Subject: [NEXTEL-1] Renting of wireless airwaves seen improving service

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Date: Tue, 03 Jun 2003 15:24:00 -0400

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Reuters

Renting of wireless airwaves seen improving service
Monday June 2, 5:01 pm ET

By Yukari Iwatani

(Refiling to eliminate extraneous word in lead)
CHICAGO, June 2 (Reuters) - Consumers may soon see
improvement in the quality of their wireless telephone service as
a result of a recent government decision to allow wireless
companies to lease valuable airwaves to others, analysts said.

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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 - Websites) 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.PK - News)
assets in 2001. But a legal challenge overturned the sales, amid
a fight between the FCC 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; London:VOD.L - News) 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-basaed asset management company Victory Capital
Management: "The changes in wireless technology are doing a lot
to improve the efficiencies of the existing spectrum."

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