US wireless auction start-up closed, official says

WASHINGTON, Jan 8 (Reuters) - A start-up company called Frontline Wireless that was expected to be a key player in an upcoming U.S. government wireless auction has "closed at this time," a company official said on Tuesday.

The comment came from Frontline vice chairman Reed Hundt less than a month before the start of the 700-megahertz auction being conducted by the Federal Communications Commission.

Hundt, a former FCC chairman, declined to elaborate when asked whether Frontline was withdrawing from the wireless auction.

But analysts at Stifel Nicolaus said in a research note that Frontline would not bid in the auction because it had failed to make the down payment needed to participate.

Frontline proposed to build a national network with one of several blocks of wireless spectrum in the 700-megahertz auction. The block targeted by Frontline would allow some commercial uses, but was subject to an FCC requirement that it be shared with public safety agencies.

"With Frontline out, the cost of obtaining the (public safety block) will be significantly reduced, in our view ..." Stifel Nicolaus said.

"This means that the already limited chance that the auction will produce new wireless broadband competition on a nationwide basis is even smaller than we previously thought, which is positive news for AT&T (T.N) and Verizon Wireless," Stifel Nicolaus said.

Verizon Wireless is a joint venture of Verizon Communications Inc (VZ.N) and Vodafone Group Plc (VOD.L).

The auction is set to begin on Jan. 24 and is expected to raise at least $10 billion for the U.S. government from airwaves being returned by television broadcasters as they move to digital from analog signals in early 2009. The signals are valuable because they can go long distances and penetrate thick walls.