FCC Gets Rid of Limits on Mobile Airwaves

In a move likely to accelerate consolidation in the wireless industry, federal regulators Thursday agreed to eliminate airwave ownership limits on mobile phone companies by 2003.

In a first step toward eliminating ownerships caps, the Federal Communications Commission voted 3 to 1 on Thursday to allow wireless carriers to control 55 megahertz of radio spectrum in a local market instead of a maximum of 45 MHz.

Commissioners also agreed to eliminate spectrum limits altogether in January 2003 after the FCC sets up procedures to weigh an expected increase in wireless industry mergers.

The decision represents a victory for Cingular Wireless, AT&T; Wireless Services Inc. and other large mobile carriers. They want to add more wireless spectrum in order to improve call quality for the nation’s 123 million cell phone subscribers and introduce airwave taxing services such as higher speed wireless Internet access.

The vote also marks the most sweeping effort yet by FCC Chairman Michael K. Powell to overhaul communications ownership rules.

“This appears to be the first of many industries where the FCC will [reform] ownership rules--whether in television or cable and other communications industries,” said David Hoover, an analyst at the Precursor Group, a Washington research firm.

With spectrum ownership limits relaxed, financial analysts say that AT&T; and Cingular Wireless are the most desperately in need of additional airwaves to satisfy customer demand and update their networks.

Among the likely targets of the two carriers are smaller wireless phone companies such as Voice-Stream Wireless, which already shares part of its network with Cingular, said Jane Zweig, chief executive of the Shosteck Group, a Wheaton, Md., telecommunications consulting firm. Nextel Communications could be another target, she said.

The FCC’s vote comes as so-called spectrum caps have become a key policy battlefield amid a refocus on wireless technology in the wake of the Sept. 11 attacks.

Since the tragedy, top Bush administration officials and many carriers have re-doubled their efforts to remove limits on how much spectrum they can control, citing the potential consumer safety, security and cost benefits of wireless phones.

Powell and his fellow Republican FCC commissioners assured consumers Thursday that their decision will not lessen competition in the wireless industry, where five to six carriers vie for customers.

Wireless competition has been “a tremendous success story for consumers,” said FCC Commissioner Kathleen Q. Abernathy, a Republican. That success, she added, would grow with the elimination of the FCC’s spectrum ownership limits which she said “are by their nature, arbitrary and inflexible.”

The reforms have rankled consumer watchdog groups as well as the FCC’s lone Democrat, Michael J. Copps, who voted against lifting the spectrum cap. On Thursday Copps likened Powell’s latest de-regulatory initiative to pandering to corporate interests.

“Let’s not kid ourselves. This is, for some, more about corporate mergers than it is about anything else,” Copps said at Thursday’s FCC meeting. “Just look at what the analysts are talking about as the specter of spectrum cap renewal approaches: Their almost exclusive focus is on evaluating the candidates for corporate takeovers and handicapping the winners and losers in the spectrum bazaar we are about to open.”

However, the wireless industry is unlikely to be swept by merger mania, Zweig said. Consolidation, she said, may be constrained in the short term by a patchwork of different wireless transmission standards as well as a slumping economy.

Yet if wireless carriers don’t move swiftly, powerful lawmakers in Congress may intervene and change the rules, the Legg Mason Wood Walker Inc. investment house warned in a research paper released Thursday.

Earlier this week, for instance, Senate Commerce Committee Chairman Ernest F. Hollings (D-S.C.) sent a letter to Powell saying, that since “the current license holders are [not] using all of the spectrum they already possess, we see no pressing need to make changes to the spectrum cap.”