FCC Spurs Competition in Wireless Industry : Technology: Agency allocates extra airwaves to ‘personal communications services’ to promote their rapid introduction.

In a dramatic about-face, the Federal Communications Commission on Thursday set the stage for all-out competition between big companies and budding entrepreneurs seeking to launch a new generation of sophisticated wireless communications.

In a 2-1 vote, the FCC allocated four times as much airwave space for wireless “personal communications services” as it originally allocated to the cellular industry 15 years ago. And the agency will allow up to seven licensees to compete in each of 47 PCS markets it has created.

The FCC commissioners expressed hope that their decision will promote rapid introduction of what is expected to become a $40-billion-a-year industry that would eventually provide wireless data and video transmission in addition to mobile voice communication.

“PCS will profoundly change the way people in America communicate,” said interim FCC Chairman James H. Quello during the agency’s meeting. “It could create thousands of new jobs. . . . This is a landmark decision.”

PCS is an umbrella term that applies to a variety of proposed wireless services, most of which would cover only relatively short distances. In its most rudimentary form, it could free workers, for example, from their desks without leaving them out of touch.

Eventually, however, wireless entrepreneurs hope that a national or even global network of transmission facilities would permit PCS devices to place and receive calls from anywhere. Thus, an individual might have a single phone number as portable and personal as a Social Security number.

Late last year, the FCC was considering allowing just two PCS licenses per market, a proposal that opponents said would have favored deep-pocket companies. The agency’s about-face came amid a blitz of letters from President Clinton’s chief spokesman on telecommunications, Larry Irving, as well as influential Capitol Hill lawmakers such as Rep. John D. Dingell (D-Mich.), chairman of the House Committee on Energy and Commerce. They urged the FCC to maximize the PCS opportunities for big and small concerns.

To calm fears that the cellular industry might corral the PCS market, the FCC barred cellular operators from bidding on PCS licenses in their cellular service area, except in cases where the cellular company serves only a small percentage of the PCS franchise area.

The FCC plan didn’t go far enough in promoting competition to satisfy Commissioner Andrew C. Barrett, who dissented from Thursday’s decision.

But most outsiders expect the decision to set off a scramble for PCS licenses from a whole host of communications concerns, including long-distance telephone companies, cellular providers, cable TV operators and fledgling PCS firms such as American Personal Communications, which is owned by Washington Post Co.

But picking PCS winners in the wake of Thursday’s decision is impossible at this juncture. The FCC will auction PCS licenses in June, but has yet to establish rules for the auction. Among the things the agency will consider: how best to ensure participation from small business, rural phone companies, women and minority entrepreneurs, which Congress urged earlier this year in authorizing the FCC to conduct the auction.

“Right now you can say the American public is the big winner because we have a tremendous amount of spectrum available for PCS service,” said Thomas A. Stroup, president of Telocator, the new PCS trade association in Washington. “But the proposed auction process is designed in such a way that it will be a while before we know who the winners and losers are.”

“We are pleased by the pro-competitive stance taken by the agency,” said Deidre Walsh, a spokeswoman for the Coalition for Wireless Competition, which represents small and minority PCS hopefuls. But she added that the group intends to closely monitor the FCC’s adoption of auction rules. “Our goal is to make sure hundreds of PCS licenses are in the hands of small operators after the auctions in 1994.”

In carving up the PCS territory, the FCC set aside a huge 160 megahertz of space in the radio spectrum for personal communications services. Three-quarters of it will go to licensed carriers and the rest will be for unlicensed use. A hertz is a single unit of frequency in an electromagnetic spectrum that reaches from audible frequencies such as radio and TV waves through X-rays and cosmic rays.

The FCC said it will allow up to seven licensees in each PCS market. The markets are defined by map maker Rand McNally’s designation of 487 basic commercial trading areas contained within 47 major commerce zones that are based on population, transportation facilities, geography and other factors.

Companies will be able to bid for four 10-megahertz bands, one 20-megahertz band and two 30-megahertz bands in each PCS market. Bidders will be able to aggregate licenses in up to 40-megahertz blocks.

The Cellular Telecommunications Industry Assn., a trade group, estimated that if PCS markets had been restricted to three licensees in 47 markets (instead of the plan ultimately embraced by the FCC), a bidder would need perhaps 20 times more capital to compete for a license.

Even with what the FCC calls the more “robust” competition envisioned with seven licensees, entering the brave new world of PCS will not come cheap.

Cellular telephone providers have spent about $12 million over the last 15 years erecting their networks. And a study by Wasserstein Perella Securities Inc. estimates that total capital expenditures by PCS operators will exceed $3 billion by the end of this decade. Much of the increased outlay stems from the fact that PCS requires a much denser concentration of transceivers--likely in every building and street intersection--in order to provide the seamless coverage of wireless services.

The Wireless Future

The Federal Communications Commission took several steps to prepare for another generation of wireless telecommunications technology. The agency:

* Set aside 160 megahertz of space in the radio spectrum for “personal communications services,” which will allow mobile communications over short distances.

* Divided the nation into 47 PCS markets, in which carriers will compete for business.

* Allowed up to seven PCS licenses in each market. Two of the seven will be available for larger carriers. The other five will be available to groups of smaller bidders.

* Divide Southern California and parts of Nevada and Arizona were divided into seven local markets.

* Solicited pubilic comment on how it should auction PCS licenses, including how to insure participation from small business, rural telephone companies, women and minority entrepreneurs.