Jacking in from FCC Port:
Washington, D.C. -- Forget everything you know about wireless communications. The rules just changed overnight. By a 2-1 vote, the FCC Thursday voted to carve up 120 MHz of spectrum in 7 blocks of 30,20,10 MHz in the hopes it will spawn whole new technologies under the banner of so-called "personal communications services" or simply, PCS.
This spectrum allotment is 4 times the amount of spectrum cut loose 10 years for the cellular industry. That was small time. We're talking spectrum land rush here.
"If history remembers anything this little agency does, it will remember what we're done here today to change the future of communications for all Americans," said Commissioner Ervin Duggan. He wasn't joking.
Here's how the spectrum breaks out: 2 30 MHz licenses within each of the 47 Major Trading Areas (MTAs); one 20 MHz license in each Basic Trading Area (BTA) and 4 10 MHz blocks in each BTA.
The spectrum allotment resolves a long, torturous lobbying battle that's been waged here over the course of the last six months. And the decisions weren't even final until 1:30 this morning when the FCC staff put the final touches its plan and bagged it for the night, hoping to grab a few hours of sleep.
The battle had been between groups pushing for allotments of 40 MHz blocks, 2 in each license area and others lobbying for 5 or more licenses at 20 MHz each. The most vocal backer of the latter plan had been the cellular industry. "Looks like the good guys won one," said Ron Nessen, vp of communications for the Cellular Telecommunications Industry Assn. (For the politically impaired, that's the same Ron Nessen that served as White House Press Secretary under President Ford.)
But what the hell is an MTA and BTA? Good question; convoluted answer. (Here's where a hyper-link to a bitmapped image file would be handy... maybe that will come with PCS...)
MTAs/BTAs were defined by Rand McNally. There are 47 MTAs and they cover the entire country; where ever you live, you're located in one of those 47. The boundaries are logical, at least they were in the 1950's when they were created to define areas of dominant influence for newspaper distribution. Today they don't mean shit.
Of course, where ever you live, you're also located in a BTA. You following this? There are 487 BTA's and each is located within an MTA. BTAs were, supposedly, defined by commuting patterns.
Here's how the San Francisco MTA breaks out: A PCS 30 MHz licensee would be responsible for serving S.F. and Sacramento. So far, so good. However, Eureka, Redding, Fresno and Visalia are also located in that MTA. It gets better: Reno is also in the S.F. MTA as are some 4 Nevada counties to the East of Reno.
Now, if you're a PCS licensee, how quick are you going to build up those rural Nevada properties? I thought so. These folks are shit out of luck... unless of course, the BTA licensees are able to provide service to you; there are 13 BTAs located within the S.F. MTA.
This subject very much concerned Commissioner Andrew Barrett, the lone dissenting vote. He said that banks wouldn't want to lend to the BTA licensees because they would be less viable.
Why? More pieces of the puzzle: The rules for who can gobble up this spectrum and who can't also effect the way the PCS landscape will eventually be shaped. For example, a cellular company can't bid on the "big PCS" 30 MHz license if they serve more than 10% of the population within that area. They can, however, bid for a one of the 10 MHz BTA licenses. Cellular's biggest concern was that they weren't going to be allowed to bid on any spectrum, so they consider even 10 MHz a win. (And because PCS will be all digital technology, as opposed to cellular's mainly analog, this 10 MHz of spectrum coughs up the equivalent of cellular's 25 MHz of analog spectrum.)
Now, 10 MHz of spectrum might not seem like much, but remember, cellular owners have 25 MHz each and there's 2 in every market (which are defined differently than MTA/BTAs, but I digress...) The Commission is allowing bidders to aggregate spectrum. That means different companies can buy up spectrum blocks and then combine them into one huge block, not amounting to more than 40 MHz per market.
This aggregating of spectrum would allow the vision of a "national pcs" service operating with 40 MHz of spectrum, as MCI had pushed for all during this time. But the logistics would be a bitch. A huge consortium would have to be formed; MCI already has commitments from 150 companies to form just this type of consortium.
The consortium would have to successfully buy one 30 MHz block in each MTA as well as one of the 10 MHz blocks in each BTA. Nice trick if you can pull it off.
They won't. You read it here first.
So, if you're an investment bank, who are you going to lend money to? This isn't a trick question; do the math. You'll loan money to the folks that are buying up the 30 MHz blocks or the ones aggregating the smaller blocks, that's who. This means the companies buying up the smaller 10 MHz blocks are "going to be left hanging," Barrett said.
In other words, the FCC has just unwittingly laid the ground work for creating the first spectrum ghettos in Cyberspace.
The FCC, under mandate from the Omnibus Budget Act of 1993, had to insure that small businesses and minority owned companies had a shot at getting in on the ground floor of PCS. They accomplished setting rules allowing only small business and minority owned companies to buy the single 20 MHz block in each BTA.
What's wrong with this picture? It's ripe for abuse and collusion. It's just too easy for someone to hire a minority as a figure head pres., set up the company as "minority owned" and when the dust settles, and the license in hand, give the president a fat exit check for his or her "contribution" to the company and move the White Boys into the corner office.
Commissioner Duggan was concerned about this, too. "I'm putting the Commission on notice that I'll be watching this area very carefully to make sure there's no abuse of the system," he said.
The licenses will be auctioned off. Good thing. These should add about $10 billion to the government coffers, according to an OMB study. And they have to be auctioned by late June.
Okay, pop quiz. Add 47 and 487 then multiple by 7. I'll wait...
Answer: 3,738. That's the number of auctions the FCC will have to hold to get the spectrum in use. How are they going to do this? Good question. If you have any ideas, send them to the FCC. I'm serious. The Commission doesn't have clue and so they've opened up a comment session in which they're asking companies to give them ideas about how to handle the bidding. Check this space in a couple of months for details.
Still with me? OK, now there's another 40 MHz of spectrum being allocated for those nifty devices that Apple and EO tell us we will never be able to live without. The FCC calls these "unlicensed PCS" devices, because no one is going to actually own the spectrum these devices operate in. Like cordless phones or baby monitors, the FCC will just designate frequencies they can operate on.
But the Commission split the spectrum into 20 MHz for voice, 20 MHz for data. "But these devices are supposed to be able to do voice and data!" I can hear you saying. Correct. And this is what Apple, among others, said to the Commission in its own lobbying effort. The commission didn't buy it. Why? Apple blew it. They submitted their comments on this subject just 2 days before the Commission closed the comment period and by that time "it was all over but the details," as one FCC staffer told me.
Apple isn't pleased; neither was Commissioner Duggan, a self-professed fan of these so-called "nomadic pcs" devices. He said that not allocating the spectrum correctly for Newtons, EOs, etc., "will delay their entry into the mass market [at their full potential] by at least three years."
What services will emerge? Who'll eventually shake out as the market leaders? Only time can tell. Maybe we'll see some innovators capture those [cheap] 10 MHz markets and bring us some outlaw technology, wireless from the edge of Cyberspace. If it happens, you'll read it here.