WASHINGTON-In a potential blow to Omnipoint Corp.’s planned initial public offering this week, wireless investor James Valentine has asked federal regulators to investigate whether the small Colorado firm is violating its pioneer’s preference for a personal communications services license in New York. Valentine claims Omnipoint is relying heavily on technologies other than that which earned the company its pioneer’s preference award.
Omnipoint, according to Valentine’s little-known Wireless Communications Council, does not appear to be complying with a Federal Communications Commission requirement that each pioneer’s preference licensee “substantially uses the design and technologies upon which its preference award is based.”
Valentine, who founded the WCC, is a major investor in North American Wireless Inc., a Vienna, Va., company working with AT&T Corp. to build PCS systems-based on Code Division Multiple Access technology-for entrepreneurs vying for licenses in the FCC’s C-block auction.
CDMA, developed by San Diego-based Qualcomm Inc., is competing with a European technology known as Global System for Mobile communications and other digital wireless technologies for a share of a PCS equipment market potentially worth billions of dollars.
Valentine contends Omnipoint is using mostly GSM infrastructure and making minimal use of IS-661 technology, which combines several technologies, including CDMA and Time Division Multiple Access and Frequency Division Multiple Access schemes and served as the basis for Omnipoint’s pioneer’s preference permit.
“Given that the award of a pioneer’s preference to Omnipoint resulted in a substantial loss of revenue to the United States Treasury, and that Omnipoint received significant financing advantages unavailable to all but two other PCS licensees, now is the appropriate time for the Commission to clarify the meaning of `substantial use,’ ” stated the WCC.
While one cannot predict how the FCC will interpret that phrase, the agency in a 1993 decision said pioneer’s preference applicants did not have to use “only its own equipment for a complete system.”
Omnipoint and Valentine have become lightening rods for controversy.
Omnipoint’s challenge of C-block auction rules last year, which prompted other lawsuits and delayed bidding for months, drew the wrath of prospective bidders who saw the litigation as a self-serving stall tactic to enhance the firm’s position in the New York market.
Valentine, for his part, played a key role in putting the problem of interference from digital pocket phones to hearing aids on the radar screens of policymakers.
Having bet big on CDMA technology, skeptics see Valentine’s advocacy on behalf of the hearing impaired and his attack against Omnipoint as a strategy to slow or kill GSM use in America.
“The fact that we’re integrating [IS-661 technology] with another network is something we’ve always told everyone we would do,” said Douglas Smith, president of Omnipoint.
Smith said Valentine’s petition is competitively motivated, adding, “We absolutely make substantial use of our technology.”
In fact, Valentine himself admits he doesn’t want his investment in NAWI-which he headed but later stepped aside from-undermined by government intervention over the interference issue at some future date.
To bolster his claim that Omnipoint’s pocket telephone system in New York will be driven primarily by GSM technology, Valentine said Omnipoint admits as much in its registration statement filed with the Securities and Exchange Commission on Oct. 19. Omnipoint said it plans to launch a pilot PCS system in Manhattan early this year.
Valentine said his charges also are supported by an engineering analysis conducted by Charles Jackson of Bethesda, Md.-based Strategic Policy Research Inc. and by business deals between Omnipoint and Northern Telecom Inc., Ericsson Inc., Pacific Bell Mobile Services and JRC International Inc., Nortel and Ericsson supply GSM equipment, while PacBell-operator of a Los Angeles PCS system that uses GSM technology-has a roaming agreement with Omnipoint.
However, Omnipoint also recently signed a contract with Texas Instruments Inc. under which TI will manufacture Omnipoint’s IS-661 technology.
