Leo I. George learned a lot about the ways of Washington as a top outside lawyer for MCI Communications Corp. in the early 1970s. MCI drove a wedge into the century-old Bell System with a handful of intercity microwave links it got for free from the Federal Communications Commission. Three years ago, George quietly began to acquire his own microwave licenses from the FCC--in a dizzying upper region of the radio spectrum, considered useless to anyone but military pilots and radio astronomers. Few others had shown any interest in this "nosebleed" section of the spectrum. Like MCI, George got his licenses for 28 of the nation's biggest metropolitan areas for nothing.
William G. McGowan, the late MCI chairman, must be smiling down on his old friend George from Deal Heaven. Thanks to advances in technology and to overcrowding in the lower frequencies, the nosebleed section suddenly has the best seats in the house. Wising up, the FCC has stopped issuing licenses. It hopes to make money auctioning off those it hasn't already given to people like George, who sold his licenses for $10 million. The company that bought the licenses, Winstar Communications Co., based in Tysons Corner, Va., is a Wall Street favorite. It lost $7 million on $25 million in revenues last year, but its stock has risen from $2 when it went public in 1991 to about $18 now, giving it a market capitalization of $680 million.
Winstar saw an opportunity to use the high-frequency airwaves for quick, cheap connections between antennas in the next generation of cellular-phone networks, so-called personal communications services (PCS). The laborious alternative is to link the PCS antennas with wires strung on utility poles or snaked through trenches. Winstar's opportunity was George's easy money--simply because George got there first. But he makes no apologies. "It was unused real estate," he says. By finding a use for it, "we took a government asset and made it more valuable for everyone." Other companies are looking at using the high frequencies for satellite phone systems, office computer networks, and crash-avoidance radar for cars (table).
BITTER SQUABBLES. The opening of the spectrum's upper frontier couldn't come at a better time. Congestion in the lower bands has produced bitter squabbles over rights to the airwaves. In contrast, the upper spectrum is Big Sky country, a land of wide-open spaces. Winstar has licenses scattered between 37 and 40 gigahertz--that is, 37 to 40 billion cycles per second. "You might call this the Wild North instead of the Wild West," says Winstar Vice-Chairman Steven J. Chrust.
In December, the FCC opened three new bands even higher. Two, at 47 and 76 gigahertz, are for car crash-avoidance radar. The third, located between 59 and 64 Ghz, is being explored by Hewlett-Packard, Apple Computer, and Sun Microsystems for wireless local-area networks. Wireless LANs haven't caught on in lower bands, partly because they don't have enough capacity. But the amount of information that transmissions can carry climbs with increasing frequencies. The band between 59 and 64 Ghz can carry as much information as fiber-optic cable.
One apparent drawback to those frequencies is now proving to be a boon. Oxygen absorbs signals in that band, stopping transmissions dead after a few hundred feet. For computer makers, that's an advantage: The same frequencies can be used in neighboring office buildings without fear of interference.
When George grabbed his licenses, he seemed to be battling the immutable laws of physics. That's why there were few other takers. Signals in lower bands, with their long wavelengths, can travel hundreds of miles and slice through buildings like butter. But at the higher bands, signals travel only a mile or two and can't cut through much besides fog and smoke. They also require more sophisticated--and costly--electronics. But they have huge information-carrying capacity. And costs have plummeted in recent years, as gallium arsenide chips that generate and detect high-frequency signals have fallen in price.
For that, thank the Pentagon. It helped tame high frequencies in the 1970s by ordering "millimeter wave" devices from the likes of TRW Inc. and Martin Marietta. Because the signals died out after traveling short distances, fighter pilots could talk by radio to one another without being overheard. And higher frequencies could use tiny one-inch antennas, small enough to fit in the noses of smart bombs to guide them toward their targets.
MONOPOLY BREAKER. For the Pentagon, the catch was that the high-frequency chips had to be made from gallium arsenide, which is faster than silicon but more difficult to process. In 1987, the Pentagon set out to lower the chips' cost by developing manufacturing and design capabilities like those used for silicon. The Defense Dept. launched a program called Microwave & Millimeter Wave Monolithic Integrated Circuits (MMIC, pronounced "mimic"). A year later, the program was transferred to the Defense Dept.'s Advanced Research Projects Agency. Among the 30 participating companies were Raytheon, Texas Instruments, TRW, Hughes Aircraft, Martin Marietta, and ITT. The program ended last year after laying out $570 million in federal funds.
Industry experts consider MMIC a big success. The cost of a typical gallium arsenide circuit fell from several hundred dollars to less than $10. "You were going from a situation where you were making chips by hand to one where you were mass-producing the circuits using highly automated techniques," says Eliot D. Cohen, MMIC's former executive director.
That technology now serves the private sector. Carmakers, for example, have long dreamed of radar to warn drivers who get too close to the car ahead. But the systems were too bulky to fit behind the front grille, and they sprayed signals so widely that they couldn't distinguish the car ahead from one approaching in the opposite lane. At higher frequencies, though, radars can be shrunk to the size of a brick. They can also generate focused beams that "see" only straight ahead. Detroit now hopes to offer collision-avoidance radar as an option in luxury cars for under $1,000 in two to four years. "I have a gut feeling that this will be as important as air bags were," says Robert W. Schumacher, director of the advanced technology center at Delco Electronics Corp. in Kokomo, Ind., a unit of GM Hughes Electronics.
Nosebleed transmissions may help break up local telephone monopolies by serving as the backbone for new PCS networks that grab business from the old wired networks. The FCC helped advance that revolution with its hands-off approach to licensing the band at 37 to 40 Ghz. Traditionally, the FCC requires applicants to file an engineering plan for each microwave link between two points--say, between two office buildings--proving the connection won't interfere with existing licensees. That's time-consuming and expensive.
In the new band, the FCC granted exclusive licenses for territories of over a thousand square miles. It's up to the licensees to set up point-to-point links for their customers and make sure the links don't interfere with each other. MCI and Teleport Communications Group Inc., who are also Winstar's customers, will use wireless links to supplement fiber-optic networks that are siphoning traffic from local phone companies.
The heyday of the Wild West came to an end when the westward expansion collided with the Pacific Ocean. But real estate in the gigahertz range is nearly infinite. Leo George's followers should march on for years.