Native corporations leap into wireless
However, some critics are questioning the outcome of the process that helped the consortium acquire rights to those markets.
Arctic Slope Regional Corp. of Barrow, Doyon Ltd. of Fairbanks and Juneau-based Sealaska Corp. formed Alaska Native Wireless to bid on wireless licenses auctioned by the Federal Communications Commission. The spectrum auction, which began Dec. 12, was completed Jan. 26.
Officials from Alaska Native Wireless believe the bids represent the largest acquisition ever of federal communications licenses by a minority-controlled entity.
Alaska Native Wireless, with its partner AT&T Wireless, was the high bidder on almost $2.9 billion in wireless licenses covering 43 markets with a total population of 71 million. Markets include Los Angeles, New York City, Denver, Tampa, Fla., Cleveland, Jacksonville, Fla., Minneapolis, New Haven, Conn., and Portland, Ore.
While the FCC is finalizing the bid award process, the Alaska consortium is now studying how to serve those markets, said Conrad Bagne, head of ASRC Wireless, the managing partner for Alaska Native Wireless.
Although the company has not yet prioritized which markets it would serve first, the two markets for which Alaska Native Wireless paid the most are important, said Bagne, who also is ASRC’s chief administrative officer.
"New York and L.A. are obviously a priority," he said, noting that the total price for those two licenses represented two-thirds of the company’s total bids.
Alaska Native Wireless also is developing a business plan for licenses it acquired in Fairbanks and Juneau, he said. One consideration is how the FCC’s incentives for companies serving Native communities around the nation will apply to the two Alaska cities, he said.
The Alaska consortium submitted further FCC filings and deposits in mid-February, but Bagne said the process could continue for 30 to 180 days. Part of the federal procedure includes the FCC’s review of the applications followed by a period for challenges to be filed against the auction bids.
"We fully expect there to be a bump in the road in the process," Bagne said.
An article published in The New York Times on Feb. 12 quoted critics who said some of the largest U.S. wireless companies took unfair advantage of FCC rules to win a majority of licenses aimed at small businesses. Criticism was not logged specifically against Alaska Native Wireless but the company does have a partnership with major player AT&T Wireless.
In March the FCC will issue another public notice for the auction’s high bidders who have sufficiently completed a long form application, said FCC spokesman Mark Rubin. Once the public notice is published, a 10-day period begins to file petitions to deny the bid awards, he said. Challenges could include if a company can be proven to be owned by a foreign company or if it violated auction rules, rather than objections to policy, he said.
"The petition to deny phase is not the phase to question the rules," he said. "The FCC can make a change for the next auction, but not for this one."
Rubin did not believe any lawsuits had been filed on this auction.
Bagne of Alaska Native Wireless said the consortium followed the FCC regulations, and he believes the bids will be found valid.
"Our response has been that the FCC put out rules and requirements for small entrepreneurs. We believe we fit those requirements."
AT&T Wireless has said it will pay $2.6 billion of that total, while the three Native corporations and other consortium investors will contribute $260 million.
The broadband personal communications service spectrum licenses are important for AT&T Wireless’ future plans. Last November the wireless giant formed a subsidiary to develop multimedia applications for its current network and a new wireless network built for graphic presentation of data, video e-mail, high-quaility music downloads and streaming audio and video, according to Alaska Native Wireless.
The Alaska consortium will employ few people in the state, but will hire others in markets where it operates, Bagne said.
To serve the markets, Alaska Native Wireless will either use AT&T Wireless’ infrastructure, build its own network of repeaters or work with another company in areas not served by AT&T Wireless, he said.
"In the long term we hope to be an operator of our licenses and maximize the return on our investment," he said.
Alaska Native Wireless plans to continue its relationship with AT&T Wireless for at least five years, he said. "Where it goes beyond that remains to be seen," Bagne said.
He also is optimistic about other opportunities in the industry.
Another Native corporation, Cook Inlet Region Inc., has invested in the wireless industry through VoiceStream Wireless Corp., which has proven successful for CIRI. A special FCC ruling last year allowed CIRI to transfer its interest in four limited partnerships and limited liability companies to VoiceStream in exchange for VoiceStream stock and cash. The CIRI board chose to use corporation assets to pay for the program and reimburse itself later by selling those shares.
In December CIRI paid the largest distribution ever by a regional corporation, totaling about $314 million to nearly 7,000 shareholders.
Alaska Native Wireless would consider a similar payout to shareholders "if we can be as successful as CIRI," Bagne said. "Our deal is definitely different. It took them five years. It doesn’t happen overnight."