Criterion Releases Paper Analyzing the Risks Involved with Frontline’s Proposal for the 700 MHz Auction

June 28, 2007

Criterion Chairman Jeffrey Eisenach replied to Frontline’s proposed service rules in the Federal Communications Commission’s 700 MHz Auction proceeding. Frontline's proposal would require both the U.S. taxpayer and public safety to become its business partners. Due diligence should therefore be performed on Frontline’s business plan.

Eisenach explains that the build-out of a wireless network is both a costly and risky endeavor. Because Frontline would be the fifth or sixth entrant into the wireless marketplace, it is unlikely to quickly attract a significant share of wireless end-users to its network. The cost of constructing a wireless network is also frontloaded because the major markets that are built out first are more expensive to cover. It is unlikely that Frontline would be able quickly retire the large debts from the construction of its network unless the access charges to public safety users are large. Eisenach also identifies several risks in Frontline’s proposal that would detract from its value in the eyes of a savvy investor. He concludes that the FCC should pass on the “business opportunity” that Frontline has presented.

To read the paper click here.