Spectrum Bill Will Transform U.S. Wireless Industry

FCC Chief of Staff Bryan Tramont told us the FCC is ready to move to notify NTIA of its intention to have an auction, a next step after it is signed into law by President Bush. “We are thrilled that Congress has cleared the way for next-generation broadband wireless services,” Tramont said: “We look forward to putting this spectrum into commercial hands as soon as practicable.”

The legislation clears half the spectrum that will be auctioned, though the trickiest half is at 1710-1755 MHz, since it’s now occupied by the Defense Dept. and other govt. users. The rest at 2110 2155 MHz, occupied mostly by fixed microwave links, will be less difficult to clear and will be cleared through more traditional procedures.

NTIA Dir. Michael Gallagher told us the legislation is critical to helping make the U.S. more competitive. “The availability of the 90 MHz… will directly impact the ability of wireless to offer robust broadband service as well as meet the growing voice needs. This will help us go a long way to closing the gap with Europe and Asia.”

Gallagher said the model created has broader implications: “Our conversations just on the staff level is that this approach also may have applications in the private sector. Leadership coming from government can help both sides of the equation.” Gallagher said the hard fight to get the bill through Congress verified his experience working on ultra wideband and other thorny spectrum issues. “This legislation is very consistent with overall spectrum experience,” he said: “Everything valuable is difficult.”

Former NTIA Dir. Greg Rohde said in a separate interview that 10 years from now the bill will be viewed as the most critical telecom legislation since the 1996 Telecom Act. “This is a long-term piece of legislation,” he said: “If we want to regain leadership in telecom…the only way we're going to remain competitive is we have to find a way to allocate more spectrum into the commercial sector and make better use of spectrum.” Rohde said a major problem the U.S. faces is that govt. users take up so much spectrum. “The only way to bring DoD and other agencies to the table is they have to have the assurance that they're going to have their costs reimbursed and the funding is available,” he said: “The significance of this legislation I don’t think can be overstated long term.”

“It’s just the right legislation,” a wireless carrier source said: “It creates an opportunity of using these monies to offset the costs of people who have to relocate. It’s the right thing to do.” “This was important to DoD and to much of industry,” a 2nd carrier source said: “No one wanted to go back to DoD or to fight this out again next year.” The legislation passed with the strong support of CTIA and a few wireless carriers, led by T- Mobile. Officials from DoD and NTIA actively worked the Hill on behalf of the legislation.

Precursor Group analyst Rudy Baca said the 3G spectrum and the way it will be made available are both significant. “It’s much larger than just the 1700 MHz band -- this is a change in the way the govt. manages spectrum,” Baca said: “The fundamental decision was to move from uncertainty to spectrum certainty. This is a very, very important development.” Baca also said the 3G auction will likely place downward pressure on spectrum prices, especially headed into Auction 58 in Jan. Baca also said the development will force T-Mobile and Nextel among the national carriers to make clear their 3G plans are. “This makes it an all-but-forgone conclusion that the U.S. will have full 3G deployment,” he said.

“You can’t beat a win-win situation for both the government and wireless users,” said Sen. Ensign (R-Nev.), chmn. of the High Tech Task Force, referring to the spectrum trust fund bill.

“I think it’s good news for the industry in general,” said Legg Mason analyst Rebecca Arbogast. “Nobody relished the prospect of a fallback plan that the FCC would have to devise to clear the military,” she said: “I would think it’s particularly good news for T-Mobile because they have to fill out their spectrum.” Arbogast said it’s too early to draw conclusions about the effect on prices. She noted that the 3G auction is still at least 18 months away. “The obvious answer is anytime you have a big chunk of spectrum coming out it would depress prices a bit,” she said: “But it’s more or less a gradual rolling out of spectrum. First you have the NextWave spectrum coming up for sale [Auction 58],” she said: “You do have the secondary market… You have the H block. Over this period of 2004, 2005, 2006 there are waves of spectrum rolling out. That will stabilize prices.” - Howard Buskirk