Archive for Tuesday, December 12, 2000

Auction could help meet wireless demand

December 12, 2000


— Those dropped calls and network busy signals that infuriate American cell phone users who have more than tripled in number to 97 million in the last five years could be alleviated by a government auction of valuable airwaves slices today.

The 422 licenses that go on the auction block cover areas including much of the East Coast, large pockets of California, Texas and the Great Lakes region. That could help big carriers, like Verizon Wireless, AT&T; Wireless and Sprint PCS, handle traffic in high demand areas and during peak calling hours.

Americans also might see new choices for cell phone service in smaller markets, as companies snap up licenses in places they don't now cover, as well as more two-way messaging and wireless Web access.

"Everyone who uses a wireless phone knows the frustration of a dropped call," said William Kennard, head of the Federal Communications Commission. The auction could help address that problem and encourage innovation in offering new services, he said. "Consumers will see the immediate benefits."

The auction, expected to last several weeks, is already shaping up to be the most competitive in the agency's history, with 87 companies participating and more than $1.8 billion in upfront payments collected. Analysts estimate the auction could bring in $10 to $18 billion for the licenses, found in the 1900 MHz range.

Included are licenses bid on several years ago by NextWave Telecom, which went bankrupt. The FCC reclaimed the licenses and despite legal challenges and congressional lobbying by NextWave has moved ahead to re-auction them.

Large companies are likely to use the new licenses they win offered in cities like New York, Los Angeles, Seattle and Boston to address the capacity problems on their high-traffic networks. Growing wireless businesses, such as VoiceStream Wireless or Nextel Communications, could use the auction to fill in gaps as they go national.

Smaller entrepreneurs have some licenses set aside just for them. That means they can offer specialty services in rural or less dense parts of the country.

Ultimately, consumers could see more carriers with nationwide networks, offering one-rate calling plans with no roaming.

David Bishop, an analyst with the Yankee Group, expects companies that win licenses to focus on bolstering their existing networks, rather than offering new data services.

"There are obviously companies that have shortages and deficiencies in certain markets," Bishop said. "I think you'll see improved quality of service going forward, because of better coverage and capacity."

The auction comes amid insatiable consumer appetite for cell phones and other wireless devices. In five years, an estimated 148 million Americans will be cell phone subscribers, each gabbing an average of 233 minutes a month, according to the Strategis Group.

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