WASHINGTON-The government stepped closer to opening its July 26 auction of personal communications services licenses to large wireless carriers that may pay high dollar for spectrum in key markets like New York and San Francisco.
“Perhaps it is time for the commission going forward in the 700 MHz auction and in the C- and F-block re-auction” to rethink the spectrum cap, said Howard Shelanski, the Federal Communication Commission’s chief economist. Speaking to reporters at a symposium of the Quello Center for Telecommunications Management and Law, Shelanski said large carriers need spectrum, while smaller carriers may not impact competition in the markets being re-auctioned.
It may be wise for the commission to let large nationwide companies use the PCS spectrum to fill in their networks, Shelanski said.
Speaking at the same event, FCC Commissioner Michael Powell noted, “The spectrum cap is an artificial constraint.”
The spectrum cap will not be enforced in the upcoming 700 MHz auction and the commission is studying the cap as part of its biennial review required by Congress.
The cap, which limits the amount of spectrum a company can control in a market, was adopted to foster competition and prevent consolidation in markets. Likewise, PCS rules set aside two blocks of spectrum solely for small businesses and minorities in an attempt to help these designated entities enter the wireless industry.
Now it appears both rules may go away so large wireless carriers can gain access to additional spectrum. Some large carriers say more spectrum will ease capacity strains on their systems as well as allow them to offer advanced data services.
Lifting the cap will allow “mega carriers” to keep spectrum out of the hands of competitors, contends Dan Pegg, senior vice president of public affairs for Leap Wireless International Inc.
“If that happens, the mega carriers will be able to keep more competition out of the market … to the extent that more spectrum falls into the hands of those mega carriers, it will be off the market forever,” Pegg said.
Leap recently filed comments opposing a plan by Sprint PCS and U S West Wireless to divide the 30-megahertz C-block licenses into three 10-megahertz licenses; authorize non-DEs to bid for these licenses as well as others and provide DEs with bidding credits.
“U S West and Sprint, like Nextel [Communications Inc.] and SBC [Communications Inc.] before them, provide no persuasive reason why the current entrepreneur’s block rules and spectrum allocation should be changed … Leap cautions the [FCC] not to let the `fatigue factor’ that is increasingly attending C-block eligibility issues cloud its view of the tangible benefits that entrepreneurs such as Leap are bringing to consumers in the wireless marketplace,” Leap said.
As an alternative, Leap suggested splitting the 30-megahertz C-block licenses into one 20-megahertz license and one 10-megahertz license. Anyone could bid for the 20-megahertz licenses for the top five markets-or markets with populations of more than 5 million-but only DEs could bid for the remaining licenses. The reverse would be true for all other markets. The 15-megahertz C-block licenses and the F-block licenses would be reserved for DEs. Small companies would receive a bidding credit of 35 percent and very small companies would receive a bidding credit of 45 percent.
“It is the only way they can offer a solution for both sides even though we continue to believe a solution for the other side is unnecessary,” Pegg said.
Ninety PCS licenses are set to be re-auctioned in July. Originally, the FCC awarded the licenses to NextWave Telecom Inc., but canceled them when bankrupt NextWave failed to make installment payments on the licenses. NextWave believes it still owns the licenses and is appealing the FCC’s decision. The re-auction also includes other licenses that have not been awarded and could include licenses of other bankrupt C-block companies.
The FCC is expected to make a decision on the rules for the C-and F-block re-auction before May 8, the date that short forms are due in the 700 MHz auction.
