July 23, 1999
Pondering the fate of pioneer's program
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By Lynnette Luna
A U.S. Court of Appeals Friday ordered the Federal Communications Commission to grant Qualcomm Inc. a pioneer's preference license, ending the seven-year battle between the commission and the cdmaOne innovator.
Qualcomm had been waging a seemingly uphill battle with the FCC over its quest for a pioneer's preference license the company believed it deserved for developing cdmaOne technology, a technology now widely deployed around the world.
A federal appeals court overturned the FCC's rejection of Qualcomm's application for the Miami major trading area in 1997, saying the agency was inconsistent in awarding licenses for innovative broadband PCS technologies.
Since then, Qualcomm has been negotiating with the FCC for the license, but the FCC later claimed it had no power to grant Qualcomm the license since Congress took away this authority under the 1997 Budget Act.
The appeals court Friday said Congress' action to eliminate the pioneer's preference program did not apply to Qualcomm. This would have meant the FCC would be required to evaluate once again whether Qualcomm deserved a license. Instead, the court went further, ordering the FCC to promptly find suitable spectrum and award Qualcomm the license for it. It's unclear where the FCC could identify spectrum for the San Diego-based carrier. The commission recently auctioned off all remaining C-block licenses.
The FCC for its part was confident the court would not defy Congress. The commission reasoned that if Congress had intended the statute not to apply to pending applications, it would have spelled it out in the legislation. But the court said Qualcomm's application was unique since the federal appeals court's 1997 order was more than just an opportunity for the FCC to re-evaluate Qualcomm's pioneer's preference application.
The court's remand was ‘‘not simply ‘for further proceedings,' but to afford Qualcomm a remedy in view of the FCC's inconsistent treatment of it, and that remedy—given the statutory context—meant that Qualcomm was entitled to a pioneer's preference,'' wrote the court in Friday's ruling.
The FCC could not comment by RCR press time.
Qualcomm's ruling is a perfect twist to a pioneer's preference process that, throughout this decade, was riddled with controversy, with protests and petitions to deny from companies questioning whether pioneer's preference winners really had innovative enough technology. The process also was plagued with legislation limiting the pioneer's program, eventually leading to its demise in 1997.
The FCC in 1991 began offering the pioneer's preference program as a way to give telecommunications innovators certain types of licenses without having to face competing applications. Applicants had to show they developed a new service or technology for the 2 GHz band or had brought the service or a technology to a more advanced state. They also had to prove the technology worked.
In 1993, the commission granted three broadband licenses: to Omnipoint Corp. for the New York major trading area; American Personal Communications for the Washington, D.C. MTA; and Cox Enterprises Inc. for the Los Angeles/San Diego MTA. Originally, these licensees were exempt from paying license fees until government and industry pressure pushed the FCC in 1995 to charge the three licensees fees that were about 15 percent below what their competitors had bid for those markets at auction.
Qualcomm's victory begs the question of: Where have all the innovative PCS technologies gone?
Under pioneer's preference rules, the three winning operators must have substantially deployed their technology by December. Cox and APC already have deployed their technology commercially, but it doesn't appear the supposed-to-be-trailblazing technologies will be further expanded.
Perhaps the most aggravating for those who still bitter about the pioneer's preference program is Omnipoint, which saved about $80 million from the program, paying $347 million for its New York pioneer's preference license.
The operator had convinced the FCC it deserved a license for developing Interim Standard-661 technology, a spread spectrum-based digital technology often described as a composite of Code Division Multiple Access technology and Time Division Multiple Access technology. It was capable of transmitting data at 64 kilobits per second.
Today, as Omnipoint heads for the December deadline, IS-661 technology remains in a testing phase, deployed in parts of Manhattan and other portions of its MTA, with no customers using it.
‘‘It's still in the testing phase, and we haven't made any decisions about what we're going to do,'' said John Grotland, spokesman for Omnipoint.
Omnipoint claims this deployment of the technology meets FCC rules that call for ‘‘substantial deployment'' of the technology. What substantial deployment means is unknown because the FCC deliberately left the definition vague to spur technology innovation.
Some, however, argue the FCC intended substantial deployment to mean commercial deployment, but it will take another party to challenge Omnipoint and determine what the FCC meant.
‘‘They have until December. If no one challenges their contention that they've made substantial use, the commission will not delve into it on its own,'' said one FCC official. ‘‘From the commission's point of view, we're busy enough that if no one raises an issue, we aren't going to launch an inquiry.''
The Wireless Communications Council raised the issue in 1996, asking federal regulators to investigate whether Omnipoint violated its pioneer's preference license. WCC claimed Omnipoint was relying heavily on technologies other than that which earned the company its award. The FCC at that time denied the WCC's petition, asking WCC to raise the issue after the December 1999 deadline.
IS-661's commercial future looks cloudy. Texas Instruments signed an agreement with Omnipoint in early 1996 to manufacture equipment based on IS-661 technology. TI would not comment on whether the company is pursuing this technology, but company spokesmen could not locate people familiar with IS-661.
‘‘We're not focusing on it,'' said one TI spokesman.
‘‘With LMDS and other solutions, the question becomes, is IS-661 the best solution? I'm not sure it is,'' noted one financial analyst.
Cox, who won its pioneer's preference license based on PCS-over-cable technology, sold its PCS interests to Sprint PCS. The technology was used in a commercial system, but Sprint PCS says it may only use the fiber portion of the network for backhaul functions. APC, now under full ownership of Sprint PCS, used its frequency-agile-sharing technology in its Global System for Mobile communications network, said the FCC. However, Sprint PCS plans to shut the entire network down by the end of the year. Engineers say APC's technology in part is used in North American GSM systems.
‘‘Theoretically, it would be more difficult to prove Cox and APC didn't meet pioneer's preference rules since they used it,'' said the FCC official. ‘‘Omnipoint is still testing, making them more vulnerable to a petition.''
Though the fruit from the pioneer's preference program seems dismal, others would argue the FCC accomplished its original intent of the program: to incite development of PCS technology. The pioneer's preference attracted hundreds of companies, and without this interest, technology never may have been developed for the 2 GHz band. Many vendors early on did not believe technology could be engineered for the 2 GHz band.
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