XM Buys WCS Wireless, Complicating FCC’s Repeater Rulemaking

WCS Wireless’s principal assets are wireless spectrum licenses in areas with 163 million people throughout the U.S., including 15 of the top 20 metropolitan markets, XM said. The WCS spectrum as a whole is being used for trials of high speed wireless broadband and VoIP applications, said WCS industry members.

But WCS licensees haven’t launched any permanent commercial services in the spectrum, largely due to uncertainty over potential interference from SDARS’ terrestrial repeaters, said a WCS lawyer. According to an FCC official, power levels are the rub. XM and Sirius’s terrestrial repeaters operate at a higher power than their WCS neighbors first expected.

“While XM and Sirius designed their repeater systems based on what they anticipated our rules would be, it turned out that power levels were substantially higher than power levels that adjacent frequency operators in the WCS spectrum had been expecting,” the FCC official said. WCS had been expecting SDARS to operate their repeaters at around 2 kW; they're up to 40 kW, the FCC official said.

The Commission hasn’t adopted final rules for SDARS’ terrestrial repeaters because it’s been “working to resolve the complex technical issues involved,” it said in the SDARS STA. But the Commission never meant the wait to be so long, said the FCC official: “It began with the thought that it wouldn’t be long before we would adopt the final rules.” Eventually, the Commission asked the WCS and SDARS licensees to work together to resolve their interference issues, “and they've been working on that solution for 3 years,” said the official.

The WCS spectrum is licensed in two 15-MHz blocks located in the 2305-2320 MHz and 2345-2360 MHz bands to either side of SDARS. WCS Wireless was formed to acquire and hold spectrum in the WCS band, said investor Columbia Capital’s corporate fact sheet. Columbia Capital calls the WCS spectrum “flexible,” holding tremendous opportunity for “numerous communications and media applications.”

The WCS Coalition, a relatively loose confederation of WCS licensees, is the WCS licensee’s mouthpiece on interference issues, said WCS Coalition attorney Paul Sinderbrand. Membership has evolved as licenses have changed hands, but the coalition includes BellSouth and Verizon.

“At this stage the fundamental problem with the WCS spectrum acquisition is that it appears as if XM is going to use it for high power, one-way transmissions, which poses a serious interference threat for anyone using low- power, 2-way wireless transmissions. This raises serious issues for WCS licensees,” said Sinderbrand. Calling WCS issues a moving target, Sinderbrand said: “Two days ago we were worried about WCS Wireless’s request for an STA to operate at a higher power. Now we're worried about XM. Who knows what will happen tomorrow. But this morning people were a lot more concerned.”

Said the FCC official: “We're waiting for input from WCS licensees and SDARS licensees on whether they are going to reach, or cannot reach, a solution that they're all happy with. We regularly and formally check to see what’s going on. Last we talked to them we were still waiting for a ‘yes’ or ‘no,'” the FCC official said: “One way to solve the problem is to put stronger filters on WCS receivers, and they have been working on a prototype. We want them to work together if they can. It appears that they are making slow but steady progress.”

“We have WCS licenses for which we paid a lot of money,” said a BellSouth spokesman, who said his company uses the spectrum for wireless broadband trials: “We've always been at a loss to understand how, after we bought the licenses, the FCC could authorize someone else to use the spectrum.” BellSouth purchased its WCS spectrum in a 1997 auction for $6.7 million, he said.

The spokesman said the XM and WCS Wireless pairing won’t affect BellSouth customers for now. “For the moment, since there are no formal operations, it has no impact on customers,” said the Spokesman: “But it has impact on our ability to do tests and it’s our property rights that we're concerned about.”

If WCS and SDARS can’t come up with a resolution, they'll likely have to turn the matter over to the FCC, said an industry lawyer. But the final result of an FCC rulemaking might not make anybody happy, the attorney said.

XM said it “expects to announce more detailed plans for the use of this additional spectrum in the future,” in a company statement. The firm said its acquisition of WCS Wireless will allow it to expand its business to video and data, increasing the variety of its subscription services.

Sirius demonstrated interest in expanding its spectrum as well this week, filing comments Wed. in the 2 GHz proceeding. Sirius asked the FCC not to allocate additional 2 GHz spectrum to Mobile Satellite Services companies ICO and TMI/TerreStar without a comprehensive review that would consider all options for the extra 13.3 MHz. An industry attorney said XM and Sirius “want the same thing, which is the ability to provide more and better services.” But the attorney said the timing of the 2 GHz filing and XM’s acquisition of WCS is coincidental.

Analysts were abuzz with chatter of XM using the spectrum to “localize” its service beyond local traffic and weather with the additional spectrum. The spectrum leg room could allow XM to tailor audio for individual markets -- more Spanish language programming in Miami at an extra charge, for example. Long term, XM could produce local content in a market, such as by luring a popular local DJ for a locally focused channel. Should XM also target video, analysts estimated 10-20 video channels fitting into XM’s operations.

Wachovia analysts speculated that XM should be able to leverage its existing 800-plus terrestrial repeater network to utilize its newly acquired terrestrial spectrum.