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Spectrum auction seen in early 2005

Valuable wireless airwaves in scores of U.S. markets, including Los Angeles, are expected to be be auctioned off in January.
/ Source: Reuters

Valuable wireless airwaves in scores of U.S. markets, including Los Angeles, Denver and Orlando, will likely be auctioned in January, a sale that could rake in billions, a source familiar with the matter said on Thursday.

Companies like Verizon Wireless, the biggest U.S. mobile phone company, are hungry for more airwaves to offer additional advanced services like high-speed wireless Internet.

The Federal Communications Commission plans to auction 155 licenses covering about 60 markets that bankrupt NextWave Telecom Inc. returned, along with another 79 other licenses that failed to sell previously or were returned or reclaimed, the source said.

However, some of the licenses will likely be designated for use only by certain entities, like small businesses, which could make it harder for the big carriers to get their hands on those licenses.

FCC spokeswoman Lauren Patrich declined to comment. The airwaves to be sold are in the 1900 Megahertz (Mhz) band, where most U.S. wireless services operate.

In addition to the expected January auction, the FCC is expected in the next two months to begin the process of making another block of spectrum in that band available for auction.

The FCC had tried to repossess all of NextWave's licenses after the company failed to pay for them on time and resold them for about $15.9 billion in early 2001. The Supreme Court ruled the government wrongly took the licenses back and the resale was voided.

One license that will be for sale in the new auction will cover Los Angeles. In the voided sale, a license for 10 megahertz of spectrum for the city sold for more than $500 million, but that was before the recent U.S. economic downturn and a significant tightening of capital spending by most companies.

NextWave, which is still in bankruptcy, agreed in April to return the majority of its licenses and plans to sell another chunk of licenses covering key markets like New York.

"The spectrum is going to go for less than it did originally, but you never can tell in a bidding war," said Ed Snyder, an analyst at Charter Equity Research. "But it's a zero sum game; if you don't get it your competitor will."

The U.S. wireless industry has suffered a slowdown in growth as there are more than 165 million subscribers. However, carriers can use the extra spectrum for new services and to improve coverage and cut dropped calls, a big gripe by users.

"We very much support auctioning this spectrum," said James Fisher, a spokesman for Sprint Corp., which owns the fourth-largest U.S. wireless carrier. He declined to comment on whether the company would bid in the expected auction.

The airwaves to be sold early next year are separate from a block in that band where Nextel Communications Inc. wants to move its operations to help end interference with public safety communications. That issue is still unresolved.

Verizon Wireless is a joint venture of Verizon Communications and Vodafone Group Plc.