Subject: [NEXTEL-1] F.C.C. Expected to Extend Satellite Operators' Reach

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January 27, 2003

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F.C.C. Expected to Extend Satellite Operators' Reach
By BARNABY J. FEDER

fter months of rumors that a decision would be handed down "any day now," the Federal Communications Commission is expected to announce this week that satellite voice and data companies can supplement their services with land-based wireless networks.

That outcome would be a victory for satellite operators, led by Craig O. McCaw's ICO Global Communications, over conventional wireless companies like Verizon Wireless and Cingular, which have bitterly opposed the concept since the F.C.C. released a preliminary proposal and asked for public comments nearly a year and a half ago.

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Lobbyists on both sides say the F.C.C. has concluded that the satellite operators cannot succeed financially unless they are allowed to use some of their allotted spectrum for land-based networks to extend their voice and data services into urban areas and indoor locations where satellite signals are obstructed.

F.C.C. officials declined to comment.

Communications analysts and companies involved in the debate also expect the commission to announce that it will reclaim and auction off a portion of the radio spectrum that was reserved for satellite communications but has not been used. Conventional cellular and other wireless companies would be eligible to bid for that spectrum to expand their own land-based networks.

Industry executives predict that the F.C.C. may also discuss its plans to revoke the licenses of satellite companies that have failed to meet certain requirements in the deployment of their networks.

Taken together, the new rules could be a major step in the F.C.C.'s efforts under its chairman, Michael K. Powell, to foster more flexible and efficient use of the radio spectrum. Depending on the details, the rulings could either reinvigorate or hasten the collapse of the ambitious dreams of Mr. McCaw, who made his fortune in cellular telephone networks.

"Spectrum is the gold of the early 21st century," said Robert A. Mazer, a Washington lawyer who represents Constellation Communications, a start-up satellite company that is merging with ICO in an effort to avoid losing F.C.C.-assigned spectrum that it has been unable to use.

But Mr. Mazer and others cautioned that the new rules could easily become mired in appeals and lawsuits, similar to the commission's bitterly contested effort to reallocate spectrum originally auctioned to NextWave Telecom, a land-based wireless company that went bankrupt. That issue is being decided by the United States Supreme Court.

The most closely watched part of the rules will be the conditions that the commission sets for when and how the satellite operators can branch into land-based operations. The agency has been forced to walk a tightrope between the satellite operators, who argue that they cannot survive without plenty of leeway, and their land-based wireless rivals, like Verizon, Cingular and AT&T Wireless. Engineering the new spectrum arrangements to avoid radio interference has also been a major challenge.

The conventional wireless companies have argued fruitlessly that the satellite companies have no right to operate on land without first buying spectrum for such services, just as the land-based companies were required to do. As a second line of defense, Verizon and the others have urged the agency to place tough restrictions on the satellite companies, like requiring their customers to have dual-mode phones capable of reaching satellites directly.

"This is a very important precedent," said Diane Cornell, vice president for regulatory policy at the Cellular Telecommunications and Internet Association, a trade group for the land-based wireless companies. "They are talking about giving away spectrum we paid billions of dollars for."

Satellite operators, who are regulated by both international and national bodies, do not pay for their right to use the airwaves. That arrangement is an inducement to provide communications to regions so thinly populated or remote that traditional wired and wireless companies cannot afford to serve them.

But the economics of satellite communications remain risky. Companies like Iridium and Globalstar, which attempted to provide two-way voice and data communications via low-altitude satellites, have gone bankrupt. ICO, which has one satellite in orbit and 10 under construction, has said it would not be able to attract enough investors to complete and operate its $3.7 billion network without clearance to use some of its spectrum for land service.

"All your cost is sunk before you take in any revenue," said Gerry Salemme, a spokesman in Washington for ICO, a London-based company that Mr. McCaw acquired after it went bankrupt in 2001. "It's the worst economics in wireless."

Satellite operators say they have benefited from new technology that reduces the size and power consumption of phones and laptops that can work with their networks. But customers also need to use the devices where satellite connections are not feasible, the companies say.

ICO has proposed that the commission could ensure that land-based services in the satellite spectrum were only "ancillary" by requiring that a satellite system be operating before any land-based service was offered. But the wireless companies represented by Ms. Cornell argue that this would give companies like ICO too much leeway to set up land-based systems that could end up using the more expensive satellite links only as a last resort and for only small portions of their overall traffic.

If that happened, she said, the commission would simply be adding more competitors to the already crowded urban wireless market. The likely result, she said, would be financial losses that would undermine the satellite companies' ability to meet the commission's goal of serving rural areas.

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Gerard Burkhart for The New York Times

Craig O. McCaw, chairman of ICO Global Communications, with three prototypes of small satellite base stations that would communicate directly with cellphones. Mr. McCaw wants satellite companies like his to gain land-based access.

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Michael K. Powell, the chairman of the Federal Communications Commission.

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