Crazy poker player Charlie Ergen has put $43B on the table in a bid to corner spectrum around 1800 MHz in the U.S - apparently. ATT + VZ could call a bluff by ceasing to bid but apparently don't want to take the chance.

So goes the most persuasive analysis, by the very sharp Tim Farrar Ergen has three entities bidding and Farrar sees patterns that strongly suggest three companies are implicitly working together. Tim makes clear he isn't sure this is the true story. The bids are anonymous and the FCC is holding identities tight. Usually the top guys on Wall Street get information somehow but they tell me they don't really know either.

Most of us expected that AT&T and Verizon would take 20 MHz each, leaving 10 MHz for T-Mobile. I thought they were effectively signaling each other to minimize competitive bidding. I was wrong, as the bidding proves.

Who else could it be? Sprint said they wouldn't bid. T-Mobile U.S. doesn’t have the cash to bid hard at this level. AT&T and Verizon bidding against each other for dominance is improbable, especially because they would have to continue the battle at next year’s auction of the TV frequencies.

That said, Verizon's Lowell McAdam our highest priority and our main focus is to keep the network superiority advantage that we have over other players in our industry. So buying things like Spectrum, deploying AWS, putting in our distributed antenna systems which we are doing aggressively around the country now to add capacity, reinforcing our Internet backbone, deploying more FiOS into the urban areas, that's the number one priority for us. Because we want to be the place that your critical services need to be on because you can rely on our network.


Charlie's Dish satellite network already owns 55 MHz of virgin bandwidth, doesn't have a network or any plausible plan to build one, and is already looking to sell/merge with a real operator. Charlie's own stock is up by $6B already as the perceived value of the spectrum he controls goes up based on the bids. He wins big if he loses the auction after pumping up prices; he may be in trouble if Verizon and AT&T call his bluff.

Farrar has scenarios in which Ergen sells out to one of the bells at a profit if he takes the auction. If no one is interested at Charlie’s prices, we have the intriguing possibility of a fifth national network. When the U.S. had six competitors, prices were much lower than Europe. When Nextel and the old AT&T Wireless were swallowed, the U.S. prices became much higher than our peers. The European debate of three vs four is misleading; the empirical evidence is that four companies create only limited competition.