TIME: Almanac 1995

home *** CD-ROM | disk | FTP | other *** search

/ TIME: Almanac 1995 / TIME Almanac 1995.iso / time / 110794 / 11079924.000 < prev next >

Wrap

Text File | 1995-02-27 | 7.3 KB | 146 lines

<text id=94TT1529> <title> Nov. 07, 1994: Telecommunications:Battle for Air </title> <history> TIME--The Weekly Newsmagazine--1994 Nov. 07, 1994 Mad as Hell </history> <article> <source>Time Magazine</source> <hdr> TELECOMMUNICATIONS, Page 58 Battling for a Slice of Thin Air </hdr> <body> Giant firms are racing toward wireless--but wireless what, exactly? By Philip Elmer-Dewitt--Reported by Richard Woodbury/Denver It was an extraordinary display of last-minute dealmaking, even for an industry that has seen more than its share of shotgun weddings and broken marriages. For the past few weeks, the giants of the telecommunications industry have engaged in a high-stakes game of corporate musical beds that left some of the most eligible partners sleeping alone and created some awfully strange bedfellows. The immediate cause of all this was an obscure bit of rulemaking from the Federal Communications Commission. The FCC for the past four months has been selling off slices of the broadcast spectrum--the radio bands used for everything from dispatching taxis to broadcasting Rush Limbaugh's belly laughs. And in preparation for a big auction scheduled to begin in December, the agency required that all companies seeking to bid on this latest piece of electromagnetic real estate disclose the names of their business partners by last Friday. The deadline triggered a frenzy of late-night telephone calls among local phone companies (the so-called Baby Bells), the major long-distance phone companies, the big cable-TV operators and a bunch of cellular-phone start-ups. When the dust settled, the biggest player on the field--the partnership of AT& T and McCaw Cellular Communications--was being challenged by two other behemoths: a joint venture formed by Sprint and a trio of cable TV operators; and a foursome of Baby Bells made up of Bell Atlantic, NYNEX, US West and the cellular spin-off of Pacific Telesis. After being wooed and spurned by a variety of players, MCI, the second largest long-distance carrier, decided to go it alone. Why so much interest in what is, after all, only a slice of thin air? Because that thin air has been set aside to create "personal communication services" that may someday connect everybody to everybody else--like the phone system does today, but without those constricting telephone wires. Through streams of digital data, PCS providers could deliver all kinds of exotic services, from smart cars that call for help when they've been stolen to vending machines that order their own refills. They could be the foundation for a wireless electronic-mail network--a kind of information highway of the airwaves--through which people could send and receive messages anywhere, anytime. In futuristic scenarios, these networks would be populated by software "agents" that look after their owners' interests, calling them up when a stock plummets, a flight is canceled or a spouse is running late. It was clear last week, however, that the companies maneuvering for position in the upcoming PCS auction had a much more mundane use in mind. Each major bidder, for its own reason, was focused on what is known in the business as pots--plain old telephone service, or in this case, plain old wireless telephone service. The Baby Bells want to use wireless PCS phones to extend their reach outside their local regions. The long-distance carriers want to use them to connect to customers without having to pay monopoly rates (45 cents on every dollar) to the Baby Bells. And the cable-TV operators need the revenues from wireless telephone to defray the cost of turning aging, one-way cable systems into modern, switched two-way networks. Said Tele-Communications Inc. CEO John Malone last week: "In effect, we are starting a new national telephone company." That's easier said than done. Most states still prohibit cable operators from offering dial tones, or long-distance companies from providing local phone service. There is also a lot of infrastructure to build: PCS phones, being smaller and lower-powered, need even more antennas than cellular systems, and the cellular companies have already planted their own in the best spots. Finally, there is a chance--given that all these companies are vicious competitors in one market or another--that the marriages of convenience could fall apart. None of this seems to have cooled the ambition of the players, however. In an auction for a separate, much narrower band of frequencies last week, some of the same companies whipped the first day's bidding to a dizzying $297 million. The December auction, which will be the biggest yet by far, could bring in anywhere from $10 billion to $22 billion. That's a lot of money. Too much, perhaps. If, as the Clinton Administration argues, the so-called information infrastructure is the highway that will lead the U.S. to new prosperity, then driving up the cost of that infrastructure may be counterproductive. Granting licenses to the highest bidders is not always the best way to encourage ingenuity. In fact, says telecommunications analyst Mark Stahlman, president of New Media Associates, "the behemoths who can afford to bid are the least likely to be innovative." Some critics question the wisdom of licensing frequencies at all. George Gilder, writing in Forbes ASAP last April, issued a plea to FCC Chairman Reed Hundt to call off the auctions altogether. Gilder is enamored of a technology called spread spectrum, which uses smart, computerized antennas to change frequencies on the fly, monitoring the airwaves for unused bandwidth and sending signals like "Wee Willie" Keeler sent baseballs--hitting them where they ain't. According to Gilder, there is no need to parcel out radio bands, because future improvements in computers will ensure that there are plenty to go around. The FCC, he says, is stuck with the old model of airwave scarcity and, as he puts it, is "auctioning off beach-front property...while the tide pours in." This is not a theoretical argument. A handful of entrepreneurs are already manufacturing equipment that uses spread-spectrum techniques to pump data through unlicensed frequencies now set aside for such things as microwave ovens and amateur radios. These spread-spectrum modems have found favor with Internet aficionados who use them to send and receive E-mail without racking up phone-line charges--or using phone lines at all. Some of the wireless cowboys were in an uproar last week over a new FCC plan to sell those unlicensed frequencies. In a series of impassioned electronic messages, Colorado activist Dave Hughes urged Internet users to "get off your cursors and start hammering Congress and the FCC!" The Administration appears to have heard. White House aide Thomas Kalil answered Hughes on the Internet, assuring that "the Administration supports unlicensed data services." It's too late to call off the current auctions and too soon to say what wireless technologies will eventually prevail. But this may be the right time to set aside some of the spectrum as an unlicensed wilderness area, where entrepreneurs can play and the best ideas can win. </body> </article> </text>