Subject: [NEXTEL-1] U.S. Moves to Allow Trading of Radio Spectrum Licenses

From: [email-masked]
Date: Fri, 16 May 2003 09:59:36 -0400

May 16, 2003
U.S. Moves to Allow Trading of Radio Spectrum Licenses
By STEPHEN LABATON

WASHINGTON, May 15 — The government took the first steps today to permit companies to
lease and trade radio spectrum licenses, a move that could result in improved service for
the nation's millions of users of cellphones and other wireless devices.

By a vote of 4 to 1, the Federal Communications Commission removed the impediments for
leasing such licenses, making it more economically efficient for big and small wireless
companies to gain access to spectrum licenses held by others. That should help them patch
the holes in their networks that create cellphone dead spots, without having to make big
capital investments.

The move followed heavy lobbying by the largest wireless carriers, including AT&T, Verizon
and Cingular, as well as players on Wall Street like Cantor Fitzgerald that are hoping to
serve as brokers or clearinghouses in the creation of a secondary market for swapping
licenses.

Officials and industry analysts say the hope is that by allowing license holders to lease
slivers of the spectrum that are currently underused, consumers will benefit from reduced
instances of cellphone calls being dropped. More efficient use of the spectrum would make
it easier to connect to the Internet with hand-held computers in crowded areas where the
spectrum available is inadequate to move data and it should help extend wireless services
in rural areas that are underserved.

The decision to allow companies to transfer portions of the spectrum they do not use
promises to reshape the economics of the market. It will also change the longstanding
federal framework that regulates the holders of spectrum licenses.

The commission extinguished a 40-year-old rule that had the effect of requiring the holder
of a spectrum license to also control the physical infrastructure needed to use that piece
of the spectrum — the antenna, the transmitter and the employees who run the operation.
The rule was intended to ensure that the license holder be responsible for fixing signal
interference and other problems.

Under the new rules, the holder of a license who is not making use of the spectrum will be
able to lease it to another company that would provide the equipment and personnel.

"Today's action is one of the most important spectrum reform decisions by this commission
in the last decade," said Michael K. Powell, chairman of the commission, in a joint
statement with another commissioner, Kevin J. Martin. "For years, the commission has
rhetorically praised the concept and possibilities created by secondary markets in
spectrum. Today that rhetoric turns into reality."

"Our decision signals a new day of increased spectrum access and improved services for
consumers," they added.

Telecommunications industry executives were similarly pleased.

"Permitting secondary markets for spectrum will deliver to carriers improved access to the
airwaves, increasing their flexibility and bringing down their costs, which should
ultimately result in lower prices for consumers," said Tom Wheeler, president of the
industry's main trade group, the Cellular Telecommunications and Internet Association.
"Football teams aren't done after draft day. They continue to meet their changing needs
through trades and late-season acquisitions. Wireless carriers deserve, and will now
receive, similar flexibility."

Officials have provided a variety of examples of how a commodities market in the spectrum
would work, including the following:

¶Nationwide cellphone companies would be able to lease pieces of the spectrum in different
regions of the country depending on the available supply and on customer demand.

¶News organizations covering political conventions or the Olympics, for example, would be
able to buy contracts to use a piece of the spectrum during the event to give them greater
capacity to beam pictures, sound and data.

¶An airport with congested airwaves from air-traffic transmissions and cellphone use would
be able to lease a piece of the spectrum from other spectrum holders that are not using
their space during peak hours.

With the proliferation of wireless communications, including growth in wireless browsing
of the Internet, an expanding group of companies has been clamoring for scarce space on
portions of the spectrum.

But federal regulations have long impeded the ability of holders to sell or lease
licenses. A 1963 F.C.C. decision called Intermountain Microwave linked the license to the
requirement that each holder also control the transmission equipment.

Three years ago, William E. Kennard, then chairman of the commission, proposed altering
the rules and allowing the formation of a secondary market for spectrum licenses in
response to increasing complaints from phone companies and others that they did not have
enough space on the spectrum.

In reconsidering the Intermountain case, the agency found a host of problems that
prevented the owner of a license from lending it. In particular, it was not clear which
company in such a transaction ought to be held responsible for problems like signal
interference.

The commission said today that it had resolved that issue. A company can become what
officials call a lease manager and provide short-term access to the spectrum. In those
circumstances, the license holder would remain responsible for complying with rules and
would be liable for any interference problems.

For long-term transfers, a company could turn over control of the license along with the
responsibilities of complying with the regulations. That would require the approval of the
commission, although officials emphasized today that they would streamline the process.

One commissioner, Michael J. Copps, dissented. He said the agency did not have the
authority under the Communications Act of 1934 to alter the rules in such a way.

http://www.nytimes.com/2003/05/16/technology/16SPEC.html

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