Cable Group Spending Big on Spectrum
Four Large Ops Buy $2.34B Worth Of Licenses
By Karen Brown -- Multichannel News, 9/24/2006 8:00:00 PM
Four of the nation’s top cable operators have effectively bought their way into the wireless services game, shelling out more than $2.34 billion to acquire Advanced Wireless Services spectrum licenses covering approximately 90% of the U.S. market.
The SpectrumCo LLC coalition — consisting of Comcast Corp., Time Warner Cable, Cox Communications Inc., Bright House Networks and cellular partner Sprint Nextel Corp. — was a top bidder in the Federal Communications Commission’s spectrum auction, otherwise dominated by cellular service providers. In all, the 29-day auction generated more than $13.8 billion in license revenue for the FCC by the time it closed Sept. 18.
15-YEAR LICENSES
The auction was one of the largest wireless spectrum grabs in recent history. It offered 1,222 licenses arranged in the 1710-1755 Megahertz frequency band and in the 2110-2155 Mhz band. The 15-year licenses can be used for fixed or mobile broadband applications, including broadband cellular services.
In all, SpectrumCo LLC won 137 licenses in a wide swath of local markets ranging from Hawaii to Bangor, Maine, and will pay out a little more than $2.37 billion total for the spectrum. That investment is second only to T-Mobile License LLC, which will write checks totaling more than $4.1 billion for its 120 licenses.
SpectrumCo also will fork over the most money for a single license in the auction, paying just north of $468 million for a license covering New York City and portions of New York State, New Jersey, Connecticut, Pennsylvania and Vermont.
Phoenix, Ariz.-based CableOne also was among the top winners, pulling down 30 licenses across the Midwest, West and Southwest totaling a little more than $22.1 million.
Under FCC guidelines, bidders cannot publicly comment on what plans they have for the spectrum until at least 10 days after the Sept. 18 auction close.
DOWNPAYMENT
That date also is the deadline for wining bidders to make their first downpayments for the licenses.
But based on the list of licenses SpectrumCo LLC won, it appears the cable consortium concentrated on the more market-focused economic area licenses, rather than the regional licenses that cover more geographic territory.
In addition, most of SpectrumCo’s 137 licenses are in the larger Block B category, a batch of spectrum including the 1720-1730 Mhz and 2120-2130 Mhz bands, totaling 20 Mhz of capacity. Other license blocks in that same frequency range offered only 10 Mhz of bandwidth.
In a research note, Merrill Lynch analyst Jessica Reif Cohen noted the SpectrumCo licenses were, indeed, wide-reaching, covering some 260 million wireless points of presence and almost 90% of U.S. markets.
INTEGRATION AID
She also pointed out that the consortium paid the most for licenses in the Comcast and Time Warner territories, reflecting the fact that the two are the top stakeholders in SpectrumCo. Comcast claims 52% interest in the consortium, while Time Warner claims 29%.
As for likely use for the spectrum, Reif Cohen pointed to comments Comcast executives made at a recent Merrill Lynch media conference that the cable operator does not intend to become a cellular operator and will, instead, use the Advanced Wireless Spectrum to further integrate its voice, video and data services.
Nor will Comcast immediately set to work building a spectrum.
“Alternatively, the cable operators may view this spectrum as a hedge against their existing Sprint JV, given Sprint’s intention to rollout its own wireless broadband network and the lack of clarity for Sprint’s long term prospects,” Reif Cohen said in her report.
