FCC votes to end mobile-phone limit
Agency to eliminate caps on airwave ownership by 2003
By Jeffry Bartash, CBS.MarketWatch.com
Last Update: 10:25 AM ET Nov. 8, 2001
WASHINGTON (CBS.MW) - Federal regulators on Thursday voted to abolish rules governing how much spectrum that wireless phone companies can own, a move likely to spur a wave of industry mergers.
The Federal Communications Commission voted 3-1 to lift the caps on how much spectrum a carrier can own in any one market. Right now phone companies are limited to no more than one-fourth of the available airwaves in big cities.
That limit will be raised in the near future, with the cap ended entirely by January 2003.
While the caps have helped to generate robust competition, they've also deprived phone companies of the ability to ease network congestion in big cities such as New York or to roll out new services such as wireless Internet access.
By lifting the caps, the FCC will enable wireless carriers to buy more spectrum, either through outright purchases or by corporate acquisitions. That could trigger a slew of mergers in which bigger carriers such as Verizon (VZ: news, chart, profile) and AT&T Wireless (AWE: news, chart, profile) buy up smaller ones.
In anticipation of such a scenario, investors have bid up the stocks of some wireless companies seen as especially attractive buyout candidates. See: Wireless sector prepares for shakeup.
The lone FCC dissenter, Commissioner Michael Copps, argued against complete elimination of the cap. He said the agency should retain some case-by-case discretion in regulating spectrum ownership. He also warned that the decision could trigger excessive consolidation and weaken competition.
Yet Chairman Michael Powell countered that U.S. regulators, particularly the Justice Department, would retain the ability to block mergers and acquisitions that harm competition.
"By any standard, this is the most competitive sector in the communications industry," he said.
By 2003, the agency will phase out the caps entirely. The issue has created a tug-of-war among a variety of interest groups seeking to influence the vote's outcome.
Powell also favors the creation of a market mechanism by which companies could buy, sell and trade spectrum to address immediate needs. At present, companies need agency approval to obtain or transfer new spectrum, a lengthy and time consuming process for regulators and businesses alike.
Once the caps are removed, mergers among the largest wireless carriers could also ensue. Most markets now have anywhere from six to eight carriers, but that number could be reduced to three or four within a few years.
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