A traditional economic rule of thumb is that when supply exceeds demand, the price does down. The same appears to hold true for radio spectrum, especially after the most recent FCC auction (number 14, for those of you keeping count). On April 25th the FCC finished the Wireless Communications Services (WCS) auction, awarding 128 licenses to 17 of the 23 participants. The bids totaled just over $13.6 million, which proved rather disappointing to Congress, who in their zeal to balance the budget were counting on WCS to raise $1.8 billion. They were also in such a hurry for the money that they ordered the FCC to begin the auction by April 15 and have the proceeds deposited no later than September 30, the end of the government fiscal year. Their disappointment may turn in to legislation that will slow down the auctioning process and give industry and the FCC a chance to catch up. The poor showing also bodes ill for the Clinton Administration, whose 1998 budget proposed raising $36 billion from such spectrum auctions.
The Wireless Communications Services allocation is made up of four blocks of frequencies in geographic areas similar to narrowband PCS. Two paired blocks of 10 MHz, the A and B blocks, are licensed in each of 52 Major Economic Areas (MEAs). Two unpaired blocks of 5 MHz, the C and D blocks, are licensed in each of 12 regional economic area groupings (REAGs), which cover a much larger area than the smaller MEAs. The FCC hopes these large regional areas will promote economies of scale and encourage manufactures to quickly develop technology to efficiently operate in those frequencies.
Table 1: WCS Frequency Blocks.
With such a short time for potential service providers, equipment manufacturers, and investors to study the proposed auction, relatively few detailed plans were made public, but it is expected that WCS will be used for such purposes as wireless high-speed access to the Internet, a return link for interactive cable television, wireless local loop telephone service, and radiolocation services for vehicles.
The FCC also had little time to develop effective rules for the service, and spent a good deal of effort dealing with interference issues. Their initial plan was to allow WCS transmitters to operate at essentially unlimited power, but since WCS frequencies border the spectrum set aside for satellite digital audio radio service (DARS), there was a potential for significant interference. After hearing opposition from potential satellite DARS operators, the FCC relented and limited WCS fixed land and radiolocation land stations to 2,000 watts peak EIRP and WCS mobile and radiolocation mobile stations to 20 watts EIRP. Additional out-of-band emission limits prompted the FCC to note that mobile service in the C and B blocks is unlikely for the foreseeable future.
IMAGE RECEPTION AT PCS FREQUENCIES
Some unintended interference from PCS systems appears to be affecting multichannel multipoint distribution systems (MMDS), which can send up to 33 channels of analog video in blocks in the 2 GHz range, the largest of which goes from 2500 MHz to 2686 MHz. Standard MMDS equipment uses a mixer and a local oscillator running at 2278 MHz to convert this block to a much lower intermediate frequency (IF), which is much easier for the set-top boxes to use.
It turns out that this local oscillator is just as far below the MMDS frequencies as it is above PCS frequencies, so unfiltered downconverters or units with poor image rejection will allow PCS frequencies to enter the mixer and produce signals strong enough to destroy MMDS reception. This is a familiar problem to many scanner owners whose units don't provide sufficient filtering, but it's interesting to note that it happens to other people's equipment as well.
Until recently this hasn't presented much of a problem, since PCS networks were still in the planning stages, or were operating at lower power levels. Now that systems are coming on line and transmitting at operational levels, MMDS operators are receiving a lot more complaints about poor reception. The solution? Better filters on the MMDS downconverters, which are not that expensive but will be time-consuming for technicians to upgrade each installation that needs it.
COMPETITION IS LOWERING PRICES
Wireless Communications Services should eventually mean more competition to some 1.9 GHz Personal Communications Services (PCS) offerings, but cellular customers in many parts of the country are already feeling the benefits of PCS competition. According to recent studies, established cellular service air time prices have fallen in places where PCS has become available. For example, one study examined 30 cities and found cellular rates significantly lower in those that are served by PCS providers.
According to the Yankee Group, in cities with only cellular providers, air time prices have dropped only 10% in the past three years. In that same time period in cities with PCS competition, air time rates dropped an average of 25%. In Washington, DC, for instance, Sprint Spectrum entered the market in 1995 with rates about 30% below those of competitors Bell Atlantic Nynex Mobile and Cellular One. BANM and Cell One have lowered their rates since then, coming down to a level only 10% or so above Spectrum's.
While this is good news for consumers, it's not so good for some PCS companies. Cellular providers have had a decade or more to build out their networks, and paid little or nothing for their licenses. PCS providers have had less than two years to establish coverage and are saddled with very large debts for equipment and licenses. Another recent study suggests that PCS providers are selling air time below cost to attract customers, but that financial conditions will not allow them to do so for long. With the potential for five wireless providers in each market region, competition is expected to be fierce, and companies will have to specialize in order to survive. Traditional cellular providers in major markets have had very healthy profit margins for quite some time, and have the breathing room to rapidly reduce prices. Whether they do so remains to be seen, but PCS companies will need to focus on their many advantages over cellular, including call privacy, security, better voice quality, and data messaging. Many consumers also appreciate the simple sign-up procedure and no-nonsense service agreements, and these "customer-friendly" features will become more important as competition heats up.
Further down the road, as air time prices continue to drop and usage goes up, at some point consumers will begin to replace their landline home telephone with cellular or PCS service. This landline displacement typically occurs at around 300 minutes a month, and with most PCS systems offering caller ID, call forwarding, voicemail, and other advanced services, price is the remaining barrier to having your home phone with you wherever you go. Many highly mobile professionals have already canceled traditional local telephone service and rely entirely on their wireless phone to keep in touch. Some businesses have already found it less expensive to provide their sales force with a mobile phone than to pay for an underused office telephone number and voicemail system.
RIGGED PCS AUCTIONS?
When the PCS auction for the D, E, and F frequency blocks closed on January 14th of this year, 1479 licenses went to 125 winners, generating about $2.5 billion in revenue. As noted in the April PCS Front Line column, this amount was quite a bit lower than what was expected. It seems the Department of Justice has taken an interest in the auction proceedings, and the anti-trust division is "looking into the possibility of anti-competitive conduct by bidders in connection with the FCC's auctioning of spectrum for PCS."
There is a suspicion that several auction participants used the last three digits of their bids to signal their intentions to other bidders, helping each other keep bids low despite strict anti-collusion rules. At least one top license winner, AT&T Corporation, has received a civil investigative demand from the Justice Department, requesting information on bidding strategies, bid amounts, and communication about the auction with other bidders.
PCS REACHES THE FINAL FRONTIER
World-wide PCS service took a major step forward on May 5th at 10:55 am EDT when a McDonnell Douglas Delta II rocket lifted the first five of 66 Iridium satellites from Vandenberg Air Force Base in California into transfer orbit. Sixty-three minutes after launch the satellites were deployed, and are scheduled to undergo a series of tests while being moved into final orbits. Ground controllers will confirm their ability to fly the satellites by commanding and controlling them, and will monitor the health and status of each satellite via telemetry. The L-band communication links between the satellites and subscriber voice and paging units will be tested, as well as the north-south inter-satellite links.
IRIDIUM had hoped to complete this first launch back in January, but the unexpected explosion of a nearly identical Delta launch vehicle caused them to delay until the cause could be discovered. High upper-level winds at Vandenberg delayed launch attempts earlier in the month.
When fully populated, the Low Earth Orbit (LEO) system will consist of eleven satellites in each of six orbital planes about 400 nautical miles above the Earth. IRIDIUM plans to offer world-wide voice service from handheld terminals, as well as short message paging and data transmission.
That's all for this month. More information on PCS and satellites can be found at the PCS Front Line website at http://www.grove.net/~dan, and I wecome comments, suggestions, and even criticism at email@example.com. Until next month, happy monitoring!
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Updated May 1, 2003