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UTILITY REPRESENTATIVE CHARGING INTO MICROWAVE RELOCATION WAR

WASHINGTON-While fighting escalates over how much personal communications services licensees should pay to relocate microwave users from the 2 GHz band to higher frequencies, a pair of entrepreneurs have come up with a plan they believe will bring peace and profits to all sides.

In fact, Path Tel Inc., a one-year-old start-up firm with offices in the Washington, D.C., area and in Los Angeles, predicts PCS operators and microwave users may actually need each other for business purposes one day soon.

Path Tel represents electric, water and other utilities with 2 GHz microwave links, but its strategy indirectly furthers the interests of PCS firms who have already spent nearly $8 billion for permits and want to quickly enter the explosive pocket telephone market.

“We don’t want to posture ourselves as an adversary to the PCS operators,” said David Daigle, Path Tel director of business development. “We don’t view this whole issue as one that should be a war.”

The 32-year-old Daigle, whose West Coast Radio Communications in Los Angeles ranks as one of the nation’s most successful Motorola Inc. two-way radio distributorships, was recruited by Path Tel founder David Schaeffer, 38, another wireless entrepreneur with experience in paging and specialized mobile radio.

By upgrading microwave systems from analog to digital technology, according to Daigle, utilities and others with microwave facilities will have enough capacity for internal communications and plenty left over to resell for profit to long-distance firms like AT&T Corp., MCI Communications Corp. and Sprint Corp., and to next-generation pocket phone service providers as well.

“If we can show a pipeline company, an electric utility or a gas utility that their microwave network, when properly formatted, can actually carry traffic other than their own, and can generate revenue from that, this is something their boards of directors will look at,” said Daigle.

“We’re talking about putting money back into the company’s bottom line, which will have distinct shareholder interest,” he added.

If enough utilities go that route, regional and nationwide microwave networks could be formed. The 1,200 incumbent 2 GHz licensees occupy 13,000 microwave paths that together stretch 180,000 miles. Compare that to AT&T’s long-distance network, the most extensive and sophisticated in the world, which is 75,000 miles long.

In addition, utilities have extensive access to rights-of-way, buildings and antenna towers and have brand equity, plus are well versed in billing and customer service. In addition to utilities, microwave links are licensed to railroads, local governments and public safety agencies.

Deregulatory and market forces have prompted utilities to realize added value from telecommunications that can be gained by leveraging their existing capital base.

These attributes have not gone unnoticed by Congress, which sees a role for utilities in a new competitive environment that it wants to make possible through telecommunications reform legislation.

Because microwave systems relocated and converted to digital would be paid for by PCS operations ($200,000-$250,000 per link), and are a less expensive then optical fiber, Daigle claims utilities could offer telecommunications services to residents and businesses at competitive prices.

Unlike agents for PCS and microwave entities, Path Tel does not charge for its representation. It contracts to consult with utilities (about a dozen to date) that decide to create telecommunications profit centers after the transition from 2 GHz band is complete. The firm is funded by capital resources and equity investors.

Daigle said Path Tel negotiated discounts with equipment vendors, like Northern Telecom Ltd., to keep relocation costs for PCS firms reasonable.

So far, talks between PCS and microwave that began in April have been characterized by classic, hard-line bargaining and name-calling, with the PCS industry alleging that microwave users are attempting to gouge them.

Microwave users say it’s in their interest to strike the best deal possible and accuse the PCS industry of wanting to shortchange them.

Federal Communications Commission rules establish a two-year voluntary negotiating period for PCS and microwave licensees to work out relocation arrangements acceptable to both sides.

If that fails, there follows a one-year negotiating period during which PCS firms are obligated to cover only costs to relocate comparable microwave facilities. The FCC will have to decide on disputes unresolved after three years.

“It’s tough work,” concedes Daigle. “My future over the next six to eight months revolves around airplanes, hotels and bad meals.”

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