Venture capital and other investment firms have been positioning themselves to enter a major auction of wireless airwaves this spring that is expected to reshape the nation's communications networks, according to multiple people familiar with the matter.
At least one local firm, Alexandria-based Columbia Capital, intends to bid on the valuable frequencies used to carry mobile voice and data, said a person with knowledge of the matter, who spoke on condition of anonymity because the plans are confidential.
The auction of airwaves has been described by federal regulators as a once-in-a-lifetime opportunity that could bolster an existing wireless network, equip a new entrant to compete with the likes of Verizon Wireless and AT&T, or enable a company to develop next generation wireless technologies. Wednesday evening marks the application deadline for those who want to bid in the auction.
A number of investment companies have been conducting their own analyses on the value of these airwaves in recent months, trying to determine whether they should jump in and how much they should spend. The result could be a bidding war as financial firms jockey with wireless carriers, cable companies and perhaps even some in the tech industry in an intensely competitive land rush for high-value wireless real estate.
"Everyone knows there is going to be a huge demand for spectrum over time and no one knows when the next auction of such good quality and quantity of spectrum will occur," said one person who spoke on condition of anonymity to speak freely about confidential business plans. "So on both the buy and sell side, everyone wants to show up and see where it goes."
Founded by Sen. Mark Warner (D-Va.), Columbia Capital has long been a major player in the wireless communications business. In the 1980s, Warner played a pivotal role in helping companies break into the emerging market for cellular service, which required licenses from the Federal Communications Commission. In 1989, he founded Columbia Capital and reaped a fortune as the industry boomed. Warner still has substantial investments in Columbia Capital, according to 2014 financial disclosure forms listed by the Center for Responsive Politics.
A Warner spokeswoman said: "Sen. Warner has had no role at Columbia Capital, and his investments have been managed by a trustee, since before he became Virginia governor in 2002."
In January, Columbia Capital hired John Leibovitz, who last year left his post as deputy chief of the wireless bureau at the FCC. The company declined to comment on its plans, as did Leibovitz.
The upcoming auction is naturally drawing interest from those in the wireless industry, such as T-Mobile, AT&T and Verizon. But the event's unprecedented nature is also attracting attention from an array of industries. For example, the nation's biggest cable operator, Comcast, said last week it intends to participate. Comcast and other cable companies are weighing an expansion into cellular service, a move that would give consumers another choice for wireless service and pit the industry directly against AT&T and Verizon.
With exclusive control over parts of the radio spectrum, financial firms could re-sell the airwaves in the way some investors flip houses, analysts say — though the FCC has put rules in place to limit such activity. Alternatively, investment houses could use the spectrum as a testing ground for startups that are designing next-generation wireless devices. The airwaves could lead to enhanced versions of WiFi, or more-reliable products in the growing market for the Internet of Things.
"The really big takeaway is, you have a number of people who are looking at the evolution of wireless," said Harold Feld, a senior vice president of the consumer group Public Knowledge. "Not expanding the existing wireless-carrier model, but looking at revolutionary ways of doing business based on the idea of pervasive connectivity."
It is unclear how many venture capital firms, hedge funds or other financial institutions have expressed interest in bidding because the FCC is keeping the names of the participants under wraps until a few weeks before the auction.
The auction, which is scheduled for March, is expected to take place in two stages. In the first, TV stations that currently own the airwaves must volunteer to give up their spectrum and sell it to the government. In the second, the government will take that reclaimed spectrum and auction it off. The process is expected to be highly complex and has never been tried by the federal government before.
TV broadcasters who wish to sell their spectrum have already identified themselves to the FCC; soon, the agency will have the second piece of the puzzle, enabling it to gauge private sector demand. A simpler auction of federal airwaves a year ago brought in roughly $45 billion in bids — a record amount. But the auction in March is expected to generate much more money, analysts say.