The Federal Communications Commission once again must address rules surrounding the now-defunct pioneer’s preference process, a program riddled with controversy throughout this decade.
Omnipoint Corp. and VoiceStream Wireless Corp. last week filed an opposition to Qualcomm Inc.’s petition that the FCC deny the carrier’s request to transfer its New York personal communications services license to VoiceStream, claiming Omnipoint hasn’t fulfilled its obligations as a pioneer’s preference licensee. Omnipoint and VoiceStream want to complete their $1.7 billion merger agreement this year.
Qualcomm, which has stated its desire to obtain the New York license, believes Omnipoint failed to substantially deploy Interim Standard 661 technology, a spread-spectrum digital technology often described as a composite of Code Division Multiple Access technology and Time Division Multiple Access technology, capable of transmitting data at 64 kilobits per second. In a jabbing and accusative FCC filing, Omnipoint contends it has satisfied its pioneer’s preference obligations.
A U.S. Court of Appeals recently ordered the FCC to find suitable spectrum and grant Qualcomm a pioneer’s preference license for CDMA technology after years of court battles, spurred when the FCC originally denied Qualcomm the preferential license.
The commission granted Global System for Mobile communications operator Omnipoint the New York major trading area license in 1993 under preferential rules that gave telecommunications technology innovators licenses without having to face competing applications. Omnipoint convinced the FCC it deserved a license for IS-661 technology and saved about $80 million from the program, paying $347 million for the license.
The FCC began offering pioneer’s preference licenses in 1991, but ended the practice in 1997 after legislation limited the program. The program was characterized by controversy, with protests and petitions from other companies questioning whether the preferential winners really had innovative technology. The FCC, for its part, was glad to rid itself of the program, but is still embroiled in the aftereffects, including a more than seven-year battle with Qualcomm.
Now the commission may have to decide whether Omnipoint substantially deployed the technology as the carrier’s five-year deployment deadline approaches in December. Commission rules call for pioneer’s preference licensees to “serve with a significant level sufficient to provide adequate service to at least one-third of the population in their licensed area…” Omnipoint said it has met this obligation by deploying IS-661 technology in specially modified GSM base station controllers, covering 36.94 percent of the population in the New York MTA.
But the commission also required pioneer’s preference winners to substantially deploy/use their technology. That definition is ambiguous, said one FCC official.
“Substantial use is no where defined anywhere,” he said. “The thought was that it would be too difficult to do because it was hard to say in a broad sense what substantial use was. The hope was that we scare the pioneer into using it, and it wouldn’t be an issue.”
Some opponents, including Qualcomm, say substantial use means commercial service. Omnipoint has told RCR it has no customers using the technology today, but argued in its FCC filing that it believes the commission’s definition is clear.
“The commission has carefully avoided redefining the substantial use requirements,” said Omnipoint. “The test is unambiguous-to build a system that covers one-third of the POPs in the licensed area.”
The commission noted in 1996, when the Wireless Communications Council raised the substantial use issue, that defining substantial use is best made on a case-by-case basis. The FCC denied WCC’s petition and said WCC could raise the issue again once the December 1999 deadline had passed.
“A finding of `substantial use’ entails a judgment of the degree and/or nature of deployment and use, which can be affected by the nature and extent of other technologies with which the pioneer’s preference technology is entwined, the effect of market forces, the effect of ensuing technological factors and other factors,” the commission said in 1996.
Market forces have affected IS-661 technology’s deployment, asserts Omnipoint. The carrier said it developed handsets for IS-661 technology, but they were rendered obsolete when the FCC changed its technical rules. Omnipoint also claims it tried to sell IS-661 technology to some of the original C-block auction winners, but NextWave Telecom Inc. owned the majority of spectrum and had opted to deploy CDMA technology because it was closely aligned with Qualcomm, implied Omnipoint. And when all the A-and B-block license winners selected upbanded cellular technologies, Omnipoint said it tried to enhance IS-661 technology to pursue wireless local loop opportunities.
Among the other claims, Omnipoint accused Qualcomm of filing the opposition because it was angry Omnipoint never chose CDMA technology and that it was attempting to uproot GSM technology in the United States.
The carrier claims Qualcomm’s evidence-press statements and a Securities and Exchange Commission filing-is not enough to prove it did not substantially deploy the technology.
But Qualcomm contends no customers can purchase IS-661 handsets today, bringing into question what purpose IS-661 is serving in the base station. It wants the commission to inquire about how many handsets Omnipoint has sold. Omnipoint said the commission never required it to sell a certain number of handsets.
“Qualcomm’s inquiry into the number of handsets Omnipoint has sold is a `red herring’ which should not be given any attention,” Omnipoint wrote in its defense. “Qualcomm has always attempted to make the pioneer’s preference process a competition between its commercial progress and that of others … Commercial success was never a condition of Omnipoint’s pioneer’s preference license.”
Kevin Kelley, senior vice president of external affairs with Qualcomm in Washington, D.C., said, “We never said commercial success was a test. We are saying is this license conditioned on making substantial use of this technology? That means commercial use. The question is, did they do it? Only the commission knows the answer.”
Omnipoint and VoiceStream also challenge Qualcomm’s right to protest Omnipoint’s license, saying it failed to demonstrate that it is a party in interest under the Communications Act.
“Qualcomm asserts such status because it `believes that the NY MTA license would be ideal spectrum to give to Qualcomm’ to satisfy its unrelenting quest for recognition as a pioneer that neither its peers [n]or the commission would give it,” said Omnipoint. “However, Qualcomm has no legal interest in the NY MTA license arising from its recent court-ordered pioneer’s preference award.”
Experts say it’s unlikely the FCC would take away Omnipoint’s license if it found the carrier did not meet pioneer’s preference rules since it paid for the license and service would be disrupted.
“It may have to be a case of outright fraud for Omnipoint to get its license taken away,” said an FCC official. “More likely the remedy would be a fine. The burden is on Qualcomm to convince the FCC and maybe a court that they know what substantial use is.”
Qualcomm said it intends to file an opposition to Omnipoint’s filing with the FCC this week.
