FCC Sets Stage for Intense Bidding on Wireless Spectrum

The Federal Communications Commission’s decision to allocate so-called pioneer preference spectrum licenses for personal communications services (PCS) sets the stage for some intense bidding at a federal auction of the PCS wireless spectrum next spring. And the bidding will be crucial for such firms as California regional phone company Pacific Telesis.

Last week, the FCC gave early Christmas gifts to American Personal Communications, Cox Enterprises Inc. and Omnipoint Communications Inc. by allocating them free slots on the PCS spectrum. It cited those companies’ leading role in developing personal communications services, which allow a user to receive wireless phone, data and fax transmissions over a small, hand-held device.

These first licenses were awarded under the “pioneer preference” determination, which is intended to encourage development of new technologies. The FCC plans to auction the remaining spectrum licenses starting in May. “I anticipate (that) for every license there will be more than one interested party,” said Fred Thomas, a senior engineer with the frequency allocation branch of the FCC.

For participants such as Pacific Telesis Group, which made a huge bet on the PCS technology by spinning off its cellular subsidiary this month, the auction is the only chance to get involved in PCS, which is similar to cellular transmission but requires less power.

“People will bid as much as they have to to win, but keep in mind the competitive situation with the existing cellular players,” said Robert Wilkes, analyst at Brown Brothers Harriman & Co. “It should be fascinating to watch it unfold.”

In granting the free licenses to the three companies, the FCC denied the requests of 47 other applicants for the pioneer preference. Pacific Telesis confirmed it was one of the applicants.

Pacific Telesis will likely have to compete for the spectrum slots with long-distance operators such as American Telephone & Telegraph Co., as well as with other Bell companies.

With the free licenses granted last week, the FCC has already allocated three of the most lucrative service regions in the country. Cox Enterprises received a region designated the Los Angeles-San Diego major trading area.

American Personal Communications received the 30-megahertz Washington-Baltimore area. Omnipoint was awarded the northern New Jersey MTA, which includes most of New York state as well as nearby states.

Telecommunications analysts said the spectrum allocations will make it more difficult for companies, such as MCI Communications Corp., that would like to form nationwide PCS networks.

Although other bands are available in those three markets, bidders “also have to take into account that they are competing with an entrenched provider who got the spectrum for free,” Brown Brothers’ Wilkes said.