[opendtv] News: Wireless Start-Up Fails to Get Financing

http://www.nytimes.com/2008/01/09/technology/09wireless.html?th&emc=th

Wireless Start-Up Fails to Get Financing

By SAUL HANSELL
Published: January 9, 2008
Frontline Wireless, which wanted to build an innovative cellular network for both private use and local public safety agencies, has collapsed because it could not raise enough money to bid in the government auctions of wireless spectrum that start later this month.
The company's failure raises questions about the ability of the auctions to raise the $14 billion or more that the federal government wants in exchange for the broadcast spectrum that will be freed next year by the shift from analog to digital television.
Last month, Frontline filed an application to participate in the auction. But it was not able to make the required deposit of $128 million that was due last Thursday, a person involved in the company said.
Frontline was one of the few newcomers to the wireless industry that have spoken publicly about making a major bid in the auctions. Some big companies, like Sprint Nextel and T-Mobile, are not bidding, although Verizon Wireless, AT&T and Google have indicated they would make offers.
Frontline was started by Reed E. Hundt, a former chairman of the Federal Communications Commission, along with veteran wireless executives and a group of elite Silicon Valley venture capitalists. The company was backed by L. John Doerr, the venture capitalist with Kleiner Perkins Caufield & Byers; James L. Barksdale, the former chief executive of Netscape Communications; and K. Ram Shriram, the former Netscape executive who was also an early backer of Google and is now a managing partner of Sherpalo Ventures.
The company's chief executive was Haynes Griffin, the former chief executive of Vanguard Cellular Systems, which was acquired by AT&T.
Despite these connections, and a year spent lobbying to create a range of frequencies intended specifically for a combination of private service and public safety communications, Frontline failed in frenzied negotiations in recent weeks to find the financial backing it needed, according to a person who has been involved in the company.
"It was a funding issue," said the person, who spoke on the condition of anonymity because of F.C.C. rules meant to limit collusion among bidders in the auction.
Mary Greczyn, a Frontline spokeswoman, read a statement that said the company, based in Greensboro, N.C., "is closed for business at this time." She declined to answer any questions.
The minimum bid for the spectrum was set at $1.4 billion, although commission rules gave Frontline a 25 percent discount because it was a small business. Still, the winner of the auction will have to pay for its prize this spring, and it would then have to spend many billions of dollars to build out the network.
Because the range of frequencies that Frontline was bidding on is meant to be shared with local police, fire and emergency workers, the F.C.C. has imposed a strict timetable to force the network to be built quickly.
As compensation for that demand, the F.C.C. intended this block of spectrum to be somewhat less expensive than the other national blocks of frequencies that do not involve cooperation with public safety agencies. Still, analysts suggest that it may simply be too onerous for a newcomer to the wireless industry to use this range of frequencies.
Blair Levin, a telecommunications analyst with Stifel Nicolaus, said that in contrast to past auctions, in this one investors are wary of backing start-ups that will have to compete with the established giant wireless carriers.
"I see very little interest from people on Wall Street in their backing new wireless entrepreneurs," he said. 


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