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AT&T undecided about bidding in 700-MHz auction

Company not sure there's a profitable business model, CEO says

By Juan Carlos Perez
October 19, 2007 12:00 PM ET

Computerworld - AT&T Inc. hasn't decided whether it will bid for the highly desirable 700-MHz spectrum band because it doesn't know if it can build a profitable business given the open-access rules set for the wireless spectrum by the U.S. Federal Communications Commission.

Calling the rules "interesting," AT&T's CEO Randall Stephenson said the company is crunching numbers and analyzing business scenarios but hasn't reached a conclusion yet.

"Is there a business model there? I'm not sure if there is or not," he said today at the Web 2.0 Summit, where he answered questions from conference chairman John Battelle and audience members.

The FCC conditions, which include open-access rules on a third of the spectrum, have been a major source of controversy.

The winner of 22 MHz of spectrum must permit any wireless devices to connect to the network, allowing wireless telephone customers to use handset devices from other carriers. The winning bidder also is barred from blocking or slowing down wireless and Web content from competitors.

Some telecom carriers wanted no conditions, while some consumer advocacy groups and Google Inc. wanted the FCC to require that winning bidders also resell the spectrum at wholesale rates to competitors, a condition the FCC didn't adopt.

The FCC is scheduled to auction 62 MHz of spectrum in the 700-MHz band beginning in January. The spectrum is ideal for long-range wireless telephone and broadband services, with signals that travel up to four times farther than in higher-spectrum bands.

"It's a huge opportunity. It's beachfront property. When it comes to buying spectrum, it's the best you're going to find for a long time," Stephenson said.

Data consumption on wireless networks is growing fourfold year over year, so a company like AT&T needs to bulk up on spectrum to keep up with the demand, he said. "It's very obvious we're going to have to add to our spectrum holdings," he said.

That's why AT&T earlier this month reached an agreement to buy 12 MHz of high-speed wireless spectrum in the 700-MHz band from Aloha Partners LP for $2.5 billion.

"It's the first time, I think, that we've ever paid $2.5 billion for a company that had no revenue," Stephenson said.

The Aloha spectrum covers 196 million U.S. residents, including 72 of the 100 largest markets in the U.S.

In other matters, Stephenson said he was very satisfied with the iPhone deal between his company and Apple Inc.

"I'm not sure I could have asked for much more out of it than what we got," he said.

Asked to comment on the decision to use the slower EDGE network for the iPhone, Stephenson said it was a request from Apple Inc. CEO Steve Jobs.

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