Prominent wireless startup company Frontline Wireless LLC has allegedly bailed out of the upcoming FCC auction for the 700MHz spectrum. Their spokesperson Mary Greczyn told The Associated Press Tuesday that "Frontline is closed for business at this time. We have no further comment." The auction is scheduled to take place Jan. 24, but can be theoretically pushed as far as Jan. 28, the last day permissible by law.

On Friday, Frontline was supposed to come up with an upfront payment for the wireless chunk it wanted, a special section of the 700Mhz spectrum, the Block D, which was set aside for an emergency communications network. The sum required to participate in the auction was $128 million. So far, no other company has bid for this particular slice, mainly because Frontline was the main planner behind the concept of a nationwide communications system which would include the newly freed up frequencies.

It's unclear whether any companies will make a last minute bid now that Frontline is apparently dead. The Greensboro, N.C.-based wireless firm is backed by heavyweights such as former Netscape CEO James Barksdale, Ram Shriram, a founding board member of Google Inc., former FCC Chairman Reed Hundt (the company's vice chairman), and its chairwoman Janice Obuchowski, who is a former U.S. Assistant Secretary of Commerce in charge of telecommunications policy.

Search engine leader Google is listed among other 96 accepted applicants on a list released by the FCC. Initially, 266 companies applied. The next step for all 96 bidders to stay in the race is to submit an up-front payment before a Jan. 4 deadline. Google is bidding as Google Airwaves Inc. Paul Allen's venture-capital firm Vulcan Inc. is also among those accepted.

The auction will actually cover the 698-806 MHz part of the wireless spectrum. The public safety network was supposed to run on a total of 10 megahertz (763-768 and 793-798 MHz), making up the so-called Block D of the auctioned spectrum.

The FCC three months ago rejected again heavy pressure from those "wireless cartels" (as described by former chairman of the Federal Communications Commission Reed Hundt) and said it won't budge on the rules it announced for the 700 MHz spectrum. Specifically, the FCC requires winning bidders for a certain portion of the 700 MHz spectrum called the "C-block" open up their services to their customers' choice of equipment.

The open-access rules were adopted by the FCC at the suggestions brought by Frontline Wireless and Google.

The auction, which was postponed by a week, 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 official date for the auction is now eight days later than first announced, on January 24, reportedly as a small concession to companies deciding whether they still wanted to bid.