Wireless spectrum: scarcity or glut?

Breakthroughs in radio technologies are finally giving large business customers much-needed confidence in a wider array of wireless broadband services that will compete on price, quality, and performance with the better-known wireline access architectures

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Alan Pearce, New Age Economics


Alan Pierce is a principal of New Age Economics (Washington, DC.)
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Breakthroughs in radio technologies are finally giving large business customers much-needed confidence in a wider array of wireless broadband services that will compete on price, quality, and performance with the better-known wireline access architectures. Indeed, with the recent technological and marketplace success of the industry, wireless companies and customers are beginning to think of wireless as the primary method of providing all of the voice, data, and video services they need.

More technological and spectrum options are being offered, including wideband personal satellite communications systems; high-frequency mixed wireless, also known as local multipoint distribution system (LMDS); digital electronic messaging service at 38 GHz; and the lower-power and frequency multichannel, multipoint distribution system, popular with MCI-WorldCom and Sprint.

Coming soon is the auctioning of 39 GHz, which will be used to provide services similar to those being offered by LMDS spectrum. Add to this the Federal Communications Commis-sion's (FCC's) plan to re-auction NextWave's 95 licenses, and it may be that the United States is transitioning from spectrum scarcity to spectrum glut.

Contributing to this trend is a migration to digital radio and higher frequencies. LMDS, for example, is just one of several new allocations that help explode the myth that radio is confined to the delivery of narrowband services. At 27.5 to 31.3 GHz, LMDS sits on the biggest slice of spectrum ever allocated to one service. An LMDS system has bandwidth potential of up to 1.3 GHz-much bigger than cellular, which has only 25 MHz, or personal communication services, with 30 MHz. As a result, LMDS is easily capable of delivering two-way broadband services-video, high-speed Internet and Web access, and telephony.

Later this year, the FCC will auction off the so-called 39-GHz spectrum-a "new" slice of the spectrum pie from 38.6 to 40 GHz. The spectrum will be divided into 14 "channelized" licenses, each with its own separate license pair. Each license pair will consist of a 50-MHz uplink in the A-block, and a 50-MHz downlink in the B-block. The country will be divided into 175 so-called economic areas (EAs). This means that the EAs are going to be larger than the 498 basic trading areas used for LMDS.

The FCC is anticipating a wide variety of bidders, including the regional Bell operating companies and other incumbent local-exchange carriers, the competitive local-exchange carriers, and LMDS license holders. Some bidders may be buying the spectrum as a speculative investment.

Opening the bidding

After a couple of years of litigation, with the FCC apparently being the final victor, the re-auctioning of NextWave's licenses will begin soon. With a combined population of about 163 million-including major cities like New York, Philadelphia, and Los Angeles-the auction, according to FCC insiders, will draw bids in the billions of dollars. Everyone knows that Nextel is going to bid, especially since it tried to buy the licenses from NextWave last year for a whopping $8.3 billion. But others will surely join the contest. The Cellular Telecommunications Industry Associa-tion and Southwestern Bell Communi-cations have lobbied the FCC to open the bidding to larger companies. The Personal Communications Industry Association, on the other hand, wants the FCC to make sure that small wireless companies with minority ownership get a preference.

NextWave's original bid was $4.7 billion in 1996, but the company was unable to raise the money and declared bankruptcy in 1998. The irony is that today, the licenses are probably worth much more than the original bid price. But only time will tell. After its declaration of bankruptcy, NextWave was forced by court order last year to hand the licenses back to the FCC.

Sounding somewhat irritated at the way NextWave delayed the process as it attempted to maintain control over its licenses, FCC chairman Bill Kennard said, "This spectrum has lain fallow for too long. Now it is time to act swiftly and put it to productive use for U.S. consumers."

The chairman should know better. Spectrum does not lie fallow, which suggests a period of rest and enrichment prior to productive use. Spectrum is either used (productive) or unused (unproductive). In any event, the good news this year is that new wireless technologies, "new" spectrum, and new service offerings will help generate wealth and efficiency for business enterprises throughout the United States.

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