FCC drew from the Wireless Communications Service auction in '97. Those proceeds were a mere 6 percent of the total ante required just to bid on a license.
The biggest problem plaguing the PCS auctions is one the government is not likely to solve. Most of the licenses up for grabs are entrepreneur blocks, meaning only smaller companies - those with gross revenues of less than $125 million for the past two years and total assets of less than $500 million - are eligible. Intended to foster competition and innovation, this rule foments more problems than it solves: Smaller companies don't have the financial footing needed to compete in a telecom market that encompasses the globe.
And while the FCC might auction and re-auction till doomsday, the financial community can't be expected to embrace little telecom wannabes.
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