The Spectrum of Innovation

In the mid-1990s, the FCC's auction of broadband PCS spectrum jolted the cellular industry by introducing new competition to the existing duopoly and triggering price reductions and service innovations that continue today. Much has changed in the decade since then. Today there are more wireless than wired customers, the Internet is a daily fixture in more people's lives and the often-hyped concept of telecom “convergence” is finally taking root.

But technological progress in the wireless arena has been made more difficult because of a lack of usable spectrum. As we have heard for years, despite our huge market for wireless services, the U.S. market lags behind European and Asian markets in the amount of spectrum available for broadband wireless services. With ever-increasing amounts of voice traffic traveling our airwaves, there is precious little room for advanced wireless services here.

That's about to change. In the next few years, the FCC will put up for bid loads of highly desirable spectrum licenses — using frequencies with favorable propagation and penetration characteristics. The results of those auctions may affect the structure of the telecom industry, and the auction winners and their suppliers could determine the path of innovation for the next decade.

The FCC plans to auction the first of its advanced wireless service (AWS) licenses (covering 90 MHz in the 1.7 and 2.1 GHz bands) next summer, and Congress is poised to act on legislation that would require an additional 60 MHz (in the highly desirable 700 MHz band) to be offered in 2008. Other spectrum auctions for licenses using frequencies below 3 GHz are also on the drawing board. On instructions from Congress, the FCC is eager to experiment with more complex auction methods, and it may decide to use combinatorial (or package) bidding in some of the upcoming auctions.

The large wireless companies can be expected to show up at the AWS auctions, and analysts estimate that these auctions will generate tens of billions of dollars for the U.S. Treasury. But these and other auctions also may attract bidders with unconventional plans for the spectrum. In a recent move designed to stimulate secondary spectrum markets, the FCC authorized licensing under a “private commons” licensing model, wherein a licensee (perhaps a manufacturer of laptop computers or wireless devices) using a peer-to-peer network can authorize users of “smart” devices to transmit on their licensed spectrum without any connection to a network infrastructure.

The private commons model opens a market opportunity for an entirely new breed of bidder. Developers of wireless devices can now acquire their own dedicated block of spectrum and create products that could communicate with each other without having to be connected to a network. This could hasten the day when everyday transactions that now rely on wired infrastructures can take place wirelessly and less expensively. The possible applications are virtually limitless.

Americans have demonstrated an insatiable thirst for information and entertainment — and for new ways to share it. We have the creativity and resources needed to accelerate the development of new wireless technologies, and soon we'll have the spectrum space for those technologies. This future soon will be upon us, and innovators with solid business plans must be ready to exploit it.

Jonathan V. Cohen is a partner in the Washington telecommunications law firm of Wilkinson Barker Knauer LLP. He previously served in senior positions at the FCC.