PCS Must Clear More Than Technical Hurdles

PCS, or Personal Communications Services, have received a great deal of attention in the United States during the past few months. And rightly so. The idea of advanced wireless communication, in competition with existing cellular and new SMR offerings, is a welcome thought. However, before the first message can be transmitted through the airwaves, several issues will have to be addressed.

Of course, a myriad of concerns are bound to arise whenever anything nearing the value of 160 MHz of scarce spectrum is to be assigned. However, the regular process has been further complicated by at least two new issues—new to the Federal Communications Commission (FCC) anyway. The first issue concerns the requirement to auction the spectrum fairly, and in a timely manner. The second issue involves a reexamination of the pioneer’s preference awards.

Going once, going twice…

Unlike existing cellular licenses that were awarded by lottery in the mid-1980’s, the Omnibus Budget Reconciliation Act—signed into law on August 10, 1993—requires the FCC to use competitive bidding to award PCS licenses. While this will provide significant revenue for the U.S. Treasury, it also steers the FCC into unfamiliar territory. This places additional pressure on the Commission to get it right the first time, and quickly.

The bidding for PCS spectrum will likely be divided into two parts with the auction for narrowband PCS coming this summer, and the bidding for broadband PCS starting later in the fall. Narrowband PCS resides in the 900 MHz band and encompasses services ranging from advanced paging to electronic data messaging. Broadband PCS, on the other hand, resides in the 2 GHz band and has been allocated 160 MHz for advanced communication services including voice, data, and video.

Earlier this year, the FCC adopted a set of auction rules that it can use to administer the competitive bidding for a particular wireless service. In doing so, the FCC wants to ensure fairness in the bidding process, while also developing a system that accurately assesses the value of the spectrum being licensed.

However, in implementing the rules, Congress has mandated that the Commission take special consideration in providing preferences for small businesses, and minority- and women-owned businesses. To satisfy this requirement, the FCC stated that small businesses will be granted the option to pay installments over the term of the license. In the case of minority- and women-owned businesses, the Commission will allow bidding credits. The 25% credit will mean that a minority- or women-owned company will only have to pay $150,000 of a $200,000 winning bid.

The FCC also decided on the method of bidding for most of the PCS licenses—a system known as “simultaneous multiple-round auction.” While this is a complex and costly method, the Commission feels that this provides the most flexibility for participants. However, the FCC may also select to use “oral-sequential” or “single-round sealed bids” in awarding some of the PCS licenses.

Pioneer’s Preference Comes Under Fire

In case the process of devising and administering a new competitive bidding process isn’t enough, the FCC’s policy of awarding pioneer’s preference has come under increased examination. The idea of pioneer’s preference is to reward companies that have made a significant investment in advancing the state-of-art with preferred treatment when allocating spectrum.

Recently however, Rep. John D. Dingell (D., Mich), Chairman of the House Energy and Commerce Committee, has questioned the current policy in granting these awards. In particular, Mr. Dingell is concerned whether the value of the award is excessive when compared with the value of the pioneer’s contribution. He also called into question whether the FCC’s rules are sufficient for such an award, and under what circumstances they are violated.

The issue of pioneer’s preference comes just as the Commission has granted awards to Mobile Telecommunication Technologies Corp. for narrowband PCS, and to American Personal Communications, Cox Enterprises, Inc., and Omnipoint Corp. for broadband PCS.

While Mr. Dingell feels that there is a place for pioneer’s preference, he insists that the awards must be based on “hard scientific data” while protecting the consideration of the merits of the applicants from political or lobbying pressure.”

The Need for Pioneers

While few will argue the last point, we need to recognize the achievements of early pioneers, including contributions that will ultimately make PCS itself possible. Many times, the pioneers are smaller companies that use the spectrum to launch the very services that their research and development helped spearhead. In such cases, it can be argued that the return to both the nation and the Treasury—in the form of revenue generated from future spectrum auctions—increases.

Likewise, when pioneers are awarded licenses, the tendency is to increase the level of competition with existing service—generally benefiting the consumer. The pioneer’s preference has demonstrated the ability to ignite interest in new technologies and services, especially in ones that early investigators find particularly vexing.

For many reasons, PCS is poised to become an important service for mobile computing devices. However, despite the formidable challenges for technical engineers, the convergence of communication and computing brings a whole new series of issues to the table.

A Note from Across the Pond

Of course, PCS activity is anything but limited to the United States. In the United Kingdom, Hutchison Telecom launched the “Orange” digital PCS (PCN) service. This service is in competition with the “Mercury One-2-One” launched last fall.

Hutchison plans to invest nearly £450 million ($675 million) by the end of 1994.