Operators Seeking Air Lines

12/07/2007 7:00 PM Eastern

Two big cable companies — Cox Communications and Cablevision Systems — were among prospective buyers that lined up last week to get a crack at a big chunk of the nation’s TV broadcasting airwaves.

But Comcast and Time Warner Cable will be sitting out the Federal Communications Commission’s 700-Megahertz auction, set to begin Jan. 24.

Cox said it was preparing to bid without partners, and Cablevision confirmed it filed the paperwork to get a seat at the auction.

The two cable operators will face, among others, AT&T and Verizon Wireless, the two biggest U.S. wireless carriers, and dozens of smaller regional players. Analysts such as Jamie Townsend of JRPG Research expect the incumbent mobile providers to be the most aggressive bidders for the spectrum, which is becoming available as the result of the government’s requirement that local TV stations cease analog broadcasts in February 2009.

Spectrum Scorecard
Who’s in — and out — of the 700-Mhz auction:
Who's In Who's Out
* Not confirmed by the company
SOURCES: Company reports, Multichannel News research
Cox CommunicationsComcast
Cablevision SystemsCharter Communications
AT&TTime Warner Cable
Verizon WirelessSprint Nextel
EchoStar Communications*DirecTV
Leap WirelessMicrosoft

EchoStar Communications could be a bidder as well, although the company declined to comment. “Strategically, it makes perfect sense for them [to acquire 700-MHz spectrum] if they want to go beyond the satellite-video business,” said Townsend, head of strategy at investment researcher JRPG.

Companies that confirmed they will not participate include Sprint Nextel, DirecTV and Clearwire.

Comcast cited existing wireless-spectrum holdings acquired with three other cable companies as part of its decision to not bid.

SpectrumCo — the joint venture Comcast established with Time Warner Cable, Cox Communications and Advance/Newhouse Communications — acquired Advanced Wireless Services (AWS) spectrum for $2.4 billion in an FCC auction last year. The operators own 137 AWS licenses that cover 91% of the U.S. population.

Time Warner Cable president and CEO Glenn Britt, at the UBS Securities Media & Communications conference in New York last week, said SpectrumCo hasn’t decided what to do with the AWS holdings.

“We’re trying to understand that space and we’re talking to everybody in that business,” Britt said.

Comcast co-CFO Mike Angelakis, also speaking at the UBS conference, said the company has not “solved” the issue of how to integrate wireless services with the rest of its products and how “the business case become[s] attractive from a revenue-generation perspective.”

The four SpectrumCo companies have launched the Pivot-branded mobile-phone service in partnership with Sprint Nextel, but the venture has not demonstrated notable success to date.

Britt said there doesn’t appear to be strong demand among cable subscribers for a straight mobile-phone service. “I don’t think the quad play is a big deal,” he told investors and analysts at the UBS event. “We have no intention of trying to build the fifth cellular network.”

To Townsend, cable is in a bind with respect to wireless. Cable risks taking a hit from Wall Street if it engages in major capital investments, but AT&T and Verizon represent threats in expanding their ability to work wireless into their service bundles.

“The big cable companies are sitting there saying, 'We’re damned if we do and damned if we don’t,’ ” he said. “They could ignore wireless and hope it goes away, or embrace it.”

Others throwing in their hats in the ring for the 700-MHz spectrum include Leap Wireless, MetroPCS and Google, which lobbied the FCC successfully to change certain rules for the auction. The so-called open-access rule requires the winner of the C-block of spectrum to allow customers to use any application and any mobile device on its network if the winning bid tops $4.64 billion.

Google probably will bid the minimum $4.64 billion for the C-block simply to ensure the “open-access” clause is triggered and then stop bidding, Townsend said: “Google doesn’t want to be in the wireless business.”

The FCC is auctioning off 62 MHz of spectrum in the 700-MHz band that is currently used for analog TV broadcasts. The spectrum is considered valuable because it supports long-range transmission and can be used for voice, video and data.

Mike Farrell contributed to this article.

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