Towerstream Corp. is far from a giant in the telecommunications industry, but the Middletown company is competing with the likes of AT&T, Verizon and Google for a valuable commodity.

The small fixed-wireless Internet provider is one of about 260 companies nationwide vying for pieces of a wireless spectrum being vacated by analog TV stations as they move to digital signals next year.

The 700-megahertz spectrum of frequencies is much sought after, in part, because of the signal’s ability to travel long distances and to pass through thick walls – crucial attributes as consumers and businesses become more reliant on emerging wireless technologies.

The stakes are high. The Federal Communications Commission is auctioning off the channels beginning Jan. 24 and it’s expected that the winning bidders for the most desirable parts of the spectrum will end up shelling out billions.

Among the companies that filed papers to participate in the auction are Internet search giant Google and mammoth telecom companies AT&T, Verizon, Alltel and Qualcomm.

But many are small companies, like Towerstream, a business-to-business Internet provider that uses WiMax technology, which can beam broadband wireless data over long distances. The publicly traded company has about 900 customers in nine urban markets – Newport and Providence, as well as Boston, Chicago, Los Angeles, Miami, New York, San Francisco/Oakland and Seattle.

Towerstream CEO Jeff Thompson said controlling a piece of the 700-megahertz spectrum would fit nicely with the company’s WiMax technology “because of the coverage and penetration it offers.”

One of the benefits: The strong, non-line-of-sight signal would allow Towerstream customers to use smaller, self-installable equipment instead of rooftop antennae that are erected by the company.

Right now, Towerstream uses a mix of spectrum it licenses from other companies and spectrum it owns. For that reason, Thompson said the auction isn’t a make-or-break situation for the company. “We have plenty of spectrum right now, but we have a great opportunity that we won’t have again,” Thompson said.

FCC rules restrict what participating companies can say publicly about their bidding strategy and their future plans, but Thompson did say the company is hoping for some outside funding to back its bids.

“We understand that in some of these markets we’ll be looking at, we’ll be competing with some of the best-funded companies in the world,” Thompson said. “We have a very precise plan, which I cannot talk about.”

It’s difficult to gauge Towerstream’s chances for success.

The company will likely bid for less-expensive spectrum blocks that cover regional slices of the United States, which could allow Towerstream to expand into new cities, according to Mike Jude, a senior analyst for Nemertes Research Group, in Mokena, Ill.

In addition, Jude said, any restrictions the FCC puts on those regional blocks of spectrum – the restrictions haven’t been finalized – could reduce the competitiveness of the bidding. Depending on the restrictions, some larger companies may deem it not worth the effort.

Meanwhile, Towerstream has qualified for a 25-percent bidding discount under a small-business provision set up by the FCC to make bidding more competitive.

“It could very well be the case that the FCC’s selection process will favor a smaller player like Towerstream in certain areas,” Jude said.

For Towerstream, participation in the auction is just the latest development in a year of milestones.

The company – which was founded by Thompson and Philip Urso, the company president, in 2001 – went public last January through a reverse merger involving a shell company called University Girls Calendar. The move allowed Towerstream to avoid the traditional, more expensive route of an initial public offering.

In the five years before going public, Towerstream had raised about $10 million and had a sales staff of 15.

In 2007, Towerstream raised about $55 million by going public and quickly moved from over-the-counter trading to the Nasdaq stock exchange. The company now has a sales force of about 100 in training. With a new sales center in Middletown, the company is aiming to have a staff of about 180 by year’s end.

The company is still losing money, however.

Towerstream reported a $1.75 million loss in the third quarter, but company executives pointed out that revenue grew more than 8 percent quarter-over-quarter, to $1.76 million for third quarter, ending Sept. 30. And Thompson predicted a “breakout” second quarter this year, when the new salespeople start making calls. “That’s going to be a pretty exciting time,” he said.

In the meantime, the company balance sheet appears strong. Towerstream reported $52.6 million in assets in the latest quarter – including $44.7 million in cash – with debt totaling $3.1 million, and $2.3 million in additional liabilities.

Thompson touts Towerstream’s WiMax wireless technology as a cheaper – and in many cases faster — alternative to cable and DSL Internet connections.

In Providence, for instance, Towerstream owns an antenna atop One Financial Plaza that can connect with rooftop antennae belonging to customers miles away. That allows Towerstream to avoid the expense and time of installing line between the locations. The company also can bypass having to rent space on existing phone company networks.

“They can’t control us,” Thompson said companies such as Verizon and AT&T. “They can’t put us out of business; they can’t prevent us from installing customers.”

And without the need for physical lines between sites, Towerstream can add new customers quickly – usually within three to five days, according to Thompson.

Locally, customers include law firm Burns Levinson LLC in Providence and EMJ Residence, a private investment company, also in Providence.

Towerstream is not the only company in the WiMax market. Major players include Sprint Nextel Corp. and Clearwire Corp. – both of which are reportedly not taking part in the FCC auction. But Towerstream is the only company focused solely on the business sector, Thompson said.

If the company does win a piece of the 700-megahertz spectrum, it will have the capability to cater to the consumer market. But that doesn’t interest Thompson right now.

Jude, the analyst from Nemertes Research Group, said part of the value of the spectrum is the ability of winning companies to lease unused portions of it to other telecommunication firms.

And Thompson indicated that might be part of the company’s plans, if it has successful bids. ·