Paul Allen's $69 Million Mystery Bid

As SW reported back in January, Paul Allen's Vulcan Spectrum was among the bidders for portions of the federal airwaves that are being abandoned by the broadcast TV biz, which is moving to digital next January. Results were announced late last month for the FCC auction, which netted $19 billion, with Verizon being the largest buyer. But Allen succeeded in adding $69 million worth of wireless spectrum to his prior local holdings. Just what does he intend to do with it?

Vulcan wouldn't comment on its plans, but wireless analyst Michael Thelander of Oakland's Signals Research Group explains that since Allen bought in the so-called "A Block" end of the spectrum, sending videos to your iPhone probably isn't his intention. "The E Block is the block that is better suited toward what I would call a broadcast technology," he says. In "the spectrum [Allen] bought...the FCC limits on how much you can transmit from your cell tower are much lower."

Those low power limits are better suited to wireless service in rural areas, Thelander adds. And Charter Communications, Allen's underperforming cable company, does cover such regions in the central and northeastern parts of our state—but he only owns spectrum west of the Cascades. So the two holdings don't appear to be compatible. Allen is also unlikely to partner with a larger player with an existing network—say, Craig McCaw's Clearwire—because none of them are currently compatible with the 700 MHz band.

"I think [Allen] has some sort of plans to build a broadband wireless network," says Thelander. "He contractually has to deploy a network. That's part of the requirements with the license. You have to build it out within a certain time frame. And if you don't, you lose the [FCC] license." (Or you can hold and sell, like real-estate speculators—but that's not what Allen did in South Lake Union.)

Building a network costs much more than buying spectrum. But Allen could, says Thelander, simply copy what the big boys are doing nationally in a limited Puget Sound scheme: "You've got Verizon Wireless and AT&T, who are big winners in that [700 MHz] spectrum. They'll be deploying essentially their next generation broadband wireless technology. It'll be two-way, voice, data—all those types of things. Allen could deploy something very similar, just do it on a smaller scale."