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Smooth a Path for Wireless

May 31, 2002

In Japan, millions of consumers are using hand-held phones with a screen the size of a business card to communicate on the Internet. In Europe, by contrast, a buying frenzy for government licenses for so-called third-generation wireless mobile networks has nearly bankrupted the telecom industry. The U.S. can profit from both situations. But first the Federal Communications Commission has to make available frequency spectrums that are caught between broadcasters and the wireless industry.

Since 1994, the FCC has been auctioning off parts of the broadcast spectrum, but the disputed upper band of the 700-megahertz spectrum is particularly suited for wireless carriers. Chairman Michael Powell has repeatedly delayed auctioning this part of the spectrum, most recently until January 2003.

He needs to get the licenses sold, to push the wireless industry into global competitiveness and get a fair price for the taxpayers. In doing so, he should also not allow broadcasters to receive an undeserved windfall.

Congress temporarily granted broadcasters the rights to extra spectrum in 1996, in return for developing digital high-definition television while still offering analog signals. They're supposed to relinquish their older spectrum holdings when 85% of U.S. households have a digital-ready television set; at the moment, that goal looks a long way off. But in the meantime, the broadcasters are allowed to cut their own deals to give up the part of the spectrum most valuable to wireless uses.

Broadcasters are demanding that wireless carriers pay them hundreds of millions of dollars in fees--on top of the more than $2 billion the FCC has set for its auction price. The wireless carriers, however, are balking at what would amount to paying twice--once to the FCC to buy the license; the second time to the broadcasters to use it.

The wireless carriers favor delay. They figure that the longer the auction is put off, the greater the chance the commission will act to stop the broadcasters from making a windfall off public airwaves. They have a point. Powell should certainly limit or ban side fees to broadcasters.

European carriers fear that U.S. companies are poised to exploit their mistakes. As Business Week reports in its June 3 issue, firms like Britain's Vodafone and Germany's Deutsche Telekom are awash in debt after spending half a trillion dollars on licenses and networks, only to discover they weren't selling the data services that consumers wanted. They fear that corporations like Microsoft have the smarts to build on Japan's success, designing and marketing user-friendly devices. By freeing the airwaves, the FCC can speed up U.S. wireless dominance at home and abroad.

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