The January 700 MHz auctions in the US are getting ever nearer, and with the passing into a quiet period for bidders, statements were issued this week from a number of players which were assumed to be involved, either saying that they were not planning to bid, as both Comcast and Time Warner Cable have made clear, or in some way qualifying their involvement.
Our partner financial group in the US, JRPG, through analyst Jamie Townsend, thinks that Comcast and TWC dropping out will drop the likely auction level for Blocks A and B even though Cox Communications has declared itself still in the game.
He also goes further to suggest an entire scenario analysis for the auctions, stating that Google may only be an early round bidder for Block C, and that either Verizon or AT&T will emerge victorious there and that while Frontline Wireless will make bids for Block D, it is unlikely to win.
He asks the question, and we echo it, just how is US big cable going to get into a quadruple play if it cannot convince itself that it is worth buying its own spectrum.
The first time Faultline ever heard that cable operators might want to run their own wireless services, we just shook our heads in collective disbelief. What are the gains in offering four services over two or more networks?
But the idea of quad play is taking off, and it can be traced back to statements by senior US cable officials, over three years ago. Given that their MVNO + deal with Sprint (Pivot) is uncertain and working badly, they might be looking around for a way to control their own destiny. But given that Quad services are non-existent at present in the US, and that a new partner may emerge, post auction, desperate for the kind of customer acquisition capability that the cable operators can give, then a sit and wait mentality may well be reasonable. It may even be that Cox is carrying the torch for all of the US cable operators and will use anything it acquires as a US umbrella to replace Pivot, which it can charge out to all the cable operators.
On November 30, Google said it would participate in the auction but made it clear that they would not partner anyone else, which is seen as Google just pushing up the price, and doing so in order for the FCC to remain happy about the open access provisions that it placed on the spectrum. Once Google feels that the price is high enough it will fall away, is the Townsend theory, and it’s a reasonable one. Google wants the open access thing to work out, but it has no desire to use up all its cash, nor to run a network, unless it has to.
Frontline has repeatedly said it would bid for Block D, which has public access requirements attached to it, but if either Verizon or AT&T turns their sights on Block D, for instance after missing Block C, Townsend thinks things will get too hot for Frontline. Frontline says it wants to build out a 4G network, and will effectively pay for it through a commercial service sold to public safety organizations, and then get anyone else on board that it has room for.
Frontline is likely to have been attracted to the low minimum bid on Block D at $1.33 billion, but Townsend reckons this could end up going for not much less than the more expensive minimum bid Block C.
Finally just yesterday Direct TV made it clear it would not bid, as did Sprint, while tiny Leap Wireless appears definitively to be in the running.