The Federal Communications Commission is defending its decision to give away valuable spectrum to satellite service providers, saying the move was required to fill gaps in rural cell phone service.
But wireless carriers—which have been waiting for a chance to bid billions of dollars for a slice of the nations precious airwaves—are crying foul. Such carriers say they deserve those frequencies more than the satellite companies, some of which are struggling to stay afloat, while others are backed by billionaires such as Microsoft Corp. Chairman and Chief Software Architect Bill Gates and cellular pioneer Craig McCaw.
"Were disappointed," said Jeffrey Nelson, a spokesman for Verizon Wireless Inc., in Bedminster, N.J. "Even satellite providers themselves have said that the business plan [for pure satellite service] does not necessarily work. Its unfortunate that spectrum that could have marketplace value could be given away this way."
Eight struggling satellite phone companies received the good news last week when the FCC distributed 70MHz of spectrum in the 2GHz band.
"The issuance of these licenses brings to closure a regulatory process that began nearly a decade ago," said FCC Commissioner Michael Copps in a statement. "With the action announced today, new services and technologies can be tested in the competitive marketplace, which will be the ultimate arbiter of their success."
Its the prospects for success that have the land-based carriers up in arms. Among the license recipients were Iridium Satellite LLC and Globalstar Telecommunications Ltd., both best known for massive and widely publicized financial woes. Iridium filed for bankruptcy in 1999 and only recently emerged, still shaky. Globalstar has been on the brink for months, just last week hiring a new restructuring officer and jettisoning several board members.
"The FCC has awarded licenses to companies who dont have a proven business model—who are either in bankruptcy or in financial straits," said Travis Larson, a spokesman for the Cellular Telecommunications and Internet Association, a wireless lobbying group in Washington.
"We are not competing with the cellular industry. We offer service where there is no cellular service," said Mac Jeffrey, a spokesman for Globalstar, in San Jose, Calif. As for the portrayal of the satellite companies as fiscally doomed, Jeffrey said, "I find that statement based on a track record of 18 months to be a little specious. ... Eighteen months after the first cellular service went into business, you were hearing the same thing."
Also winning licenses last week were The Boeing Co., Celstat America Inc., Constellation Communications Inc., Mobile Communications Holdings Ltd., TMI Communications and Co., and New ICO. New ICO is backed by communications kingpin McCaw and is affiliated with Teledesic LLC, a joint project of McCaw and several deep-pocketed investors, including Microsofts Gates.
"70MHz is a lot of spectrum," Larson said. "And when you look at spectrum needs across the industry, its clear that it could be better allocated. ... Not only do we not have room for the projected growth of voice services, but we also dont have enough room for the next generation of wireless Internet services."
According to CTIA figures, there has been a 1,263 percent growth in cell phone voice minutes since 1993, compared with a 278 percent growth of allocated spectrum.
In addition to their desire for more space, the cell phone carriers are concerned that the satellite spectrum licensees might use their newly won airwaves for terrestrial services that would compete with existing cellular services. New ICO already has appealed to the FCC to allow licensees to use the spectrum terrestrially, saying customers in cities cant use satellite services because buildings block the signals. The FCC has yet to rule on the request.