Nextel Communications Inc.'s (Nasdaq: NXTL) surprise $144 million cash bid for the wireless assets of bankrupt operator WorldCom Inc. (OTC: WCOEQ) has once again sparked interest in the operator's strategy for rolling out high-speed wireless data services in the U.S.

According to a filing with the Bankruptcy Court for the Southern District of New York in Manhattan late Monday, Nextel has won the auction for spectrum licenses, network equipment, and tower leases, beating out a previous bid of $65 million from BellSouth Corp. (NYSE: BLS). A spokesperson for WorldCom confirmed the Nextel bid but offered no further comment. The deal won't be made official until it has been approved by a bankruptcy court judge. A hearing is expected on July 8.

WorldCom, which plans to trade under the name MCI when it emerges from Chapter 11 protection but is using the WorldCom name for its bankruptcy proceedings, is the largest holder of Multipoint Microwave Distribution System (MMDS) spectrum in the U.S. MMDS services operate in the 2.1GHz to 2.7GHz band licensed by the Federal Communications Commission (FCC), offering 1-Mbit/s data transfer speeds over an area of around 30 miles in a line-of-sight (LOS) configuration (i.e, no big buildings or hills in the way).

WorldCom had been using this licensed spectrum to provide fixed wireless, high-speed Internet services in about a dozen markets in the U.S before its spectacular downfall last year. It holds licenses for over 100 U.S. markets.

Forget the fixed, however, it's what kind of mobile wireless service Nextel might be able to provide with the spectrum that has got analysts talking.

Companies like IPWireless Inc., Navini Networks Inc., and others have been talking about using MMDS frequencies to allow laptop computer users to move between wireless base stations without losing their connection.

Traditional line-of-sight and non-line-of-sight (NLOS) systems don't have the ability to hand off between base stations because the large MMDS modem that is used to send and receive signals from the home is not practical for mobile use.

Analysts say that it may be time for the MMDS technology to migrate to the laptop and mobile phone. "It raises a lot of interesting possibilities that bear close consideration," says Andy Fuertes, senior analyst at Visant Strategies. Nextel is the only major U.S. carrier that has not yet announced a migration path to third-generation services, and the operator has said in the past that it may consider alternatives to established 3G technology to provide high-speed wireless data services to its business and blue-collar-oriented subscriber base.

The carrier is also known to have already tested similar systems from Flarion Technologies (which doesn't have a technology that operates in this spectrum in the U.S. at the moment) and NLOS wireless kit vendor NextNet Wireless Inc. in the Philippines (see Nextel Trials Flarion's Flash).

Fuertes says he can think of at least four reasons why Nextel wants the spectrum:

Phil Marshall at the Yankee Group also had a bit of a chin-scratching session about Nextel's plans for the spectrum. "They could use it for a wide-area data service, a bit like a hotspot network, but with more mobility," he conjectures.

Nextel isn't offering much in the way of comment about its plans. "Nextel has made it a practice to pursue valuable spectrum for affordable prices today in order to provide maximum flexibility for the future," writes a Nextel spokesperson in an email reply to questions.

WorldCom originally paid around $1.3 billion for the MMDS licenses in 1999. [Ed. note: gutted!]

— Dan Jones, Senior Editor, Unstrung