Subject: [NEXTEL-1] Spectrum Leasing Off And Running

From: NEXTEL-1
Date: Fri, 16 Jul 2004 11:16:34 -0400

Spectrum Leasing Off And Running
July 16, 2004 9:41am
Wireless Week

WASHINGTON—Eight months after the FCC approved new leasing rules, the
vibrant secondary markets that the commission envisioned for leased
spectrum are beginning to stir.

Since the FCC approved new rules aimed at streamlining the leasing
agreements between spectrum holders and spectrum lessors, nearly 100
leasing agreements have been filed electronically at the FCC, according
to the commission's electronic database. A comparable number may have
been filed in paper form, although the total of those non-electronic
filings is a little harder to nail down, FCC officials say.

Last October, the FCC issued new rules that cut its lengthy licensing
requirements for transferring licenses between license holders and those
that want to lease the capacity temporarily. At the FCC's October 2003
meeting, FCC Chairman Michael Powel called the rules "one of the most
important spectrum reform decisions by this commission in the last
decade," saying they would fundamentally change the dynamics of how
spectrum is used as a resource. Carriers, Powell said, would be able to
more easily construct wireless networks using the spectrum of other
carriers, an important step toward creating "facilities-based" networks
for companies, such as rural carriers, that couldn't afford to buy their
own spectrum outright.

The new rules, Powell said, would produce a profound change in wireless
markets. "A carrier with a business plan that calls for serving only the
most densely populated portions of its service area now has every
incentive to lease the balance of their spectrum to an entrepreneur.
Similarly, the cost-benefit equation for spectrum sharing has been
transformed," he said.
Although Powell's high bar of success hasn't been reached yet, ample
evidence points toward an increasingly energetic market for secondary
spectrum leasing. Attorneys in Washington who specialize in preparing
agreements, comments and other legal paperwork for submission to the
commission say spectrum leasing is warming up. "It's clear that carriers
are looking at leasing as an alternative way of getting access to
spectrum," says Jonathan Cohen, partner at Wilkinson Barker Knauer LLP,
a Washington D.C.-based telecom law firm that has filed a number of
leasing agreements for wireless carriers. "This is still new. The role
leasing will play in business plans is still developing," he says.
"We've seen companies using leasing as a bridge to a sale." Spectrum
buyers can file a lease agreement and get use of the spectrum more
quickly than following the sale procedure, he explains. "They're also
using leasing for short-term spectrum needs," he adds.

Wireless carriers are mum about their initial filings and about the
potential of secondary spectrum markets. Officials at major carriers
declined requests to talk about their activity in the area, saying the
leases aren't that big an area for them yet. AT&T Wireless, Cingular
Wireless, Nextel Communications, SBC — through its Pacific Telesis and
Southwestern Bell operations — all have filed in the last few months to
lease spectrum under the rules, as have a number of smaller carriers and
concerns, including First Avenue Networks and Highland Cellular
Holdings. Although it's difficult to determine from the applications how
spectrum is being used, experts in the area say it's fair to assume, at
this point, it's being used for primarily utilitarian purposes, to fill
in capacity temporarily as new network equipment is installed on a
carriers' primary network, as backup capacity or in preparation for a
sale of the spectrum outright at a later date.

FCC officials say that's to be expected only months after the initial
rules went into effect, as businesses need time to develop business
plans for future offerings that capitalize on them. "The focus of the
initial order is working to remove restrictions," says John Muleta, FCC
wireless telecommunications bureau chief.

Muleta says he fully expects leasing demand to pick up considerably once
carriers get used to the idea and after some of the outstanding wrinkles
are ironed out.

Copyright © 2004 Reed Business Information - US

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