Auction For In-Flight Broadband Winds Down

An auction of nationwide airwaves that could lead to cheaper in-flight broadband and telephone calls was winding down Thursday, with a small Colorado-based company as the apparent winner for the largest swath of radio spectrum.

The auction conducted by the Federal Communications Commission will resume Friday, but AC BidCo is the only remaining contender for the largest of the two bands being sold. Its provisional winning bid is $31.3 million.

AC BidCo was formed for bidding purposes by AirCell Inc., of Louisville, Colo., and Ripplewood Holdings LLC, a New York-based private equity firm.

AirCell makes equipment that provides voice and data service for aircraft passengers and crews through satellites. The equipment has been installed by the three largest fleets of time-share corporate jets, according to AirCell's Web site. It had revenue of $18 million in its latest fiscal year, according to a filing with the FCC.

AirCell spokesman Tom Myers said that because of FCC rules, the company was unable to comment on the auction while it was still officially in progress.

The spectrum is currently used by Verizon Airfone, a subsidiary of Verizon Communications Inc., the country's largest telecommunications company by revenue.

Airfone will have two years shrink the bandwidth used by its in-flight phone service, which began in 1984. Airlines with Airfone service include Continental, Delta, United and US Airways.

Airfone dropped out of the bidding early, surprising observers.

"I just would have thought Verizon would have had somewhat bottomless pockets for this," said Glenn Fleishman, editor of the Wi-Fi Networking News site.

"We're exploring other options, and we'll comment further after the quiet period is over," said James Pilcher, Airfone's director of marketing.

By replacing Airfone's equipment with more up-to-date gear that uses the spectrum more efficiently, AirCell could bring down the cost of service and raise data speeds dramatically to that of home broadband connections, Fleishman estimated.

"This is probably a $50 to $100 million a year revenue business, at least," Fleishman said.

The Boeing Co. operates a competing in-flight broadband service, Connexion, via satellite for international carriers. It had earlier expressed interest in the auction, but did not take part.

In the auction, there is also a narrower air-to-ground band for sale separately. The lead bidder for that band on Thursday afternoon was LiveTV LLC, the in-flight entertainment subsidiary of New York-based JetBlue Airways Corp. Its provisional winning bid was $2.62 million.

JetBlue has not revealed what it intends to do with the spectrum. Fleishman speculated that it could be used for some form of streaming video service to complement the DirecTV service LiveTV provides on JetBlue flights.

JetBlue appeared to have one contender still in the running for that band: Space Data Corp., a Chandler, Ariz., company that sends signal repeaters high into the air on unmanned balloons. The repeaters convey wireless data from oil company vehicles and pipelines to ground stations.

Space Data is also exploring using its balloons to provide cellular coverage to rural North Dakota, where phone carriers have little incentive to cover the thinly populated prairie with expensive cellular towers.

The spectrum auction, which started two weeks ago, is a complex procedure with no set ending time. Space Data is using an apparent stalling tactic to keep the auction from closing.

Tim Ayers, a spokesman for Space Data, said that because of FCC rules he was unable to say why the company was keeping the auction alive, or how it would use the spectrum if it wins.

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