FCC Wireless Auction Could Open Up Airwaves
Tuesday, September 19, 2006
Cellphone customers should soon encounter fewer dead spots in their coverage areas and more easily use next-generation phones that play television-quality video and perform other high-tech tricks, thanks to a Federal Communications Commission spectrum auction that concluded yesterday.
More than 100 bidders -- including cellphone giants T-Mobile USA Inc. and Verizon Wireless -- have promised to pay a total of $13.9 billion to the U.S. Treasury for chunks of the airwaves no longer used by the federal government. It is the largest amount of radio spectrum ever sold at once.
Just like radio and television stations, cellphone companies use the airwaves to send customer calls, text messages, e-mails and video. Each company has a spectrum range it must stay within to avoid interfering with other providers.
Cellphone companies and phone makers have long coveted the new spectrum, which is designed to carry wireless high-speed Internet services. The spectrum augmentation can be thought of as completing a patchwork highway system, widening it from four to eight lanes and raising the speed limit as much as tenfold.
The new spectrum should spur the wider rollout of so-called Third Generation, or "3G," wireless devices. These include cellphones, PDAs, wireless game units and credit-card-sized gadgets called "aircards" that slip into the side of a laptop and eliminate the need for hardwire Internet connections or even WiFi networks. Aircards have become a must-have for business travelers, but the current network coverage limits the speed and amount of data they can transmit and receive.
Once the wireless companies activate the new spectrum, owners of 3G devices should find it easier to do things other than just talk on their phones -- access e-mail, surf the Internet, play games with other users and watch streaming videos, say advocates of the service.
"There's no bad news for the consumer in this auction," said telecommunications analyst Blair Levin at Legg Mason. "At a minimum, it will increase the efficiency and improve the quality of the networks." Levin said he thought consumers might experience the benefits of the FCC auction within a year and a half.
The auctioned spectrum, spread across the country, was divided into small, medium and large blocks to include bidders of all sizes. A total of 104 bidders bought 1,087 licenses to use the spectrum. About half the bidders qualified as small businesses, the FCC said.
T-Mobile won the most spectrum, paying $4.2 billion for 102 licenses, followed by Verizon's Cellco Partnership. In third place was Spectrum Co., a consortium of cable companies Time Warner Cable, Cox Communications Inc., Comcast Corp. and Bright House Networks. Next was MetroPCS Communications, with Cingular Wireless rounding out the top five.
The cable consortium raised the most eyebrows from those watching the auction, who wondered if cable companies such as Comcast want to get into the cellphone business. But Comcast co-chief operating officer John Alchin recently told a Merrill Lynch investor conference that the company has "no interest in being the fifth cellular operator."
Levin speculated that Comcast may want to offer its own aircard to rival those sold by Verizon, for instance. Comcast will say only that the spectrum gives it flexibility to roll out new products.
Though the spectrum auction was the FCC's largest, Levin said it will not change the marketplace like the 1990s FCC auction that created several new competitors in the wireless industry. The next auction likely to have a similar impact will be in 2008, when the FCC sells analog television spectrum taken back from stations that have converted their signals to digital.