WASHINGTON-When all is said and done at the Federal Communications Commission, the auctions ended and the money counted, some 14,745 megahertz of spectrum from all parts of the chart will have been sold to those whom the commission has deemed “most committed to offering new services.”
Only 120 megahertz of that spectrum was carved out for personal communications services; the rest has been earmarked for narrowband, multipoint distribution services, interactive video and data services, specialized mobile radio services, digital broadcasting, digital audio radio service, the flexible wireless communications service, paging, multiple address systems, overlays, emerging technologies and operations above 40 gigahertz.
Some of this auctionable spectrum certainly will be used for PCS-like voice and data services, but there probably is little chance in the foreseeable future that PCS licensees will be thrown into bankruptcy by other service providers that locate in their areas. When television first came into being, there were those who thought it would kill radio. Some predicted cellular telephony would cause paging’s decline. And coming full circle, the Internet has not usurped TV viewership.
“There is the misconception that all spectrum is PCS spectrum,” commented Kathleen O’Brian Ham, chief of the Wireless Telecommunications Bureau’s auction division. “A variety of different types of services will be auctioned, and many will be for new and niche offerings. We’ve only seen the tip of the iceberg in terms of demand for wireless services.”
The commission has completed 12 auctions since receiving authority to sell spectrum in 1993, and 12 more are scheduled for this year; there could be more if pending rule makings are completed. The wireless telecommunications services auction, the most free-wheeling of the commission’s offerings thus far, will begin April 15, and the digital audio radio services auction began April 1. Other wireless-related sales that could begin during the fourth quarter include general wireless communications services (25 megahertz), 220 MHz (1.55 megahertz), 800 MHz SMR-upper block (10 megahertz), and several paging blocks.
While some believe there is a spectrum glut that will choke all services competing in a marketplace, Ham thinks otherwise. “The commission is rolling out spectrum because a lot of people want it,” she said. “Many have business plans and are ready for auctions. There is a business demand for auctions, and a consumer demand for new wireless services. From my vantage point, we’re right on the mark.”
This is not to say that all spectrum recipients will live long and prosper. To survive, most PCS operators-particularly smaller companies competing in smaller markets-will have to depend on new and innovative services to garner customer support. Bigger players, like those connected with phone companies and those who were able to amass important financial backers or customers, won’t have much of a problem in the competitive marketplace.
Aside from the obvious competitors-the two local cellular incumbents-PCS providers as a whole, according to a recently released white paper from BIA Consulting Inc. in Chantilly, Va., will have to contend soon with competition from enhanced SMR providers, such as Nextel Communications Inc. and Geotek Communications Inc.
“As recent experiences with these two companies as well as a small operator in Hawaii suggest, digital SMR could make significant inroads into many markets targeted by cellular and PCS companies by focusing on the high-value commercial segment; mobile professionals; and certain niche sectors within paging, data, cellular and PCS,” BIA wrote. Paging and narrowband PCS pose somewhat of a threat to PCS, BIA explained, particularly when there is subscriber overlap between paging/narrowband PCS and broadband PCS.
Lesser known services, including microwave and milliwave offerings like MMDS, LMDS and 38 GHz proposals, could impact PCS carriers’ success in the wireless local loop arena.
But what alternatives do PCS licensees have if they cannot generate sufficient cash flow or cannot get their networks completely built out on their own? They can partition part of their market to another carrier. They can partner, and in that way can preserve their licenses in addition to offering their subscribers additional services. They also can sell their licenses-and many have-but there are strict rules governing to whom they can sell, especially if they were classified as small businesses and, as such, received bidding credits.
A- and B-block and D- and E-block winners have the most flexibility when it comes to divesting a license. Winners of entrepreneur-block licenses-those in the C- and F-blocks-cannot sell their entire retinue of licenses for the first three years of their 10-year license span. Up until year five, entrepreneurs cannot sell their licenses to anyone other than another entrepreneur-block eligible that can meet FCC guidelines. If they sell to a non-eligible, the difference in the price paid by the original owner and the price that would have been paid absent bidding credits must be remitted to the Treasury as a penalty under the “unjust enrichment” rule. After five years, C-and F-block licensees are free to sell to whomever can meet FCC licensee-eligibility rules.
Even with the potential for failure, present in any business deal, Ham still holds high hopes for a competitive wireless environment from which carriers and consumers alike will benefit. “Wireless penetration has grown steadily during the past 10 years, much like the penetration of VCRs,” she said. “The marketplace will adapt, and wireless will grow.”
