T-mobile is not a company likely to repeat past LMDS mistakes:
One of my whopper mistakes occurred back in 1998 when I was a telecommunications regulatory lawyer. In my work practicing before the Federal Communications Commission (FCC), I became aware of a new high-speed wireless technology in the 28 GHz radio frequency band called Local Multi-Point Distribution Service (LMDS). It promised faster Internet transmission speeds of 500 kbps compared to the then-current telephone line dial-up modem speed of 28 kbps. How antiquated those speeds sound today!
Anyway, I learned that in 1992 the FCC had granted a company called CellularVision USA -- now Speedus Corp. an exclusive LMDS license for the greater New York City metropolitan area. Granted, as in free, because CellularVision had pioneered the LMDS technology and the FCC wanted to reward innovation. Well, for six years until 1998, CellularVision had used the license to offer a one-way wireless television service, but the real goal was a two-way interactive high-speed data and video service that could be used for Internet and cell phones. Two facts shouted “red flag!”: (1) The CEO of CellularVision was a member of the Hovnanian homebuilding family with no real technology background; and (2) the company had never turned a profit since inception.
I ignored these problematic facts for two reasons: (1) I was enamored with the “high-speed wireless” buzz of LMDS technology; and (2) the FCC had scheduled a nationwide LMDS spectrum auction for February 1998. I was gambling that the auction prices would be very high just like they had been for the broadband personal communications services (PCS) auction in 1996-97 that yielded $20 billion for the U.S. Treasury. If the auction went well, CellularVision’s New York license (arguably the most valuable LMDS license in the country) would be revalued upward and the company’s stock would soar.
Bottom line: the LMDS auction was a huge disappointment with more than 100 cities not even receiving the minimum bid. CellularVision’s stock, which had been hovering around $8 per share prior to the auction, cratered almost immediately and fell below $1 later that year when financial problems forced the company to sell a huge chunk of its spectrum to another company, leaving it with insufficient remaining spectrum to provide service. Just as well, LMDS never took off because other high-speed technologies like cable modems, DSL, and satellites turned out to be superior.
Lessons learned: (1) buy a business that is already financially sound, not one that is a continual money loser that needs a successful auction to bail it out; (2) don’t buy a business run by a ne’er-do-well with no technical expertise; (3) understand competing technologies that may render the company’s technology obsolete; and (4) never buy a company that has the word “vision” in its name.
