Wireless Spectrum Auctions

MDS America has “proved Northpoint system can co-exist” with DBS on day-to-day basis, CEO Kirk Kirkpatrick told us Wed. in interview on proposed plans for U.S. service. FCC issued experimental license to MDS America Fri. (CD May 7 p7). Company could offer new challenge for Northpoint and to DBS, which is opposed to allowing terrestrial services in 12.2-12.7 GHz band (CD May 8 p7). FCC is considering several spectrum-sharing options for satellite services, but Northpoint debate has been most contentious. MDS America, which competes with Northpoint, may end up as ally in proceeding (CD April 27 p7).

Some wireless technology developers are recommending FCC set aside 5 GHz of spectrum or more when Commission finalizes proposal for service rules for spectrum at 92 GHz. Expectation is that as early as this fall FCC will launch rulemaking, although industry already has been bouncing ideas off Commission for what developers would like to see in that spectrum. On issue whether band should be made available on unlicensed basis or via licenses, panel organized by Wireless Communications Assn. (WCA) has floated idea of hybrid approach that would license some segments and allow others to be unlicensed at more restricted power levels, said Donny Burt, vp-advanced technology, e-xpedient/CAVU. Among “last mile” technologies that can be offered in that band, developers said, are gigabit ethernet-based systems that can connect buildings and extend metropolitan area networks.

Verizon Wireless in filing at FCC balked at request by New ICO (CD April 4 p1) seeking flexibility to offer terrestrial mobile services using mobile satellite service (MSS) spectrum. New ICO sent letter to FCC Chmn. Powell last month suggesting that it would have to fold unless it received approval for new spectrum from domestic and international regulators. Verizon said request would violate Sec. 309(j) of Communications Act, which requires that spectrum used to provide commercial terrestrial services be auctioned. “New ICO received its MSS licenses for free,” Verizon said: “Given the enormous sums that Verizon Wireless and other mobile operators have paid for licenses, this would yield a tremendous windfall to New ICO and confer on them an unfair competitive advantage.” Verizon said New ICO’s suggestion that “MSS is no longer viable” should mean that spectrum be reallocated for advanced mobile services. Carrier said 1990-2025 MHz and 2165-2200 MHz have been identified internationally for 3G services. “Given the difficulty that the Commission is having in identifying spectrum for 3G, it should not overlook this obvious opportunity,” Verizon Wireless wrote. On other 3G issues, Verizon cited “flawed assumptions” in recent FCC report on use of 2.5 GHz band for advanced wireless services such as 3G. It said band segmentation was possible without harming Multichannel Multipoint Distribution Service (MMDS). “Importantly, MDS operators have no long-term ownership rights to leased ITFS [Instructional TV Fixed Service] spectrum,” carrier said. “Thus, a reallocation of some ITFS spectrum would not undermine their spectrum rights. Moreover, if MDS operators believe that they need additional spectrum to deploy broadband fixed services, they can bid in the auction.”

Following meeting last month on interference issues, satellite digital audio radio service (SDARS) licensees and Wireless Communications Services (WCS) operators don’t appear to be closer to agreement on terrestrial repeaters. In recent ex parte filings at FCC, XM Radio and Sirius Satellite Radio proposed rules that would cap number of high-power repeaters that could be deployed without first coordinating with WCS licensees. WCS licensee AT&T Wireless (ATTW) offered counterproposal, providing technical analysis that carrier said would demonstrate why SDARS plan still would cause interference to fixed wireless operations. XM submitted draft rule to FCC for terrestrial repeaters in effort to rebut concerns that repeaters operating at levels above 2 kw could cause interference. XM told FCC that AT&T Wireless “recently disclosed that its concerns with terrestrial repeaters are based on its having designed the front end of its receivers to tune to the entire 2305-2360 MHz band, covering both the WCS and the DARS band, and that it has no filtering to eliminate DARS transmissions in the 2320-2345 MHz band.” XM said it shouldn’t have to bear costs of AT&T’s “failure to adopt reasonable engineering practices.” Sirius raised similar arguments, saying WCS licensees should have used receivers with enough front-end selectivity to reject “the amount of interference that the rules already permit from nearby WCS operations.” XM proposed rule that would: (1) Put no additional limitations on low-power repeaters. (2) Define “medium-power” repeaters as operating between 2 and 10 kw. Such repeaters provide more targeted transmissions that increase power in given direction, using sectorized antennas and focus energy into relatively narrow beamwidth. Such antennas decrease probability that WCS base station would be located within that range. Every medium-power repeater would be coordinated with WCS licensees. (3) Limit to 250 number high-power repeaters, operating at 10-40 kw, that XM would operate without coordination. In Mon. ex parte filing, AT&T referred to meeting last month in which SDARS and WCS licensees exchanged technical data. SDARS licensees provided details on planned repeaters in Atlanta, Boston and San Francisco. AT&T said its interference analysis found: (1) If SDARS licensees operated terrestrial repeaters at levels of 10-13 kw each, “interference to the ATTWS fixed wireless base station would preclude the provision of service to more than 171,000 households in Atlanta alone.” (2) If SDARS licensees operated repeaters at 40 kw, interference to base station would preclude AT&T fixed wireless service to almost 435,000 households there. (3) If high-power repeaters were replaced with multiple standard power repeaters operating at 2 kw, SDARS licensees could “achieve the same coverage for their own service but reduce the size of the exclusion zone in Atlanta” by 43.2%. Carrier wrote: “Both sets of licensees paid for their spectrum at auction or in the secondary market. It is reasonable to expect that both services should bear the burden of establishing a viable co- existence.” AT&T urged FCC to adopt rule in which SDARS licensees could deploy terrestrial repeaters at peak power of up to 400 w/MHz, evenly distributed across band for total of 2 kw per 5 MHz. Proposal also would limit out-of-band emissions generated by SDARS terrestrial repeaters to levels specified by licensees that have less than transmitter power levels.

Nextel said Tues. it bought assets of Let’s Talk Cellular & Wireless for $32 million. Assets include bulk of company’s holdings, including 200 retail stores, national distribution center based in Dallas, hq in Miami, store inventory. Nextel said stores would remain open and convert to Nextel brand. Separately, Fitch affirmed ratings for Nextel’s senior secured bank facility and senior unsecured debt. Fitch cited company’s strong first- quarter results, including adding 500,000 subscribers in each quarter last year, average $73 revenue per user, low customer churn. It said rating also reflected expectation that company had enough spectrum to pursue its business plans. “Nevertheless, additional spectrum would enhance Nextel’s competitive position and improve capital efficiency,” Fitch said. “The primary opportunity for Nextel to acquire additional spectrum would be in the much-delayed 700 MHz auction, currently scheduled for September 2001.” Nextel shares rose 15% on Nasdaq Tues. to close at $18.69.

PanAmSat wants FCC to require early demonstration of compliance with operational and additional operational limits of companies before allowing spectrum sharing by NGSO FSS, GSO and terrestrial companies. Voicing strong opposition to portions of plan, PanAmSat filing argued against reconsideration petition from Skybridge as satellite companies weighed in with opinions on FCC decision on proposed spectrum sharing in 2 separate bands.

Verizon Wireless emphasized to FCC why it thought Commission should postpone granting licenses won in $17 billion Jan. PCS auction, with carrier laying out alternative payment proposal if agency decided to ignore its advice. Verizon has been asking Commission to consider deferring grant of C-block licenses until U.S. Court of Appeals, D.C., makes decision in NextWave case. Most licenses up for bid in auction had been reclaimed from NextWave after FCC cancelled its licenses for nonpayment. Verizon Wireless won largest single block of licenses in auction, purchasing nearly $8.8 billion (CD Jan 29 p1). Last month, NextWave also asked FCC to delay spectrum awards until D.C. Circuit issued opinion (CD March 13 p4). “Requiring payment now would be premature because the money would have to be held in reserve for possible return to the high bidders,” Verizon wrote in supplemental comments filed with Commission this week. “It would create significant problems without any countervailing benefits.” Verizon said that in past auctions, bidders were able to make final payments and immediately start building out spectrum. “Here, however, some bidders may determine that it is financially imprudent to invest still more funds until the cloud on the licenses they won are removed,” carrier said. “Lenders who are already committed to fund a bidder’s payment may balk at supplying still more funding without any certainty that they are secured by unconditioned licenses.” Verizon also argued that “litigation uncertainties” could increase borrowing costs. Without clear signal from FCC on repayment date, auction participants could have to secure financing arrangements that were more expensive or impose breakage costs for early repayment. If Commission decides to move ahead on granting licenses, Verizon proposed plan that would allow high bidders to either pay for NextWave spectrum immediately or defer payment but agree to pay interest on final payments. Under proposal, applicants would have to make final payments for all licenses that weren’t tied up in NextWave litigation within 10 days of public notice granting licenses. Applicants that won NextWave licenses could also make entire final payment within 10 business days or wait until 10 days after D.C. Circuit issued decision affirming cancellation of licenses. In latter case, applicants would be required to pay interest. NextWave spokesman said: “Verizon is absolutely right to say that requiring companies to pay billions of dollars for those contested licenses before the court rules is contrary to the public interest and violates basic, common sense.”

FCC unanimously approved Deutsche Telekom’s (DT) merger with VoiceStream and Powertel, imposing no special conditions on $34 billion deal and provoking renewed commitment from Sen. Hollings (D-S.C.) to seek restrictions on foreign govt. ownership in U.S. telecom companies. FCC adopted order 4-0, with Comr. Furchtgott- Roth dissenting in part on separate deal on national security issues between federal agencies and companies. Order, approved Tues., is expected to be released as early as today (Thurs.) Commission said in news release it found DT would “have neither the incentive nor the ability to engage in unfair competition, specifically predatory pricing, in the U.S. domestic mobile telephony market.”

FCC Wireless Bureau Chief Thomas Sugrue outlined several prospects for potentially freeing additional private wireless spectrum Fri., including possibility of user fees, audit of spectrum uses, current secondary spectrum proceeding. Point of user fees for private land mobile radio licenses, idea that has been floated in past and would require change by Congress, wouldn’t be to generate revenue but to increase efficiency of spectrum use, Sugrue said in lunch speech to Land Mobile Communications Council (LMCC) annual meeting in Washington. “The theory is unless there’s a cost placed on bandwidth and coverage, licensees wouldn’t improve their efficiency of both,” he said, noting that FCC couldn’t make change on its own.

“Unintended outcome” of high prices paid in recent wireless spectrum auctions has been to force carriers to curtail infrastructure investment, Gartner Dataquest said in new report. “Because the telecommunications sector is so large, the investment slowdown has actually slowed the U.S. economy,” said Ron Cowles, Gartner analyst for telecom and networking. “The government should consider using a portion of the auction revenue to apply financial incentives for infrastructure development to build advanced networks,” Cowles said. Other steps that govt. could take to stimulate telecom sector investment include investment tax credits, streamlining of rules that inhibit infrastructure deployment and modifying rules that stymie competition, report said. It also said govt. must redefine universal access to include broadband equal access “allowing bandwidth connectivity for advanced services to all areas, business and residential alike.”