SBC Communications Inc.’s impending plans to add Ameritech to its growing stable of telecom acquisitions brings to the front burner the significance of the 45 megahertz cap on wireless spectrum.
Say what you will about him, former FCC chairman Reed Hundt instituted the cap on wireless spectrum to ensure a competitive wireless marketplace. Basically, the rule prevents wireless licensees from owning more than 45 megahertz of spectrum in a given market. Cellular operators are given 25 megahertz of spectrum, while A-, B- and C-Block PCS licensees receive 30 megahertz of spectrum. Thus, no wireless carrier could own two cellular licenses (50 megahertz), two large PCS licenses (60 megahertz), or a PCS and cellular license (55 megahertz) in the same city. D-, E- and F-Block PCS licenses are 10 megahertz each, and many of the licenses were bought by wireless players that wanted to add on to their existing spectrum base.
SBC and Ameritech each own cellular licenses in Chicago and St. Louis. Under existing rules, if SBC and Ameritech merge, the new company must rid itself of one of its licenses.
However, FCC Chairman Bill Kennard has hinted a few times that the FCC may revisit the 45-megahertz cap to see if it is needed. Keep the cap, I say.
Chicago is the third-largest cellular market in the United States, with 1.76 million subscribers. It also has a reputation as one of the nation’s most competitive wireless markets.
AT&T Wireless Services Inc., PrimeCo Communications L.P., Sprint PCS, NextWave Telecom Inc. and Pocket Communications Inc. have PCS licenses in Chicago. Sprint, NextWave and Pocket do not yet offer service.
While some of these PCS players could be formidable wireless competitors, a combined SBC-Ameritech would dictate that city’s wireless prices.
An Ameritech exec told me once that Ameritech signs on more customers in one day than PrimeCo had at its launch. Whether or not that is an exaggeration, the fact remains that Ameritech and SBC have had 15 years to sign up cellular customers and build their networks. PCS licensees are just starting out.
Competition exists in the wireless arena today. Carriers have different target markets, different price points, and offer different features to entice certain segments of the customer base. That innovation does not exist in the long-distance business and there is only a suggestion of competition (for business customers) in the local exchange marketplace today.
Doing away with the spectrum cap would be the death of meaningful wireless competition.
