Frontline Wireless announced on Wednesday that it was out of the auction.

The consortium, which included Reed Hundt, former FCC chairman, and VCs such as John Doerr, did not give a reason for its withdrawal from the auction. But there has been speculation that the Greensboro, North Carolina-based consortium was unable to raise the auction’s “reserve price” or down payment of $1.33 billion.

Blair Levin, an analyst at brokerage Stifel, Nicolaus & Co., said Frontline’s problems showed it would be difficult for new players to raise money to bid against the major wireless companies, which already have cell towers and other costly infrastructure in place. That could drive down the auction’s overall revenue and leave the public safety network without any bidders if the major companies decide that the FCC’s plan is too complicated.

“The odds of it working the way the FCC wanted have certainly gone down, but that doesn’t mean it doesn’t work,” Levin said.

Posted: 01|10|08 at 11:19 am. Filed under: Auction News.