FCC again will consider lifting wireless ownership caps

The cap, which limits the amount of spectrum a given wireless provider can hold in a given market, was upheld by the Federal Communications Commission in 1999 and this month on the grounds that it promoted wireless competition in markets. But now the third review is being conducted by the new FCC under the chairmanship of self-proclaimed deregulator Michael Powell.

There has been growing pressure on the FCC to lift or modify the cap, given that according to the Cellular Telecommunications and Internet Association, 70 percent of Americans have a choice of at least five competing mobile phone providers, and at least 11 million people can choose from among seven different providers. It's also believed by some that the cap will inhibit the development of so-called 3G services such as wireless high-speed Internet access and streaming video, as major carriers such as Verizon Wireless and Cingular Wireless won't have enough room to provide existing and advanced service in key markets.

It could also help lift some pretty woeful stocks, analysts said.

Adjusting or lifting the cap "could be potentially a big boost" to the depressed stock prices of the major carriers, said Elliott Hamilton, executive vice president of The Strategis Group. "It would definitely have an impact on the wireless landscape."

Small wireless carriers want the cap preserved, however. Testifying before the House Commerce Telecommunications Subcommittee last July, Leap Communications CTO Mark Kelley said, "It is not an overstatement to tell you that Leap Wireless, as well as scores of other new wireless carriers, would not be in business today" if the cap hadn't been put in place.

Strategis Group's Hamilton believes lifting the cap will lead to consolidations among major carriers that could be good for their shareholders. Kelley agreed there would be consolidations, but added that merged or not, the major carriers would buy up additional spectrum in markets and hoard it for future growth, preventing the growth of smaller carriers such as Leap that wouldn't be able to pay as much for the spectrum.

The move to eliminate the cap already has the support of one of the FCC's four commissioners.

Arguing there is no "policy rationale" for the "efficiency-stifling caps," Commissioner Harold Furchtgott-Roth said in a statement, "I would have tentatively concluded here that the caps should be eliminated."

Furchtgott-Roth berated the Commission for its "repeated re-examinations of these issues without substantial alterations in our policy approach."

Powell and Furchtgott-Roth are currently the only Republicans on the Commission, although President Bush is expected to name a third soon. He may also replace Democrat Susan Ness with another Democrat, as she currently is serving in a recess appointment awarded by President Clinton before he stepped down. While evenly split on party lines now, the FCC soon will have three Republicans and two Democrats in keeping with which party is in the White House.

A bipartisan coalition in Congress has been arguing for some time to eliminate the cap out of fear it will inhibit the growth of 3G services and leave the United States even further behind Europe and Asia. The movement is led by House Internet Caucus co-chairs Bob Goodlatte, R-Va., and Rick Boucher, D-Va.

Boucher said the caps will mean that established providers won't have the airwaves capacity to provide traditional and 3G service, and the all-important latter offerings will be provided by upstarts that may not be able to provide the same service quality.

Boucher said that given the high-spectrum demand for 3G services and the increasing competition in the wireless market, "the caps, frankly, don't make any sense."

The rules process launched by the FCC likely will take several months, but that still will be well before the spectrum auctions for 3G services, tentatively scheduled to occur no later than Sept. 30, 2001. On March 1 the FCC has promised to release a report identifying where the 3G spectrum block or blocks will reside, and what will be done with entities such as the Defense Department that are already using those airwaves.