The stakes are rising in the broadband wireless race

Whether you call it LMDS, broadband wireless local loop (BWLL), or point to multipoint, the race to plant the corporate colors over as large a footprint as possible is already nearing its midpoint in western Europe.

For those of you who haven't been watching closely, Germany, Norway, Spain, Finland, Portugal, Ireland and Luxembourg have all announced the recipients of their licenses. Switzerland is in the middle of its auction, while France is awaiting final judgment on theirs. Still to come are two of the big five, the United Kingdom and Italy, as well as Belgium, Austria, the Netherlands, and the rest of Scandinavia. Currently, 38% of the western European population are awarded and this is planned to teach 100% by year end.

So how does the race look so far? Crowded. In a second attempt to force open the access markets, the national regulators have concluded that a number of new competitors are required, and BWLL plays a pivotal role in their plans to drive down access prices. With few exceptions, we can expect at least four players in every market, with some markets having as many as seven or eight competitors. Analyzing the license winners, and looking behind the various consortia, one can begin to see which players are going to have significant footprints. Keeping in mind that this game is still very much under way, Formus, FirstMark and BroadNet are the front runners.

Teligent, Winstar and StarOne are close behind. UPC also has several licenses, but its offer is likely to be targeted at residentials combined with their cable assets. If size of footprint is your indicator of success, then these are the companies to watch.

A second observation is that the stakes in the game are rising rapidly. The auctioning of licenses in Switzerland has provided some insights into just how high the stakes could get. The previous benchmarks for the value of licenses come from North America, where the range of prices paid varied from [epsilon]0.1 to [epsilon]7 per head of population in the most recent Canadian auction. In the Swiss auction so far, we have seen prices ranging from [epsilon]4 to [epsilon]15 per head of population. The justification for paying the higher entry price is provided by the lack of access competition in the national marketplaces, the embryonic nature of the market for Internet access (the primary BWLL product), and the high prices for access that remain despite all the efforts of the regulators to bring leased-line costs down.

There are many arguments for and against auctioning versus awarding of spectrum that have been debated since the first cellular licenses were issued. However we might expect to see many countries that were previously undecided (Italy and Eastern Europe) moving to auctions as the incomes provided by the licenses are too attractive to turn down. Whether or not this is the best way to achieve increased competition will remain a national debate.

One final thought is in regard to picking the winners. Keep in mind that Finland handed out the first license a year ago, Germany six months ago, and the others since then. These players are now splitting their attention between new license acquisition and launching operations. Market analysts, if they haven't done so already, will shift their scrutiny from the size of the footprint to the success of the rollout. For an indication of future success, turn your attention from "customers covered" to "customers connected" in Germany.

Scott Jacobs is a partner and managing director at Internet and telecoms consultancy Cluster Consulting Ltd ., London, now advising Europe's bidders for broadband wireless, WLL and UMTS licenses.

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