Telecom’s competitive landscape is less one important player, with news today that Frontline Wireless has shut down. Frontline was believed to be a potentially serious player in the upcoming January 24th 700 Mhz spectrum auction. With backing from serious Silicon Valley money, Frontline was believed to be the only player, outside of the existing national wireless players, who had their eyes on building a competing national broadband wireless network. Frontline did not pay their required $128 million auction down payment and RCR Wireless is reporting they have closed.

With Frontline out of the picture, Verizon and AT&T are really the only companies in position to gain enough spectrum for a national footprint. The spectrum should come cheaper to the winner as well, with one less interested buyer. The only wildcard left is Google. But speculation is that Google has no intention of building a network and are only participating in the auction to ensure the FCC’s “open network” mandate remains. This development puts many smaller carriers at risk for providing 700 Mhz service as well, because it was widely believed that Frontline was going to partner with smaller carriers to build out a national footprint. The carriers that remain are far less likely to pursue a partnering strategy. The result may be far fewer competitive entrants, and a much less intense competitive environment.

Wholesaling wireless spectrum may be on the horizon, thanks to the upcoming 700 Mhz spectrum auction. While virtually absent from the wireless industry, wholesaling bandwidth is commonplace everywhere else in telecom. One could argue that MVNO arrangements are examples of wireless wholesale, but the MVNO reality looks more like a sales and marketing resale arrangement, than true wholesaling. The rules set up by the FCC for auction 73 may bring the reality of true wireless wholesale to the marketplace. If that reality indeed comes true, the competitive landscape could be altered, especially in smaller and underserved markets.

One of the primary reasons that smaller regional carriers can’t match their larger carrier brethren (i.e. Verizon, AT&T) with attractive wireless options is the high cost of spectrum. Additionally, past wireless auctions rules have favored larger carriers because the geographic regions for auction are very large. Auction 73 is attempting to remedy these challenges by encouraging true wholesale players to participate in the D block spectrum band auction. If a viable wholesaler wins the D block auction, they would in turn have the ability to lease spectrum to a variety of service providers who lacked the financial ability to gain 700 Mhz spectrum themselves. Conceivably, there would now be hundreds of service providers anxious to use this leased spectrum to provide wireless service of their own, which more than likely will compete with established services from AT&T, Verizon, Sprint, and others. Companies like Frontline Wireless are leading this wholesale option effort. There are a variety of factors tied to the wholesale rules, including making spectrum available for public safety purposes. But before we get ahead of ourselves, favorable wholesale rules don’t automatically translate into viable wholesale options. Potential wholesalers will have tremendous financial and operational challenges to overcome before they can hang the “We’re Open” sign in the front window. Like anything else, this issue has a variety of concerns unique to special interests. It's certainly not perfect. All things considered though, wholesaling wireless spectrum is a good thing, providing a method for service providers who normally would not have the means to participate in the wireless spectrum auction process, the ability to launch competitive wireless services.

The upcoming 700 Mhz wireless auction should be quite an interesting affair. The jockeying for rights to bid on this spectrum may be unprecedented. The usual suspects are well entrenched to participate, but a variety of newcomers to the process have let it be known that they should not be denied an opportunity to “play ball.” From a couple of upstarts who say they want to build a new national broadband network, to the cable industry, and maybe even to Google, the 700 Mhz prize is one that everyone has their eye on.

And why shouldn’t they? 700 Mhz represents “beachfront” property in the broadband landscape. Google has even suggested doing away with the FCC auction process, and instituting a new one, based on their Internet advertising auction model. An upstart company, Frontline Wireless suggests that the auction process should be changed as well – changed so that they can build a national network of their own. Another upstart, Cyren, has a similar motivation to Frontline, with one minor detail – they suggest that the spectrum be awarded to them, rather than auctioned. Estimates suggest that should the auction process go through, it could result in anywhere from $10 to $30 billion dollars to the U.S. Treasury. Not enough to pay off the national debt, but a nice “chunk of change.” One thing is for certain, the winners of the spectrum will have the opportunity to do amazing things with wireless broadband and ultimately alter the competitive landscape.