To: Jon Koplik who wrote (3692 ) 10/29/2001 8:06:07 AM From: John Carragher Respond to of 12231 October 29, 2001 U.S. Regulators Consider Altering Rules for Wireless Spectrum Licenses By MARK WIGFIELD Dow Jones Newswires WASHINGTON -- Staffers at the U.S. Federal Communications Commission have recommended that the agency allow some wireless carriers to license larger chunks of the wireless spectrum, with limits phased out entirely in about 18 months. Peter Cramton, a spectrum expert representing Leap Wireless Inc. in the spectrum-cap proceeding, said staffers have recommended that the current limit of 45 Megahertz for urban markets be increased to 55 Megahertz on the way to its eventual elimination. Mr. Cramton's description of the change, gleaned from conversations at the FCC, was confirmed by an FCC official, who noted that both the size of the increase and length of time for the phase-out could change by the time the four FCC commissioners vote on the matter. That vote is scheduled for Nov. 8. However, the agency had no official comment on the matter while the matter is still pending. A lobbyist for the Cellular Telecommunications and Internet Association, or CTIA, said she believes the limit could be phased out as early as next year. Wireless spectrum is the raw material for wireless communications and essential property for wireless carriers battling for market share. The current rule, established in 1996, is credited with creating vigorous competition for wireless services in a U.S. market that initially had only two cellular providers. But providers are chafing at the limits, saying they have insufficient airwaves to carry heavy traffic or offer advanced services. The FCC began reviewing the rule in January in an effort to see if it is still needed to preserve competition. Repeal of the spectrum cap is a top priority of the CTIA, while companies such as Leap have argued that such a move would result in excessive consolidation and hurt consumers. On the political front, House members have blasted the rule of late, arguing that the busy signals that affected wireless-phone users during Sept. 11's terrorist attacks demonstrated that wireless carriers don't have enough spectrum to meet demand. While Congress has no direct say in the matter, it can pass laws forcing the FCC to act, exert pressure through the budget, or use other means to prod the commission. Under new rules, antitrust authorities would still review any mergers. But such case-by-case review "is often a slow, ineffective means of eliminating anticompetitive mergers," Mr. Cramton says. Retaining the 45-MHz limit would also provide more flexibility by creating a robust "secondary market" for spectrum that can be tapped by carriers who need an increase in capacity short-term, he says. The CTIA, for its part, argues that competition is firmly in place and that the cap has outlived its usefulness. The limit has left some carriers without sufficient spectrum to serve customers in major markets and is inhibiting rollout of advanced services, the group has said. Mr. Cramton notes that the 55-MHz limit would allow traditional analog cellular carriers allotted spectrum in 25-MHz chunks -- a group that includes Verizon Wireless, Cingular Wireless, and AT&T Wireless -- to buy digital PCS providers, whose spectrum slices could be as large as 30 MHz. CTIA lobbyist Diane Cornell says that a change to a 55-MHz limit wouldn't result in massive consolidation because many analog cellular carriers already have some digital PCS spectrum. Technological incompatibilities will also limit consolidation, she said. Write to Mark Wigfield at mark.wigfield@dowjones.com