WASHINGTON-The wireless telecommunications industry is leery of a new budget-driven, flexible-use auction proposal that could create more competition for carriers on Main Street and Wall Street.
The auction of the 2305-2320 MHz and 2345-2360 MHz bands has to begin by April 15 and must be completed by Sept. 30, the last day of fiscal 1997.
At the same time, the Federal Communications Commission has shored up rules for auctioning unserved cellular areas at 800 MHz.
The 2.3 GHz spectrum, part of a block originally intended for digital satellite radio service, was freed up to help pay for the $6.5 billion cost of White House programs in the FY97 appropriations package negotiated by congressional Republicans and the Clinton administration before lawmakers adjourned the 104th session in late September to campaign for re-election.
Even before the 30 megahertz Wireless Communications Service auction plan was official, the wireless industry voiced skepticism and even outrage about it.
“If there was ever any suspicion as to whether or not spectrum auctioning was being done solely for the good of the marketplace, this decision certainly sends the message loud and clear. This is about making money,” said Jay Kitchen, president of the Personal Communications Industry Association.
Specifically, Kitchen said PCIA opposes national licensing and eligibility restrictions in the form of the 45 megahertz commercial wireless spectrum cap.
“New entrants who have spent time and money to build out their systems nationwide will be hurt; spectrum caps will prevent many players from being able to participate and it would slam the door on small providers,” Kitchen stated.
Another concern is that the introduction of more spectrum and carriers into the wireless marketplace will create added demand for financing at a time when C-block personal communications services auction winners are still trying to round up money for licenses and system buildout costing hundreds of millions-even billions-of dollars.
Similarly, FCC Commissioner James Quello raised concerns about the potential impact of the 2.3 GHz auction on C-block licensees and future D-,E- and F-block auction winners.
“We must ensure to the extent possible that any decisions we make, including the creation of new potentially competitive services not prejudice existing licensees by suggesting that we have somehow predetermined winners and losers by deeming one service or other more deserving of regulatory flexibility or beneficence,” said Quello.
C-block PCS licensees tend to be small- and mid-sized firms, due to the fact that auction excluded the Baby Bell local telephone companies and long distance carriers that dominated A- and B-block auctions.
FCC officials describe the early criticism as protectionist fears, the same kind they heard when the agency proposed to auction PCS licenses (encompassing 120 megahertz) to create competition for the cellular duopoly.
Ron Nessen, a spokesman for the Cellular Telecommunications Industry Association, said the new competitive landscape precludes the need to apply the spectrum cap. He added that considering a nationwide license flies in the face of the FCC’s previous opposition to such licensing. The FCC is weighing whether or not to count the new spectrum against the cap.
The 45 megahertz-per-market limit, if applied to the 2.3 GHz spectrum, could prevent cellular and PCS firms from bidding.
While the proposal would let licensees offer fixed, mobile, relocation and digital satellite radio services and enable them to partition services areas, disaggregate spectrum and franchise (representing a growing trend toward spectrum flexibility), other key auction rules are up for debate.
The FCC is seeking input in December on the size of geographic service areas and the amount of spectrum for each license, buildout requirements and on Congress’ call that public safety spectrum needs be taken into account.
As such, the new 2.3 GHz spectrum poses an interesting political dilemma for the FCC. Wireless carriers, fearing new competition, appear willing to hand over the 30 megahertz to public safety.
The FCC, pressured by Congress to pay serious attention to future public spectrum needs, could satisfy commercial and public safety wireless sectors by allotting new frequencies to police, fire fighters, medics and others as recommended by a federal advisory panel.
But that probably won’t happen because the FCC owes $3 billion to the U.S. treasury from the new auction. Therein, lies the problem that is causing growing friction between congressional telecom policymakers and budgeteers in the House, Senate and Office of Management and Budget who came up with the idea for the 2.3 GHz auction.
While telecom policy appears to suggest accommodating public safety with the 30 megahertz, budget policy rules.
The strain between spectrum and budget policymakers is expected to come to a head during spectrum reform debates next year.
Despite the fears voiced by wireless carriers, it’s not clear the spectrum would draw more bidders for the crowded pocket telephone field.
In fact, early speculation had MCI Communications Corp. and Microsoft Corp. interested in buying the spectrum for wireless Internet service. While wireless carriers have interest in that market, it is a peripheral business that lacks the threat new pocket phone operators represent.
