Cable, Satellite Firms Prep For Spectrum Auction

Cable and satellite companies are placing substantial advance deposits for Wednesday's Federal Communications Commission auction of spectrum in a clear signal they will be major bidders.

Satellite providers EchoStar Communications and DirecTV have ponied up nearly $1 billion and cable operators Comcast Corp. and Cox Communication have placed more than $600 million jointly to reserve seats at the auction.

Traditional mobile phone service providers including T-Mobile and Verizon Wireless are also expected to bid for the 2,100 MHz spectrum.

"Both satellite and cable companies need to broaden their bases," said Joe Nordgaard, managing director of Spectral Advantage. "Cable companies already have a significant set of holdings into U.S. households. But they want a broader offering and 2,100 will provide some of that for them."

As for satellite companies, Nordgaard said they are in something of a bind, because their partners offering TV entertainment -- landline telephone companies -- are moving into the entertainment business by deploying fiber optic lines in their regions."But now the phone companies are selling entertainment, too," said Nordgaard. "Satellite companies need to broaden their base."

Even so, Nordgaard said the 2,100 auction as just a holding action until 2008 when the FCC is expected to auction existing TV spectrum. "The TV spectrum is far more valuable than 2,100," said Nordgaard, adding that the lower spectrum TV bandwidth has much better propagation advantages and wider coverage than 2,100 MHz.

T-Mobile, which has put up a $583 million upfront payment to the FCC, is also expected to be an aggressive bidder in the auction. The wireless service provider has lagged behind other mobile phone providers in coverage and in deployment of 3G services. An accumulation of new spectrum will boost its coverage.

Less clear are the plans of Sprint Nextel, which is still sorting through spectrum acquired in its recent merger. Sprint already supplies mobile phone solutions to cable companies including Comcast and Time Warner. Cingular Wireless also is still digesting its acquisition of AT&T Wireless to be considered.

As much as $15 billion could be raised in the auction, according to an estimate from the Congressional Budget Office. An important measure behind the auction, Nordgaard said, is a desire by policy makers to create more competition for U.S. households.0