The cellular industry was barely 10 years old when competitors started knocking on the door. In the early 1990s, Nextel Communications Inc. was amassing specialized mobile radio licenses and formulating a digital plan to make it a serious threat to cellular carriers. Meanwhile, a new brand of services was in its infancy-personal communications services.
PCS has its roots in Great Britain. The Department of Trade and Industry in 1989 published “Phones on the Move,” an outline of a personal, wireless telecommunications service that would compete with cellular and other existing mobile services. In June 1989, the British government awarded three companies licenses to initiate two-way wireless communications services using Groupe Speciale Mobile communications technology.
A handful of U.S. companies borrowed the British idea and obtained licenses to test the new services here. APC and PCN America petitioned the Federal Communications Commission to allocate spectrum for PCS, which envisioned Personal Communications, Cox Enterprises and Omnipoint Corp.
On Dec. 5, 1995, the government kicked off the A- and B-block broadband PCS auction, attracting a variety of bidders including Craig McCaw, who later dropped out. AirTouch, Bell Atlantic, Nynex and U S West banded together to bid on licenses under the name PrimeCo, and Sprint joined with cable giants Comcast Corp., Cox Communications Inc. and Tele-Communications Inc. to bid for licenses under the WirelessCo name.
The auction, which drew 18 bidders, lasted three months and netted $7 billion for 99 licenses. The big winners at the auction included WirelessCo, which walked away with 29 markets for $2.1 billion; AT&T, which bid $1.68 billion for 21 markets; and PCS PrimeCo, which bid $1.1 billion for 11 markets.
Energized by its initial success, the FCC was anxious to begin the C-block auction, which was set aside for entrepreneurs, but it was hampered by legal challenges. After several fits and starts, the C-block auction finally began one year ler of GroupServe Inc. “It was amazing to me how many of the things that were predicted came true, in terms of how it becomes an emotional process, how it’s so easy to overbid for spectrum or for anything.”
Meanwhile, APC commercially launched its PCS network on Nov. 15, 1995, in Washington, D.C., marking the beginning of the commercial PCS industry. Newly licensed PCS players had a significant challenge before them in trying to differentiate their service offering from those of the incumbent cellular carriers.
“The cellular industry was doing everything it could to stop it from happening,” said Jay Kitchen, PCIA’s president and CEO. “They did not want PCS to develop because it was competition, and they knew if they got competition it would drive the price down and their (return on investment) would drop dramatically as well. The cellular industry had its foot squarely on the air hose of the PCS industry.”
Cellular carriers rushed to improve their systems to prepare for PCS n and airtime rates for a service that had never before been offered.
Once they got licenses, PCS carriers were required to share in the cost of relocating microwave users that occupied the spectrum. PCIA established a cost-sharing structure that required the second and third carriers coming on to the frequencies to reimburse the first carrier for expenses they incurred while moving the microwave licensees off the frequencies, said Kitchen. PCIA also established a clearinghouse that identified more than a quarter of a billion dollars in cost-sharing obligations among PCS players.
Carriers also had to get systems built against a cellular industry that had a 10-year head start.
“The cellular carriers had the luxury of building out their systems more incrementally,” said Stroup. “They received a substantial size territory and typically built from the core market outward. They really didn’t face any competition other than the other carrier in the market.
“The PCS carriers really did no;
“The competition has created an environment for better service and also new service offerings, and I think we’re going to see that continue as we go into this new generation,” said Kitchen.
