Wireless waiting game Interconnection delays hold up wireless progress >BY JASON MEYERS, Wireless Networks Editor

When Congress passed the Telecommunications Reform Act a year ago, the wireless sector of the industry was generally considered a competitive model. Spectrum auctions had already ensured that multiple operators would be competing in every market, and advancements in digital technology were making wireless service an attractive wireline alternative.

Despite early promise, however, the events of the first deregulated year have not yet pushed wireless much beyond that starting point.

"One year is really too short a time to judge the full impact of the act on the wireless industry," said Rob Hoggarth, senior vice president of paging and narrowband personal communications at the Personal Communications Industry Association. "At this point, so many questions still remain unresolved.

The most important component awaiting resolution involves interconnection, a topic still mired in controversy and being battled in an appeals court. From the wireless perspective, the issue is whether local exchange carriers should have to pay wireless operators interconnection fees reciprocal to those that wireless carriers currently pay LECs.

Some believe the additional revenue those fees would generate could be the variable that would allow wireless to crack the alternative local access market. Elliott Hamilton, vice president of the North American telecom division of The Strategis Group (formerly MTA-EMCI), predicted that if reciprocal interconnection existed, LEC interconnection revenues would drop from $33 billion over a 10-year period to just $6 billion.

"That's a huge shift in revenues away from LECs," Hamilton said. The money wireless operators spend just to interconnect has prevented them from seriously invading the local loop, he said. "It's very hard to do that if they have to pay those interconnection fees.

One observer pointed out that despite a lack of outward action so far, the passage of the act alone served as a signal that the local loop is up for grabs.

"There's a mandate that says there's going to be competition in the local loop," said Ira Brodsky, president of Datacomm Research. "The reform act provides a psychological comfort level that there are going to be guaranteed alternatives.

Flat-rate pricing and the features offered by new personal communication services companies are the early signs of eventual landline alternatives, he said.

Deregulation may have already begun to benefit the wireless sector in less obvious ways. Mergers such as those proposed between BT/MCI and SBC Communications/Pacific Telesis-while ostensibly decreasing the number of competitors-could ultimately provide economic benefits to wireless customers.

"These mergers will actually be beneficial to end users because the companies can get economies of scale from their operations, and that could translate to lower prices for consumers," said Spencer Stern, a consultant at OmniTech.

So while regulatory reform has yet to rattle the structure of the wireless sector too severely, the mere concept of a more open market inches wireless higher up in the telecom hierarchy.

"While the jury is out on the ultimate effectiveness, we've achieved a stature now in which we can really expect grudging acknowledgment from government and wireline interests that wireless carriers are legitimate co-carriers," says Hoggarth.

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