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As Wireless Auction Nears, It's Decision Time for Bidders : Telecom: Aspiring providers of advanced communications must register by today to take part in Dec. 5 sale of licenses.

October 28, 1994|JUBE SHIVER Jr. | TIMES STAFF WRITER

WASHINGTON — By the close of business today, federal regulators will learn who wants in on one of the biggest financial sweepstakes in U.S. history: a multibillion-dollar auction of licenses for advanced wireless services that could revolutionize the way Americans communicate.

After weeks of frenetic deal making that has resulted in a series of landmark alliances among the nation's biggest telecommunications companies, aspiring auction participants will register with the Federal Communications Commission today and later place deposits of as much as $16 million for the right to participate--with the eventual winners gaining the privilege of offering so-called broad-band personal communications services, or PCS.

The Dec. 5 auction of 99 broad-band licenses will be by far the largest and most important in a series of controversial wireless license sales that began this summer and have so far wildly exceeded financial expectations.

For the government, the December auction is expected to produce a windfall of more than $10 billion. For industry powerhouses and daredevil entrepreneurs alike, it offers a rare opportunity to get in on the ground floor of what some predict will be a $40-billion-a-year industry early in the next century. For consumers, it holds the prospect of go-anywhere communications with which people can send and receive phone calls, computer data and perhaps even video though devices as small and as portable as a wristwatch.

"These are licenses to run the telephone companies of the future . . . and build the wireless lane of the information superhighway," said Reed E. Hundt, chairman of the FCC.

Despite the high expectations of the FCC--and of telephone companies that have in some cases revamped their long-term strategies virtually overnight to position themselves for PCS--developing the new services will be no cakewalk.

There are more than half a dozen competing broad-band PCS technologies, and several have yet to be fully tested, noted Pekka Soini, director of business development for Nokia, a Finnish electronics powerhouse. A few that have been tested aren't suitable for use in moving vehicles or have "compromised voice quality," said Gary Brush, a product manager at Bellcore, the research arm of the regional Bell telephone companies.

In addition, the Justice Department is investigating whether some of the recent alliances established to bid on PCS licenses could violate federal antitrust laws. Many experts think the department ultimately won't take any action, but some say the auctions could still trigger a flood of lawsuits by disgruntled bidders, further delaying the deployment of PCS.

"This is a high-stakes game with a lot of money on the line, and I don't think you can expect people to just walk away and be good losers," said an official of one company that plans to bid in December.

Still, PCS is undeniably creating enormous excitement and anticipation both inside and outside the telecommunications industry.

Los Angeles lawyer Johnnie Cochran, for example, couldn't be busier these days with clients such as O.J. Simpson and Michael Jackson. But last month he flew to the nation's capital to hear a pitch on PCS, two Washington lawyers say. A spokesman for Cochran confirmed he flew to Washington in September but declined to discuss the nature of the visit.

"I think people who have looked at this understand there is a great deal of risk associated with an industry that is not yet built and proven, but there appears to be a consensus that wireless communications is one of the great growth areas of telecommunications over the near future," said a partner at Skadden, Arps, Slate, Meagher & Flom, a major Wall Street merger and acquisition law firm.

It has only recently become clear, however, just how much risk the would-be PCS providers will have to assume. The federal government's first wireless auction in July, involving so-called narrow-band PCS licenses (to be used for paging services) and some specialized interactive TV licenses, was a far more expensive affair than anyone had anticipated, drawing more than $800 million in bids.

The rich prices prompted an 11th-hour scramble among potential bidders to fortify their financial war chests for the December auction. Just last week, the regional Bell telephone companies US West, Bell Atlantic and Nynex announced they would team with cellular provider AirTouch Communications in the PCS bidding. Earlier this week, long-distance carrier Sprint Corp. and three of the nation's largest cable TV companies said they would form a new company, in part to bid for PCS licenses. Those contestants are expected to be joined at today's filing deadline by AT&T, GTE and many others.

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