In the end, Fort Morgan-based Viaero Wireless couldn’t hang with AT&T and Verizon.
“When you look at what some of the larger carriers paid for their spectrum, (we couldn’t compete),” said Viaero president Frank Dirico. “We were not able to do that because the pricing got too high.”
When the results of the highly anticipated wireless-spectrum auction were made public earlier this month, the nation’s two largest cellphone providers unsurprisingly emerged as the biggest winners, spending a total of $16 billion on the 700-megahertz auction.
The government auction of radio spectrum reclaimed from television stations raised $19.6 billion overall.
But for companies such as Viaero, a small cellphone service provider that operates in eastern Colorado, most of Nebraska, and parts of Kansas and Wyoming, the auction, which began in late January, yielded disappointing results.
“We were hoping for a lot more than we got. We only got three markets and were outbid on the rest of them,” he said. “Our expectation was to get a much broader area . . . perhaps four times the area.”
Dirico said the company was able to secure licenses for spectrum in Weld County and for two areas in South Dakota. Through cash and bank financing, the company spent $2.1 million on the auction, a pittance compared with the cellphone giants.
Dirico was one of the lucky ones. A handful of rural Colorado companies, including smaller telcos with Colorado operations, participated in the auction. But based on high prices and new rules disallowing small outfits from using special credits or discounts to offset bidding prices, many didn’t get very far.
“The process didn’t seem very conducive for smaller players,” said Gary Witt, executive vice president of the Colorado Telecommunications Association, a trade group of 26 rural telephone companies in the state. “We were very disappointed they weren’t able to be successful, particularly . . . where we believe the megahertz spectrum is going to make a big impact with consumers being able to gain access to broadband service,” he said.
Transmitted like TV signals
The spectrum being sold will become available to the winners next February, when broadcasters shut off their analog signals in favor of digital ones. The available wavelengths would allow companies to transmit data and voice signals over longer distances and through walls — just like television signals. It’s attractive because providers would need to build fewer towers to offer better and faster wireless services.
“It’s a shame the (Federal Communications Commission) wasn’t able to create more of an opportunity for some of the smaller companies to gain access to this spectrum,” Witt said. “It’s extraordinarily valuable.”
Pleasant View-based Farmers Telecommunications, a subsidiary of Farmers Telephone Company, based in the southwest part of the state, had better luck securing 700 megahertz licenses in an FCC auction in 2002 than it did this year.
“The dollar amounts were significantly less then than they are now,” said general manager Doug Pace. “It’s become a very competitive market.”
Pace wouldn’t offer specifics of the company’s participation in this year’s auction but said the company was outbid on licenses.
Industry watchers who followed the auction said AT&T’s and Verizon’s big wins would do very little to spur competition, despite FCC chairman Kevin Martin’s statements earlier this month that the auction would offer additional choices for consumers.
“A bidder other than a nationwide incumbent won a license in every market,” said Martin in a written statement. “As a result of the 700 MHz auction, there is the potential for an additional wireless ‘third- pipe’ in every market across the nation.”
But those “third-pipe” players will not have a nationwide presence, says Brian Santo, editor of CED Magazine, a publication about broadband technology.
“It’s all going to be very feeble competition and only market to market,” he said. “For example, Cox might be strong in Phoenix and nowhere else. Bresnan will be strong in Montana and nowhere else.”
Small players in Colorado weren’t the only ones unable to compete. According to Frank Ohrtman, president of WMX Systems, a Denver-based consulting company, outfits in rural areas of Utah and Wyoming were also unsuccessful in the auction.
“It was too much for them”
“All the guys in this class got shut out,” he said. “They’re a little blue after this. They tried really hard, but it was too much for them.”
Even raising the money to enter the auction was a gargantuan task for most, said Witt. Many Colorado Telecommunications Association members banded together with other local companies and investors to come up with the money needed to bid.
“These were huge investments. The bidders from Colorado were much more community-oriented than a lot of the different larger firms were,” Witt said. “So it does sting a little bit more.”
Many of the companies will have to build out to expand wireless service on their own. For Dirico, it’s an uphill battle he’s used to.
“For the small carrier, this business is not for the faint of heart,” he said. “It’s a lot of moving parts. It’s a daily challenge.”
Kimberly S. Johnson: 303-954-1088 or kjohnson@denverpost.com
