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US wireless auction: what a palaver

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It would seem that Xmas panto culture has crossed the Atlantic and set up shop in the mobile market. "US wireless auction a failure", "Oh no it's not", "Oh yes it is".

The frenzied coverage of what is a pretty unexciting auction for much-needed bandwidth has seen media companies contradicting themselves before they've even finished their first story. Let's set a few things straight.

There are 422 licences up for grabs in 177 to 195 different spots in the US (depending on who you believe). Most areas will only have 10MHz available to give, but some will have 15, 20, 30 or even 40MHz of bandwidth on the slab. The most important concern the big cities: New York, Los Angeles, Washington DC.

There are six main players: AT&T, Verizon, Cingular, Nextel, VoiceStream and Sprint. We don't want to get involved with the involved and sordid histories of each and we don't agree that six companies is too much competition for the wireless market as long as they work together a little more.

The US mobile industry is in a dreadful mess, partly due to the business culture of non-cooperation, partly because of the logistics of covering such a big area. Europe and Scandinavia have a common standard and far denser population. They also have plenty of bandwidth.

The States, with its huge TV culture has seen bandwidth eaten up. These auctions give a little bit of sustenance to a starving mobile market - although even these nearly didn't happen. This isn't 3G stuff we're talking about either, it's just your run-of-the-mill mobile technology. But the companies do need it if they are to get networks working across large areas and encourage people to embrace mobiles like the rest of the brain-tumoured world.

Of course, the other complicating factor is that under FCC rules, no one company is allowed more than 45MHz in one market - far less that what companies have over here in the UK. The FCC is looking to change the law on this limit but of course has entered the increasingly Kafkaesque world of the US legal system. We were going to cover some more of the daft legal wrangles over the wireless market but we've changed our minds because they're boring.

So to the big question: how much money? What will they pay? Will it be too high? Too low? Mmmmm, just right?

As with the 3G auctions over this side of the Atlantic, no one has got a clue. It could go crazy, it could collapse and die. That hasn't stopped endless experts chipping in and screaming headlines every time a bid is raised. The eventual range of estimates came out as $5 billion to $20 billion.

The auction finally started last Tuesday and got off to a slow start. However, by today it has hit $9.3 billion, so it's safe to assume that $5 billion was too low. The cost of the licences won't hit the lunacy of the UK and German 3G prices, BUT the equivalent price may be paid since the US licences aren't 3G. Which, it is widely agreed, were too high. ®

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