Bidding begins today at a federal auction for the largest blocks of airwaves ever put up for sale. And an unlikely bidder will be among the venture capitalists, wireless industry giants and other high rollers taking part: Virginia Tech.

Virginia's 126-year-old land-grant university hopes to win a license covering the 7,000-square-mile area around the university's Blacksburg campus. Should it win, student engineers hope to construct a test project showing that low-cost, high-speed Internet access to each home and office, using small antennas, is possible in an area where mountains and trees often cause radio interference.

Yet the Federal Communications Commission, which is holding the auction, yesterday denied Virginia Tech's request to be classified as a bidder with no revenue, a designation that would have allowed the school to get a 45 percent discount on the price of its license.

The reason: The nonprofit Virginia Tech Foundation, which is financing and carrying out the project, has endowments totaling roughly $78 million, $3 million over the limit required for the "small business" designation. The FCC, which has never before considered a bidding application from a nonprofit university project, ruled that the foundation's money should be counted as revenue. The agency also counted the $500 million that the university gets annually from tuition, state aid and other sources.

The FCC "has not adopted any special exemptions for not-for-profit entities," said a letter yesterday from Kathleen O'Brien Ham, chief of the agency's wireless bureau, to Virginia Tech. The university, therefore, "does not meet the gross revenue requirements to qualify as an entrepreneur."

Adding salt to the wound, university officials say, is that most of the wealthiest bidders qualified for the discounts of 25 percent to 45 percent because, despite their billions in assets, their companies have little or no revenue.

They include WNP Communications Inc., a consortium of venture capital funds; mutual fund manager Mario Gabelli's BCK/RIVGAM L.L.C.; and established wireless industry players Teligent Inc. and WinStar Communications Inc. The FCC used to count a bidder's assets when deeming who gets the preferences, but it recently dropped that rule.

"It is really ironic that we find ourselves in this game with some pretty heavy hitters that actually qualified as small businesses," said Earving Blythe, vice president of information systems for Virginia Tech. Without the bidding discounts, he said, "we could be blown out of this thing after the first or second round."

A half-dozen other bidders have expressed an interest in the Roanoke market area, which runs on either side of Interstate 81 from Lexington, through Blacksburg to Wytheville. They include WNP, Gabelli's group and Craig McCaw's Nextband Communications L.L.C

It's unfair, university officials say, that Virginia Tech should be denied bidding discounts when other much wealthier bidders qualify. The university, well-known for its telecommunications research, has no commercial designs for the license it hopes to win. It plans to earn no revenue. The moment a commercially viable system is developed, sponsors say, it will be sold to some other telecommunications company that is in the business of offering such services.

Despite the setback, Virginia Tech is forging ahead into the auction, with four computers set up in the graduate students' office in the College of Business to participate in the FCC's electronic bidding system. A half-dozen faculty members, and as many grad students, have spent 18 months, without pay, preparing for today.

"From our perspective, we have zero revenue for this project," Blythe said. "It never occurred to us that we would be in any way disadvantaged as a nonprofit entity."

FCC officials said that Virginia Tech should have raised the issue earlier, and that the agency was ill prepared to tackle new rules for all nonprofits in a short time frame.

"While it sounds sympathetic because it's a foundation set up by a state educational institution, it would be difficult to distinguish them from any other not-for-profit group," said one official, who asked not to be identified.