TELECOMMUNICATIONS
     

artwork by Andre Lucero

They were right. When the FCC auction closed in February 1998, the largest chunk of spectrum went to a Virginia start-up, WNP Communications, for $186.9 million. The new company, which Tom Jones ran from an office in his secluded Albemarle County home, walked away with rights to 30 of America's top 50 markets. Less than a year later, WNP announced it would be acquired by Nextlink Communications of Bellevue, Wash., for $695 million.

"This justifies our belief that the licenses were valuable," says Jones, president of New Venture Directions Inc. and the brains behind WNP. "Nextlink is becoming prominent in the newly emerging telecom arena, and this acquisition is a vote of confidence."

LMDS is a means of transferring data, voice and video through wireless connections. It is so powerful that its technology makes even fiber-optic connections seem old-fashioned. According to Virginia Tech researchers, it can transmit 8,000 high-density color photographs per second, can provide Internet access at 100 times current modem rates, and can carry more than 200 video channels simultaneously.

Unlike cellular, LMDS uses a fixed, building-mounted antenna to pick up microwave signals. And LMDS has the potential to promote low-cost competition in both local telephone and cable television markets, offering economical solutions to last-mile problems.

In last year's LMDS auction, the FCC offered bidding credits for small businesses and entrepreneurs. Even though the principals paid a hefty $100 million down payment on the licenses, WNP was granted a 45 percent small-business bidding credit. "With Nextlink's acquisition of WNP and the licenses, we were no longer eligible for the credit," says Jones. "We repaid it with interest. We paid $153 million [with interest] to the FCC." Jones says the companies won the needed FCC, Securities and Exchange Commission and other regulatory approvals and completed the deal on April 26.

Jones was the visionary behind WNP, but he had a number of other major investors in the company. So he says he realized only a fraction of the approximately $355 million profit. Other investors included Arlington-based Columbia Capital; Royce J. Holland, CEO of Allegiance Telecom Inc. and former president of MFS Commnications; Trygve Myhren, president of Myhren Media and former president of what is now Time/Warner Cable; and Curtis J. Wilson Jr., president of Galan Corp. "I got a small percentage to make it worthwhile," Jones says. "I paid my mortgage and my kids' education, so I did OK."

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Two other Virginia bidders -- Virginia Tech and CRH Consortium, 51 percent owned by Staunton-based CFW Communications -- also won pieces of the LMDS spectrum in last year's FCC auction. So when the remaining 121 A-block and 40 B-block licenses went on the FCC auction block this spring, the two bid again. The spectrum was divided into two categories, with the A block being the larger of the two.

"Our strategy was not take away from Virginia businesses," says George Morgan, head of finance for Tech's Center for Wireless Technology. "But if no Virginia companies were willing to provide the capital, we were willing to step in and bid."

Tech dropped out of the bidding before the auction closed in early May. "We got knocked out," Morgan says. "But we're not unhappy about that. We just wanted to make sure that if Virginia companies didn't think it was affordable, we'd be there as a backstop."

Even though Tech was not competitive in this year's follow-up auction, researchers have big plans for the four licenses won last year. Right now they're getting all the right equipment in place. "I don't think there are technological limits on what can be done," says Charles Bostian, director of Tech's Center for Wireless Technology. "But getting the equipment is the barrier."

According to Morgan and Bostian, Tech is deploying equipment for an LMDS test location in the Blacksburg area. "This is our first step toward full deployment," Morgan says. "We have five links for a small number of users, and they will have wireless connections at T-1 speeds. Ultimately it will be 100 times faster than T-1."

CRH Consortium obtained seven licenses last year and was the high bidder for A-block licenses in Fredericksburg, Cumberland and Elkins, W.Va., this year, according to Warren Catlett, vice president of strategy and business development for CFW Communications. "This brings us yet another avenue to resolve the last-mile dilemma for consumers and business," says Catlett. "And with a lot of bandwidth, it gives us the ability to bundle many services."

© JULY 1999, Media General Business Publications Inc.,
publisher of Virginia Business Magazine