Frontline Out of 700 MHz Auction

Frontline Wireless is apparently out of the 700 MHz auction, according to reports from RCR Wireless and the New York Times, as well as an email note from our telecom analyst pals at Stifel, Nicolaus. According to the reports, the startup, which counted former FCC chairman Reed Hundt and VC John Doerr among its backers, apparently couldn’t raise enough money for the deposit required to participate in the upcoming auction.
The quick take: Good news for incumbents Verizon and AT&T, who no longer have to bid against Frontline for spectrum. Some might say Frontline’s fate was sealed this summer when the FCC issued rules for the auction that didn’t quite mesh with Frontline’s plans. Others, like the Stifel, Nicolaus gang (whose research is primarily targeted at large investors), note that it is neither easy nor cheap to build new national networks, and of course, there is no guarantee of profitability.
Because of “quiet period” rules governing entities participating in the auction, Hundt said he could not talk about the matter when contacted via email.

Here’s a small snippet from the Stifel, Nicolaus note:

New entrants always face significant problems in raising funds, but there are particularly challenging conditions attached to the D Block license. These include an obligation to coordinate with public safety to build out a joint network, a non-refundable down payment, an aggressive build-out requirement, and the details of the public safety trustee’s requirements.
In short, Frontline’s difficulties were unlikely to be specific to Frontline, which, because of the track record of some of Frontline’s backers probably had as good a chance as any new entrant could in terms of raising money.

Paul Kapustka, former managing editor for GigaOM, now has his own blog at Sidecut Reports.