HOLLINGS EXHORTS FCC NOT TO RELAX WIRELESS SPECTRUM CAP

Cap, which CTIA has been pushing hard to have lifted completely now without transition period, currently is 45 MHz in most markets and 55 MHz in rural areas. Letter from Hollings, Inouye and Markey said spectrum cap had kept competitive marketplace in effect for wireless industry. “We see no reason for the Commission to jeopardize this deregulatory environment by encouraging marketplace consolidation which undoubtedly will require greater government oversight,” they wrote. They argued that cap encouraged carriers to invest in “new digital compression technologies to achieve greater efficiency from their current assets as well as to deploy more spectrum-efficient equipment and facilities.” Lifting cap would “perversely” reward companies that have been least efficient in using their spectrum, they wrote. Letter said that in 1999, FCC decided to retain 45 MHz in all but rural areas to avoid jeopardizing benefits such as lower prices that spectrum ceiling had made possible so far. “In the past 2 years, we would be interested in knowing what has changed in the marketplace that warrants an FCC decision to substantially modify or eliminate the cap,” letter said.

Hollings, Inouye and Markey also rejected arguments that cap needed to be relaxed or eliminated to provide sufficient capacity to offer advanced services. They said some carriers already were offering advanced services with existing spectrum and cap could be adjusted when additional spectrum was put up for auction without “adversely affecting the current number of competitors in the marketplace.”

Bush Administration weighed in last month for first time on spectrum cap, as NTIA Dir. Nancy Victory urged Powell to adopt “full and immediate repeal” (CD Oct 25 p1). Victory told Powell that Administration believed that keeping cap wouldn’t preserve competition but more likely would result in harm to consumers. Administration’s push for immediate lifting of spectrum ceiling echoed letter from House Commerce Committee Chmn. Tauzin (R-La.) and Telecom Subcommittee Chmn. Upton (R-Mich.) that also urged Powell to eliminate cap. They said wireless market had become so much more competitive since spectrum restriction was imposed in 1993 that cap today no longer made sense (CD Oct 13 p4).

This week, several other congressional Republicans delivered similar message to Powell. “The cap has outlived its usefulness and become counterproductive,” Sen. Hagel (R- Neb.) said in letter sent Tues. Seven other Republican senators, in letter Mon., urged agency to end “artificial regulatory limits on spectrum available for commercial mobile radio services.” That letter was signed by Sens. Bennett (Utah), Inhofe (Okla.), Enzi (Wyo.), Hutchinson (Ark.), Warner (Va.), Cochran (Miss.) and Helms (N.C.). “Spectrum cap elimination will also provide immediate relief from a spectrum shortfall while government addresses the long-term need of additional new spectrum.”

In ex parte filing, WorldCom, largest wireless reseller in U.S., reiterated its support for keeping caps, but said if Commission decided to relax restrictions, company urged sunset period to allow resellers and others time to adjust. Noting FCC consideration of 12-18 month transition period before ending cap, WorldCom said one year would be “wholly inadequate.” It said it was “deeply concerned that shortly after the announcement of a merger among 2 major CMRS carriers, both of those carriers will be far less willing to enter into favorable resale arrangements with WorldCom.” Transition period of longer than 12 months would provide company with enough time to assess whether to enter into long-term or high-volume resale contracts with existing carriers, it said. As for expanding 45 MHz cap to 55 MHz in transition period, WorldCom recommended that FCC limit temporary increase to only largest U.S. markets.

CTIA told FCC in Nov. 1 ex parte filing that if agency developed internal guidelines for evaluating wireless transactions, they should be based on same criteria that Justice Dept. uses in its antitrust analysis and rely on methods used by DoJ in its competition evaluations. “Internal processing guidelines need not be developed as formal rules in a rulemaking process,” CTIA said. “Further, the Commission should provide sufficient flexibility for addressing transactions that may be filed while any internal processing guidelines are considered.”

Besides spectrum cap, FCC also will decide today whether to eliminate cellular cross-ownership restriction. Alltel told Commission in Nov. 1 ex parte filing that agency immediately should eliminate cellular-cross ownership limit in all markets. “Retaining the cellular cross-ownership restriction while at the same time increasing the spectrum cap will afford PCS carriers flexibility to enter into a wide range of transactions that would be prohibited to cellular carriers,” Alltel said. “Such a discriminatory regulatory scheme will have severe implications on Wall St.” Keeping cellular cross-ownership restriction in place in rural service areas would only “preclude many smaller carriers from entering into transactions not restricted to larger carriers,” Alltel said.