Cellcos face challenge from satellite, cable cos in AWS auction

The first three of these have also registered a joint bid for AWS, making a strong signal of commitment with a $638m down payment. Any spectrum they gain would likely be ploughed into the joint venture with Sprint, which will not bid in its own right, since it already faces the challenge of migrating the Nextel iDEN system in 800MHz to CDMA; rolling out the upgrade to its core 800MHz/1.9GHz CDMA offering, Rev A; and building its broadband wireless system in its 2.5GHz band.

The cable major that has stayed out of the collaborations, Cablevision, will bid in its own right. In what spectrum analysts Kagan Research call a "defining moment" for the US wireless business - bringing in a new set of competitors - it is still likely that the major cellcos will carry off the bulk of the winnings, since this spectrum is so central to their business plans.

A really dramatic shake-up of the operator landscape will wait for 700MHz, whose spectral efficiency and range makes it even more attractive for next generation moneyspinners such as mobile television.

So we do not see many WiMAX providers among the companies putting down the largest deposits - the exception being NextWave, which emerged from bankruptcy last year with only its 2.5GHz holdings intact (its cellular spectrum, acquired in an earlier auction and never built out, were mainly sold to Verizon as part of its turnaround plan). NextWave plans to create a WiMAX network using its own technology, but will need additional spectrum to have any impact beyond the local.

And while some internet players have filed applications, their failure to make hefty upfront payments suggests these are largely a way to test the water or snap up specific city rights, rather than a real onslaught on the US telecoms sector.

The 700MHz auction could be very different, partly because of the attractiveness of the spectrum and partly because new technology options such as the various mobile TV platforms and software defined radios will be more mature and cost effective by then. At this point, even more disruptive operators are likely to bid - including internet players like Google or PC giants like Intel and Microsoft - but many of the ground rules being laid down with AWS will impact on just how radical the change that 700MHz could bring is allowed to be.

For instance, there is still debate over whether any portion of the 700MHz spectrum to be allocated in 2008 will be license-exempt, and also whether the rules should favor the broadband wireless agenda - encouraging large, non-traditional providers offering innovative multimedia services - or the universal access agenda, weighting the terms in favor of rural carriers, which have their eye on the band as a potentially cost effective way, with its long range capabilities, to deliver services to sparsely populated areas.

Some of these rural players have applied to bid for AWS rights, but the smaller cell sizes, compared to 700MHz, still make it tough to arrive at a profit model in remote populations. The really rural players do not appear among the big hitters in terms of upfront payments for AWS, although some will only need to bid for small territories of course, but the urban-focused regional carriers are very enthusiastic.

Although the largest regional player, Alltel, is staying away, MetroPCS and Leap Wireless are both in the top 10 deposit payers. These are both low cost, flat rate operators mainly working in urban areas, and Leap in particular has seen strong growth in recent quarters (last year, analyst company Yankee Group urged Verizon Wireless to buy up MetroPCS or Leap in order to go after high volume, low income population groups and compete with the MVNOs, without compromising its core brand, an outcome that still seems likely in the medium term).

Leap offers service in 40 markets across the country and recently was the highest bidder for 13 licenses in the Federal Communications Commission's Auction 58. MetroPCS was the high bidder in six markets during the same auction, including a 10MHz license covering Los Angeles, and also acquired spectrum from NextWave's bankruptcy settlement. It is focused on California and the south east.