U.S. Moves to Allow Trading of Radio Spectrum Licenses

[Dave Farber <dave () farber net>]

U.S. Moves to Allow Trading of Radio Spectrum Licenses

May 16, 2003
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?ex=1054076387&ei=1&;
en=847ffdcbbd7b8ebb


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