Subject: [NEXTEL-1] Renting of Wireless Airwaves Seen Improving Service 11 minutes ago

From: [email-masked]
Date: Mon, 02 Jun 2003 17:14:47 -0400

Renting of Wireless Airwaves Seen Improving Service 11 minutes ago

By Yukari Iwatani

CHICAGO (Reuters) - Consumers may soon see improvement in the
quality of their wireless (news - web sites) telephone service as a result of a
recent government decision to allow wireless companies to lease valuable
airwaves to others, analysts said.

However, the newly created leasing market does
not change the industry's fundamental need for
more airwaves that will allow companies to offer
advanced wireless Internet services such as full
motion video and high-speed audio downloads.

The U.S. Federal Communications Commission
(news - web sites) last month voted to make it
possible for wireless operators to lease their
valuable airwaves to other carriers in a move to
encourage greater use of wireless capacity,
known as spectrum.

That decision gives companies a potentially
faster and cheaper option, compared with
large-scale acquisitions, to temporarily fill holes
in their coverage areas, industry executives and most analysts said. Cell
service is hampered by missed calls and dead zones where signals go
quiet.

"It's spreading out the lumps. It'll provide better service for the customer,"
said independent telecommunications analyst Jeff Kagan."

While the Big Six wireless telephone companies all offer service in the
biggest cities, they constantly struggle to improve the quality of signals,
particularly in areas such as New York where they don't have enough
capacity to handle all of the cell phone calls that are made.

Operators tried to increase their spectrum holdings through the auctioning of
bankrupt NextWave Telecom Inc.'s (Other OTC:NXLC - news) assets in
2001. But a legal challenge overturned the sales, amid a fight between the
FCC (news - web sites) and NextWave over the ownership of the unused
airwaves NextWave owned.

Since then, companies have been swapping rights to airwaves with other
operators, sharing bandwidth or acquiring smaller companies that own parts
of the airwaves.

AT&T Wireless (NYSE:AWE - news) Chief Executive John Zeglis told
Reuters in an interview the FCC's latest ruling "will speed up some of the
transactions that we'd like to use to fill in white spaces."

Verizon Wireless (NYSE:VZ - news) (VOD.L) Chief Executive Dennis Strigle
also told Reuters he was "happy to have that option," and Len Lauer,
president of No. 4 wireless operator Sprint PCS Group (NYSE:PCS - news)
said it was possible they might lease some of their unused spectrum.

But while consumers will soon benefit from the freeing up of leased space,
the industry itself won't get much help. Indeed, analysts say it could cause
problems for an industry already glutted with competition.

"I quite frankly don't see this as necessarily a good thing... It lowers the
barrier for competition and there's already too much," William Benton,
wireless analyst with William Blair & Co., said.

Benton said that more companies might be inclined to offer lower prices for
their services and trigger another price war if they thought they could handle
a surge in cell phone use through leased spectrum.

Analysts said the secondary market will not have a dramatic impact on a
business that needs to consolidate into a relatively small handful of healthy
competitors.

"There are economics and other reasons why consolidation is going to
happen," Michael Doherty, analyst with British research firm Ovum, said.
"At the end of the day, I don't know how much this really changes the
fundamental need for new spectrum in the market."

The biggest immediate impact could be an improvement in the quality of cell
phone service. Craig Nedbalski, managing director of Cleveland-based asset
management company Victory Capital Management: "The changes in
wireless technology are doing a lot to improve the efficiencies of the existing
spectrum."

http://story.news.yahoo.com/news?tmpl=story&u=/nm/20030602/wr_nm/telecoms_wireless_dc_3

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