THE VIRGINIAN-PILOT
Copyright (c) 1995, Landmark Communications, Inc.
DATE: Thursday, December 21, 1995 TAG: 9512210344
SECTION: BUSINESS PAGE: D1 EDITION: FINAL
SOURCE: BY DAVE MAYFIELD, STAFF WRITER
LENGTH: Medium: 73 lines
In Washington, the big story this week revolves around budget impasses, deficits and spending cuts.
But off in a corner, almost overlooked, one federal agency is doing its part to bolster the government's balance sheet.
Chapter 2 of the Federal Communications Commission's great airwaves auction has begun.
Out of it will emerge yet another set of providers of wireless phone services by decade's end. Analysts say it should eventually lead to lower rates for calling on the fly.
The action started Monday morning, while most of the rest of official Washington shut down amid the budget impasse. Almost 500 licenses for so-called Personal Communications Services were put on the auction block by the FCC.
The auction, which will continue as long as bids keep going higher, could last for several weeks.
Through Wednesday, the FCC raked in more than $650 million from entrepreneurs who want to build the cellular-like PCS networks.
That's on top of another $8 billion the agency raised earlier this year auctioning the first round of licenses for the services. Telecommunications giants like AT&T, Sprint and Bell Atlantic dominated that round of bidding. AT&T and a Baby Bell coalition that includes Bell Atlantic won licenses to provide services in the Norfolk, Richmond and Roanoke areas that time. They plan to start selling the services by early 1997.
The latest PCS auction, in which 254 small companies registered to bid, has started out as strong as the first.
One reason is that several big telecommunications companies that skipped or barely participated in the first round are backing some of the small-business bidders now. MCI and BellSouth are among the backers. But Mark Lowenstein, director of wireless research for The Yankee Group in Boston, said many independent red-blooded entrepreneurs are also bidding.
Lowenstein predicted the PCS building boom will eventually create four or five major new telecommunications enterprises. Much the same thing happened in the cellular boom that started in the early '80s, he said.
Craig McCaw built his Kirkland, Wash.-based McCaw Cellular Co. into the nation's largest cellular provider, for instance, before he exited in a multibillion-dollar sale to AT&T.
One would-be PCS mogul is an Ohio telecommunications investor named Ghanshyam C. Patel.
Patel heads a Columbus-based company called PCS Mobile America Inc., which at one point this week was the high bidder in the current auction of licenses in the Norfolk and Tampa, Fla., metropolitan areas. Patel has already ponied up more than $6 million to land the licenses.
He has been looking for a new enterprise to sink his teeth and money into after being ousted last June from the chairmanship of a Columbus company he founded eight years ago: ConQuest Telecommunications Services Corp.
ConQuest pulled in about $32 million in revenues last year providing operator and business long-distance services. Patel was part of a board group that wanted the company to push aggressively into PCS. He and his supporters were tossed from the board by a faction that considered such a move too risky.
Lowenstein agreed that PCS will be a perilous business. The cost of building networks will likely force ``several rounds of consolidation,'' he said. Still more auctions are scheduled. Eventually as many as a half-dozen PCS competitors and two cellular rivals will be grappling in each market for customers.
But with demand for wireless phone services growing so rapidly - Lowenstein predicts 62 million cellular or PCS users in 2000, up from 30 million now - it's easy to understand why entrepreneurs are willing to take the risks.
Still, the surest winner in the building boom, Lowenstein said, will be phone users. ``More choices will mean lower prices,'' he said. by CNB