Imagine Cablevision's chairman Charles Dolan, News Corp.'s (NWS

) Rupert Murdoch, and Berkshire Hathaway's (BRK

) Warren Buffett duking it out. That's exactly what happened on Aug. 9, which marked the first day of the Federal Communications Commission's Auction 66, involving the largest chunk of wireless spectrum to ever come up for bid in the U.S.

Entities backed by individuals, cable companies, satellite TV providers, telcos, and angel investors had bid a total of $933.5 million in the second of two rounds of bidding for wireless licenses in locales like New York and Long Island that day. (Each license gives the owner the right to offer services in a given area.) At first glance, that fell far short of the $2 billion minimum the FCC said it would be willing to take for the licenses. However, wireless spectrum bidding typically only heats up in auctions' final days. And already, Auction 66's second-round bids exceeded bids made in the first round, held several hours earlier, by $165 million.

Exactly what each bidder plans to do with whatever spectrum they end up winning is subject to much speculation. Cable companies and satellite TV providers are expected to use the spectrum to offer wireless voice and data services as part of their bundled offerings in order to better compete with telcos offering bundled voice, broadband, wireless, and TV services. Some companies are looking to launch wireless data services based on new technologies like WiMax. Others are just speculating, hoping to flip their spectrum in secondary deals and make a few million quick bucks.

BIDDING HEATS UP. It should take Auction 66, in which 168 approved bidders are participating, about a month to play out. Early expectations that the auction could net between $8 billion and $15 billion for the 1,122 licenses on offer may have been conservative. The $933.5 million bid in the second round for only 488 of 1,122 licenses available may indicate a long month for participants. "I think [the auction] is going to exceed expectations," says Richard Doherty, director at consultancy The Envisioneering Group. In fact, licenses sold at the auction might end up being the highest-priced wireless licenses ever sold in the U.S., says Andrew Cole, an analyst at consultancy The Management Network Group (TMNG

).

The bad news for participants is that bidders might end up spending more than they anticipated. One example: T-Mobile, a unit of German telecom concern Deutsche Telekom (DT

) bid the largest amount—$437 million—in the Aug. 9 first round in order to win licenses to improve coverage and build out its next-generation wireless network.

But by the second round, Wireless DBS, an entity backed by DirecTV (DTV

), EchoStar (DISH

), Rupert Murdoch, and other high-profile players, emerged as the largest bidder. So while T-Mobile, the U.S.'s fourth largest wireless service provider, has committed some $6 billion to the auction, it may find itself overextended, some analysts say. "I am not sure T-Mobile has deep enough pockets," says Doherty.

CABLE AND SATELLITE. As the process wears on, bidding is expected to become more frenzied as cable and satellite TV service providers, who need spectrum licenses to augment their existing offerings with wireless service, put up a fight. Four of the top 10 bidders in the day's first and second rounds were cable or satellite firms.

One active participant is SpectrumCo, backed by Comcast Chairman and Chief Executive Brian Roberts, as well as Comcast (CMCSA

), Cablevision (CVC

), and Cox, among others. Another active bidder, Dolan Family Holdings, is tied to Charles Dolan, chairman of Cablevision, as is bidder Antares Holdings. Yet another bidder, CableOne, is affiliated with Warren Buffett's Berkshire Hathaway (BRK

) and The Washington Post (WPO

).

One reason cable companies are bidding through several separate entities is that the auction allows for certain qualified bidders like Antares, whose revenues fall below a certain threshold, to purchase spectrum at a discount of 15% to 25%. And they're showing they're intent on winning: "[In the first several rounds,] they are putting down the gauntlet," says H. Mark Gibson, senior director of business development at spectrum consultancy Comsearch. Wireless spectrum is exactly what these companies need to match telcos' offerings, which are becoming increasingly similar to their own service packages, including TV, broadband, and voice-calling services.

TELCOS. Several regional telcos have also jumped into the bidding in order to provide next-generation wireless services. Most notably, Dallas-based Metro PCS, which provides prepaid, flat-fee, unlimited monthly wireless service that doesn't require a contract, bid $79.5 million in the auction's first round, becoming the round's second-highest bidder behind T-Mobile. The outfit wasn't one of the top-10 bidders in the second round.

Meanwhile, Cricket Licensee and Denali Spectrum License, backed by Leap Wireless (LEAP

), a provider of unlimited wireless voice and data plans, were top bidders during the day as well. On Aug. 9, Leap announced it had received an $850 million bridge loan with help from Citigroup (C

) and Goldman Sachs (GS

) specifically to participate in Auction 66. Leap said it would repay the loan by issuing unsecured debt securities. These companies' bids could be a sign that these operators are hoping to expand their service areas.

LONG SHOTS. The auction also attracted several dark horses. Daredevil Communications and Red Rock Spectrum Holdings appear to be among several firms backed by individual investors who might be looking to make a quick buck on purchasing and reselling spectrum. In the auction's second round, Red Rock bid $3.5 million. In the auction's first round, Daredevil bid $8.9 million, but didn't make it onto the top 10 bidders list in the second round.

Meanwhile other big guns—the telco giants—are just starting to show up. Verizon Wireless, the joint venture of Verizon (VZ

) and Vodafone (VOD

) is behind the Celco Partnership, which made its first serious bid in the second round. Cingular Wireless, a joint venture of BellSouth (BLS

) and AT&T (T

) and the U.S.'s largest wireless carrier nearly doubled its bid amount between the first and second round, to $44.6 million.

HEAVYWEIGHTS ON DECK. Others have yet to up the stakes in the bidding. Clearwire, a wireless broadband service provider backed by Craig McCaw and Intel (INTC

), has yet to appear among top bidders. McCaw achieved fame by cobbling together wireless spectrum in the 1980s to build McCaw Cellular, which he sold to AT&T in 1994 for $11.5 billion, becoming one of AT&T's largest shareholders.

In July, Clearwire raised $900 million in funding, and that money will likely be used to purchase Auction 66 licenses. Another much talked-about venture yet to make a showing in the top 10 bidding is Bend Cable Communications, a cable TV firm based in Bend, Ore., which is backed by Microsoft (MSFT

) co-founder Paul Allen.

But Auction 66 is just beginning. By the time it wraps up, likely in September, chances are all the heavyweights will enter the ring—sending wireless license prices further skyward.