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Allen May Beat Google In Spectrum Bid

Written on
Dec 26, 2007 
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Wall Street Journal  |
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Allen May Beat Google In Spectrum Bid

mobiletv1.jpgIf Microsoft Corp. co-founder Paul Allen succeeds in acquiring spectrum at the Federal Communications Commission auction next month, it would add to the valuable collection of airwaves he already has amassed in the Pacific Northwest.

Mr. Allen, through his Vulcan Spectrum LLC, disclosed a commitment last week to bid at the Jan. 24 auction, alongside Internet giant Google Inc., wireless operator AT&T Inc. and others.

While his intention to bid came as a surprise to many, it could allow him to add to the swath of spectrum he has acquired through Vulcan in the valuable 700-megahertz band. This low-frequency variety is valued for its ability to penetrate walls and other obstructions.

Mr. Allen snapped up 24 700-megahertz licenses through Vulcan in 2003, FCC filings show. Those licenses are based entirely in Washington and Oregon and include major metropolitan areas such as Portland, Ore., and Seattle.

The question is what Mr. Allen plans to do with his spectrum holdings.

Tim Sanders, an analyst with market researcher Maravedis Inc., said Vulcan may be acquiring and holding the spectrum for cable operator Charter Communications Inc., in which Mr. Allen bought a controlling stake in 1998. Keeping the spectrum in the hands of a private entity like Vulcan could save Charter money on taxes, Mr. Sanders said. In addition, he said, it could reduce the amount of information publicly traded Charter is required to divulge about what it might be doing with those assets.

“Amassing spectrum is a venerable tradition,” Mr. Sanders said. “There are tons of spectrum in the U.S. just sitting there waiting for somebody to do something with it. Mostly it is in the hands of big companies. In the cellular frequencies, it is very well utilized and nearing capacity, but in other spectrum ranges it is barely deployed.”

Speculation about Mr. Allen’s other possible intentions for the airwaves include video broadcasting. Qualcomm Inc., for example, uses 700-megahertz spectrum for its MediaFLO mobile-television service. “Certain blocks have more relaxed requirements that make them more attractive for [video] broadcast services,” Signals Research Group analyst Michael Thelander said of the 700-megahertz spectrum.

Or, Vulcan could simply be amassing the valuable resource in hopes of selling it at a later date.

Michael Nank, a spokesman for Mr. Allen, declined to comment on the reasons for Vulcan’s entry into the January spectrum auction.

Other companies, such as AT&T, probably would use the 700-megahertz spectrum to provide connections for Internet, mobile phones and streaming video.

Spectrum is one of many areas Mr. Allen has dabbled in over the years. Mr. Allen co-founded Microsoft with Bill Gates in 1975. He subsequently left the company and went on to numerous other ventures, including his investment in Charter and ownership of the Portland Trail Blazers pro-basketball team and the National Football League’s Seattle Seahawks. Mr. Allen regularly appears in Forbes’ annual list of the world’s wealthiest individuals.

One of his interests is real estate, a sideline that draws some parallels to spectrum, which can be purchased, maintained and then sold later for a profit.

Mr. Sanders of Maravedis noted that Aloha Partners LP bought up licenses in the 700-megahertz band that provide coverage for 196 million people, and in October agreed to sell the spectrum to AT&T for $2.5 billion.

Although the FCC has rules requiring spectrum owners to build out networks and put the airwaves to use, their stringency varies, and deferrals are possible.

An FCC spokeswoman said the buildout rules for the airwaves up for auction in January are slightly more stringent than those auctioned previously in the 700-megahertz band.

John Letzing is a writer for The Wall Street Journal

Compliments of The Wall Street Journal





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