PacTel Threatens Suit Over FCC Awards : Technology: It says rivals who received PCS licenses may have broken the rules through repeated contact with the agency.

When the Federal Communications Commission last year invited comment on rules to establish a new technology called wireless personal communications services, Pacific Telesis discovered that some of its competitors seemed especially eager to offer advice.

In the two months leading up to a Dec. 23 decision awarding free franchises for the new technology, officials of two of the three winning firms were repeatedly in touch with the FCC, in possible violation of rules, PacTel complained last week.

PacTel, whose cellular phone business is threatened by the new PCS technology, called for a review and threatened to sue to overturn the award--one of numerous challenges considered likely as this summer’s high-stakes auction of further PCS franchises draws near.

At issue is the so-called pioneer’s preference rule, by which those deemed to be technological leaders in a field are awarded free franchises while others must bid huge sums at an auction--$250 million or more in the case of PCS.

The potentially lucrative franchises will launch businesses in a technology that will enable the transmission of voice, data and video communications via wireless transceivers that experts say will eventually be as portable and unobtrusive as a wristwatch.

The FCC voted last week to uphold the pioneer’s preference rule. But Commissioner Ervin S. Duggan issued a statement warning of the policy’s “potential dangers.” He said those include “politicizing” the awards, difficulty in determining “what constitutes true innovation” and “being caught up in endless litigation.”

PacTel complained that American Personal Communications of Washington huddled with FCC officials 25 times before winning a free franchise and that another firm, little Omnipoint Communications of Colorado Springs, Colo., contacted the FCC 11 times.

The contacts were permissible as long as they were limited to discussions about PCS technology. But in a five-page letter to the FCC on Friday, Pacific Telesis alleged that the discussions may have been aimed at influencing more important rule-making the FCC was undertaking at the time: a review of pioneer’s preference rules themselves.

“The three recipients of (PCS) awards . . . all made ex parte contacts” with the FCC, Michael K. Kellogg, a lawyer for Pacific Telesis, wrote in the letter.

He added that the FCC had previously warned that failure to comply with its ex parte rules “could result in . . . (the) imposition of sanctions.”

More than 50 concerns sought recognition for inventing PCS technology, but only three--Omnipoint, American Personal Communications and Cox Enterprises of Atlanta--received free licenses to provide PCS in Southern California and metropolitan New York and Washington.

Officials at Cox could not be reached. But American Personal Communications dismissed the allegation of improper FCC contact as “groundless,” and Omnipoint President Douglas Smith said an overwhelming number of those who commented on the pioneer’s preference rule supported Omnipoint.

“We did not violate any ex parte rules, “ said Smith, whose company employs about 100 people. “The fact that Pacific Telesis is bringing up an unfounded technicality as their objection shows you how weak their case is.”

Yet some critics say the PCS awards are less a reflection of the companies’ inventiveness than of their influence in persuading FCC officials that they deserve credit for pioneering a technology that was being worked on by a host of firms.

Critics also say the free licenses give the companies a huge competitive advantage over other firms that are expected to pay upward of $250 million each for similar licenses to operate on the public airwaves.

“This pioneer’s preference is a stupid policy. The government doesn’t go around setting aside oil leases for people who come up with an innovative way to drill for oil,” said former FCC general counsel Henry Geller, who is now a private Washington communications lawyer for public interest groups.

Geller crusaded for such free awards when he worked for the FCC, but he now says his previous position was a mistake.

That wasn’t the outcome the FCC envisioned when it adopted its pioneer’s preference rule in 1991. The agency embraced the idea in an effort to reform a half-century-old license-approval process that many believed worked against entrepreneurs who had spent their time and money inventing new communications technology.

Until the early 1980s, the FCC allocated the airwaves through administrative hearings that subjectively evaluated competing applicants.