WASHINGTON-As key House and Senate GOP lawmakers probe whether licenses valued at more than $1 billion were given away to Teledesic Corp. and Teligent Corp. as part of a back-room deal that policy makers justified on national security grounds, questions just as serious have been raised about the motives of those making the charges.
In Teligent’s case, allegations of impropriety surfaced shortly after the Vienna, Va., wireless startup went public two weeks ago. It could have been worse for the company. The possibility existed, according to a knowledgeable source, that publication of the Teligent-Teledesic controversy might coincide with Teligent’s Nov. 21 initial public offering. Teligent management nervously braced itself for that scenario.
But that didn’t happen and the IPO was successful as investors confidently bet on Teligent to crack the $110 billion local telco market monopolized by the seven Baby Bells.
Laurence Harris, senior vice president and general counsel of Teligent, said last week he believes the company was the target of commercial sabotage. “Our competitors wanted to stop our public offering and they failed,” said Harris, who is now anxious to ferret out what forces are at work behind the spectrum fracas.
The competitors Harris referred to include entrenched local wireline phone companies, like the outspoken BellSouth Corp., and would-be wireless rivals to the seven Baby Bells, like WebCell Communications Inc., a Washington, D.C., startup looking to bid on spectrum next February.
The Federal Communications Commission is expected to rule on challenges by BellSouth and others to a March ruling that shifted around spectrum to accommodate Teledesic, Teligent and the Pentagon.
“This is about fair public policy and consistency,” something WebCell President David Mallof said was in short supply in the Teligent and Teledesic licensing proceeding.
Though Teligent’s IPO escaped disaster, subsequent news articles questioning why the companies received their spectrum for free have put it and Teledesic on the defensive and have put the controversy smack dab on Congress’ radar screen.
Teligent, however, is not alone in receiving free spectrum. Other wireless local loop operators marketing to businesses, like WinStar Communications Inc. and Advanced Radio Technologies, also received licenses for free.
For much of last year, Teledesic and Teligent knocked heads over whether they could share the 18 GHz band, the same frequencies the United States says it needs free of disruption for military spy satellites.
In the end, Teligent, headed by former AT&T Corp. President Alex Mandl, was bumped up from 18 GHz to 24 GHz and given four times as much spectrum at the higher frequency to compensate for poorer propagation at 24 GHz.
Teledesic, funded by billionaires Craig McCaw and Microsoft Corp. Chairman Bill Gates, was allowed to remain at 18 GHz after engineers and policy makers concluded the Kirkland, Wash.-based Internet-in-the-Sky wouldn’t interfere with spy satellites.
McCaw and Gates didn’t pay a cent for their spectrum because of an FCC policy that shies away from global satellite system auctions for economic and technical reasons.
Still, the lack of a revenue alternative to spectrum auctions deprives American taxpayers of compensation for commercial use of the public airwaves and, thus, raises policy and budgetary questions.
While critics characterize the move to 24 GHz as a $1 billion windfall for Teligent, the firm replies that it wanted to stay put at 18 GHz and that the long, drawn-out controversy delayed its entry into the market.
The House and Senate have adjourned until late January, but congressional staffers remain busy on Teledesic-Teligent.
House Commerce Committee Chairman Thomas Bliley (R-Va.) and Senate Commerce Committee Chairman John McCain (R-Ariz.) have asked FCC Chairman Bill Kennard, who was FCC general counsel when Teledesic and Teligent licenses were granted in March, for a full explanation in writing this month.
“These latest allegations raise serious questions about the independence of the FCC from improper executive branch interference and about the integrity of the commission’s processes,” said McCain in a Dec. 3 questionnaire to Kennard.
Likewise, Bliley said the “FCC’s highly unusual action raises a number of timely questions concerning the substance, process and timing of that action.”
Specifically, Bliley pointed to high-profile lobbying by former policy makers on behalf of Teledesic and Teligent, Clinton administration input, a $50,000 donation to the Democratic National Committee by the Eagle River Investments Inc. holding company of Teledesic Chairman McCaw and a defunct $25,000 FCC travel fund underwritten by Teledesic for an international conference considering globalspectrum for the company.
Officials at Teligent and Teledesic maintain their licenses were awarded fair and square and that the public had ample opportunity to comment on their applications in recent years.
The attack on Teledesic, which plans to fire up a $9 billion low-earth-orbit global satellite system in 2001, appears to have more to do with the McCaw campaign contribution than with any competitive reprisals. But there still seems to be a connection, albeit indirect.
Officials associated with Teligent and Teledesic said they believe the national spotlight on campaign fund-raising investigations was used to draw attention to Teligent by its competitors.
The FCC defends its handling of the matter.
“The solution was driven by national security concerns and the issue of whether the commission appropriately interpreted the national security is before the FCC,” said Ruth Milkman, former deputy chief of the FCC International Bureau who is now second in command in the Common Carrier Bureau.
Milkman said that while 18 GHz microwave licenses were awarded to Teligent’s predecessors in 1993, 1994 and 1995, it wasn’t until 1995 that the National Telecommunications and Information Administration said Teligent’s 18 GHz operations would disrupt spy satellite operations.
Why NTIA, a unit of the Commerce Department, waited until 1995 to call attention to the issue is unclear and something congressional investigators want to know.
Former FCC Chairman Reed Hundt, a fierce auction proponent, is reported to have been alarmed upon first hearing that Teligent got spectrum for free. But Hundt nonetheless signed onto the settlement reached by Teligent, Teledesic and the Clinton administration.
“The bottom line is Teledesic was not the major beneficiary of a deal,” said Teledesic’s Larry Williams.
