There’s a budding opportunity out there for WiMAX providers and providers-to-be: new spectrum in the Educational Broadband Services (EBS) 2.5GHz range. That’s the same spectrum Sprint Nextel Corp. (S) and Clearwire Corp. (CLWR) rely on for their WiMAX services. But now smaller operators have a chance to get their hands on some of the spectrum as one state puts up 67 licenses for lease. There’s also a 2011 FCC deadline that’s pushing lease holders nationwide to find operators that will put spectrum to substantive use. However, there is a hitch: the global economy. Hardly anyone can raise money. And if interested companies can’t finance their WiMAX endeavors, some of the 2.5GHz spectrum could go fallow.
By May 1, 2011, EBS spectrum holders must prove to the FCC they’re using the waves for the public good, not just keeping them in hopes of a premium sales price. These holders tend to be large institutions including colleges, universities, states and the Roman Catholic church. As the FCC deadline nears, they’re trying to find other entities to sublease, and use, the spectrum. The lease holders don’t want to offer services themselves because even doing the minimum to meet FCC requirements could cost $1 million, said Rick Rotondo, chief marketing officer of Spectrum Bridge, a company that helps parties buy and sell spectrum. In this economy, few public or nonprofit firms have that kind of cash.
So lease holders are counting on the likes of Sprint and Clearwire — and smaller businesses, too — to sublease the spectrum and put it to use.
There are some barriers to achieving that goal, however.
One is that the coveted large, and most of the medium, markets already are leased. The exception is the state of South Carolina, which is offering 67 licenses for bid until Feb. 16, 2009. The South Carolina spectrum could be a great opportunity for RLECs and independent telcos, sources say, except for the difficulty they’ll likely encounter in securing financing for such projects. One smaller company is aiming to buck that trend, but at this point, a behemoth looks best-positioned to snag most, if not all, of the South Carolina spectrum.
Another hurdle is that once the South Carolina radio waves are spoken for, the country’s remaining 2.5GHz spectrum will cover mostly rural, or less desirable, markets. The situation worries lease holders, Rotondo said. That’s because few providers want to build in hard-to-reach areas. And if no one goes after that left-over EBS spectrum, spectrum owners might not be able to retain their licenses.
“There’s some nervous folks out there right now,” said Rotondo, whose company is helping South Carolina with the spectrum bidding process.
But there are some other ways to skirt the problem. The FCC allows EBS spectrum holders to sublet their licenses not only to service providers but also to entities such as municipalities and enterprises; those parties then could construct their own broadband networks. And if service providers still want to get into wireless broadband, but don’t want to fund the network buildouts, FCC rules allow for spectrum partitioning. That means a logging operation, for example, could rent spectrum from the service provider and build its own private broadband network in a remote part of the United States.
