Details and Delays Bog Down FCC Bid to Try New Auction System Former Use of Lottery Fails to Build Base for New Technologies

Article excerpt

THE Federal Communications Commission (FCC) is a small government agency that churns out the red tape that keeps the nation's communications industries in line.

But every so often, in doling out pieces of the radio spectrum for new technologies, the agency has conducted amazing lotteries where virtually anyone - from AT&T to Al's Deli - could try to get a license.

Sometimes, Al's Deli won the lottery but didn't build a new communications system. It would sell its license to whatever communications company offered the highest bid. No one really likes this system. "This isn't Lotto America," an FCC staffer said. But starting this year, the FCC is auctioning spectrum instead.

Practically everyone applauds the move - in theory. The auctions should earn an estimated $10.2 billion over five years for the government. "The way it was done in the past was basically to make people rich through luck," says William Bane, vice president at Mercer Management Consulting Inc., a New York-based consulting firm. "It's hard to imagine that this {auction system} isn't better than that."

The problem is, in trying to set up a new auction system, the FCC has run into a hornet's nest of details and delay. Firms and industry groups have filed 66 petitions asking the FCC to modify its plan to auction off spectrum for a new technology called personal communications services. Even ardent supporters are having second thoughts about it.

"We have so little experience in this, and we have so much at stake that {the auction} could create a quagmire," says Peter Huber, senior fellow at the Manhattan Institute for Policy Research in New York. "The paramount objective should be to get the spectrum out so that the new industry can be developed."

"I don't really care {how it's done} as long as they get the spectrum allocated," adds Kimball Brown, vice president of mobile computing at Dataquest Inc. in San Jose, Calif. "They're playing all kinds of stupid games."

Last week, the FCC set the bidding rules for the first auction in two-way wireless messaging, known as narrow-band personal communications services, or PCS. (In a separate action, the commission also set rules for an auction in a short-distance communications technology known as interactive video and data service.) Starting this summer, the commission will allow companies to bid for a narrow-band PCS license, which could set the stage for a new industry in hand-held data communicators.

But the auction with the most immediate impact will be in broadband PCS, which is a new kind of mobile-phone service. …