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7/14/2006
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Upcoming FCC Auction Will Mean Better Cell Services

Telecom carriers will start bidding for precious wireless spectrum to become available beginning Aug. 9.

Telecom carriers will begin bidding for a chunk of precious wireless spectrum on Aug. 9, potentially easing the delivery of Internet content over the airwaves. The FCC hopes the auction will propel advanced features such as mobile Web browsing and video. But with spotty cellular phone coverage a problem nationwide, don't be surprised to see many of the winning carriers using it to improve existing services in the near term.

The FCC will auction 1,122 licenses in the 1,710- to 1,755-MHz and 2,110- to 2,155-MHz radio-frequency bands for what it calls Advanced Wireless Services spectrum, meaning that it's intended for new wireless applications that require a lot of bandwidth, such as Web browsing, messaging, and video. The FCC is reallocating the spectrum that's now used for various government and other services. Several major telecom carriers, including Cingular, T-Mobile, and Verizon Wireless, have submitted applications to the FCC in hopes of snatching up more spectrum--a scarce commodity in the United States. It's been about 10 years since a similar auction. Eighty-one bidders were selected to participate out of hundreds of applicants.

T-Mobile likely will be among the most aggressive bidders, since it can't upgrade its network to third-generation cellular without the spectrum. Its top competitors already offer 3G, designed to support multimedia data with speeds ranging from 128 Kbps to several megabits per second. Verizon Wireless likely will be a "bit more surgical" in bidding only to fill in gaps in its coverage needs, Forrester Research analyst Charles Golvin says. He anticipates that if Verizon Wireless gets spectrum, some of it will be used to offer mobile voice-over-IP services. Cingular, a potential bidder, had an incomplete application and has until this week to resubmit.

Several cable companies, including Cable One and Dolan Family Holdings, which has ties to Cablevision, have their sights on the spectrum for potentially offering "triple play" consumer packages that serve up data, voice, and video over IP. Satellite providers also are in the mix with plans to use wireless spectrum for broadband services. DirecTV Group filed a joint application with rival EchoStar Communications under the name Wireless DBS.

The FCC has divvied the spectrum into hundreds of rural licenses--rather than a handful of licenses that span large geographic areas--making it easier for smaller providers in remote cities and towns to bid. They also get a financial advantage in the process; smaller providers that bid on spectrum are required to pay just 75% to 85% of their winning bidding price, according to FCC rules, while large providers pay 100% of their winning bids.

That's why some industry experts view the auction as more of an opportunity for providers to expand and improve their voice service offerings and not the advancement of wireless broadband or mobile TV as implied by the Advanced Wireless Services moniker. "For the foreseeable future, voice calling will continue to drive cellular services in the U.S.," says Rudy Baca, a partner at law firm Rini Coran PC, which specializes in telecommunications and represents several bidders in the auction.

Don't Drop That Call
Many mobile users remain dissatisfied with the quality of their cellular service and are more interested in being able to keep someone on a call than watching video on a tiny screen. "All of the 'toys' are of no interest to me. The dominant need is plain old good phone service," says Wayne Dengel, a Sarasota, Fla., resident who switched from Cingular to Alltel because he couldn't get good coverage. Roaming charges are still too high, he adds.

The FCC estimates the Advanced Wireless Services auction sale could raise as much as $15 billion. After this, the next auction to watch is for the 700-MHz spectrum, due to happen in the next few years. That promises even more improvements and advances in wireless services. That's the far-reaching, building- penetrating spectrum used by television broadcasters today, and it will be freed up when they move to digital.

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