Frontline Wireless Bid Failed Amid Investor Concern, Bid Rules

FRONTLINE WIRELESS BID FAILED AMID INVESTOR CONCERN, BID RULES
[SOURCE: DowJones, AUTHOR: Corey Boles corey.boles@dowjones.com]
When Frontline Wireless abruptly closed its doors two weeks ago, most people assumed the group was an early victim of credit market stinginess. But according to several people familiar with the events that led to Frontline's demise, potential investors grew nervous that vague Federal Communications Commission bidding rules left Frontline exposed in its partnership with public safety agencies. The FCC auction rules state that whoever buys one of the spectrum chunks, known as the D-block, must work with public safety agencies to build a wireless broadband network for use by police and firefighters. In order to ensure the winner of the D-block license cooperates with the public safety community, the FCC rules say if it is deemed the licensee wasn't negotiating in "good faith" it could be forced to forfeit more than $100 million and lose all rights to the spectrum it had acquired. According to the people familiar with Frontline's perspective, potential investors in Frontline were extremely concerned about the vagueness of this rule. Moreover, Cyren Call, which is representing the public safety community in negotiations with possible bidders for the D-block, informed Frontline in one meeting the winner of the D-Block auction would be required to pay $500 million over 10 years to lease access to spectrum controlled by public safety in order to build the wireless broadband network.
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