A three-month contest over the rights to provide the next generation of mobile phone service ended this week, with a total of $7.03 billion - or $98 for every household in America - being pledged by 19 companies.
The companies bought 10-year licenses to provide a new phone service that promises to be more flexible and less costly than existing cellular.Sprint and three big cable companies - Tele-Communications Inc., Comcast Corp. and Cox Cable Communications - emerged as the auction's biggest spender.
They pledged $2.1 billion for 29 of the 99 licenses sold by the Federal Communications Commission, snagging the nation's most populated market - New York - as well as licenses in San Francisco and Dallas.
AT&T was the second most aggressive bidder, plunking down $1.7 billion for 21 licenses, including ones to serve Chicago and Boston.
And, a consortium of the cellular companies of Nynex, Bell Atlantic, US WEST and AirTouch put up $1.1 billion for 11 licenses, including Chicago and Dallas.
"This is the largest sale of public property in history," FCC Chairman Reed Hundt said.
"The winners bought an opportunity to be telephone companies of the 21st century," Hundt said. "You're going to see these companies fight tooth and nail and prices go way, way down."
So low, said Hundt, that the new mobile phone providers will eventually be able to provide local calls at the same rate or lower than local telephone companies.
About 20 million people now use cellular phones and their bills average $58.65 a month, according to the Cellular Telecommunications Industry Association.
The new mobile phone service is expected to fuel cellular growth to 100 million people within 10 years. Many existing cellular companies are improving service to prepare for the onslaught of new mobile phone providers.
Through their license acquisitions, the Sprint alliance will have a potential customer base in the new business of 145 million people; AT&T, 107 million; and the Nynex cellular consortium, 57 million, Hundt said.
The licenses permit companies to serve specific geographic areas and operate on specific slices of the public's airwaves.
Two licenses were auctioned off in 48 markets and one each in New York, Los Angeles and Washington. A second license had already been awarded in those markets under an FCC program that rewards technical innovation.
Pacific Telesis spent a total of $700 million for just two licenses to serve 31 million people in San Francisco and Los Angeles. The LA license alone cost the company almost $500 million, Hundt said.
The auction began Dec. 5 with 30 companies competing for the licenses.
Proceeds from the auction go to the U.S. Treasury. Three previous auctions for other licenses raised $1.2 billion.
Smaller-market licenses for the new phone service will go on the block for the first time in April. In the end, several thousand licenses will be sold.
In contrast to existing cellular service, which has only two licensed providers per market, the new phone service will most likely have four, but has the potential for six.
The FCC says this licensing plan should maximize competition among companies, leading to low prices for consumers, more choices among providers and the likelihood of better service.
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