Everybody Wants A Piece Of The Air
The daily buzz of cell-phone calls, BlackBerry messages, and laptop Web surfing fills the airwaves and frees millions of people to communicate from bike trails and coffeehouses. But wireless service providers are poised to turn even more of the rituals of life into life-on-the-go. To achieve their goals, they're eyeing a rich prize from Uncle Sam: the airwaves long occupied by TV broadcasters that could soon be up for grabs.
This summer, perhaps even before Congress heads home for its July 4th recess, a key committee is expected to introduce legislation that would require TV stations to go all-digital and relinquish their analog airwaves by Dec. 31, 2008. That would complete the push launched in 1996, when Congress gave local stations an extra set of airwaves to go digital. The stations, which fear losing viewers who lack digital TV sets, have long fought the move. But the bill finally appears to have a decent chance of passing. Lawmakers are eager to collect the $10 billion the Congressional Budget Office is privately telling Hill aides that spectrum sales could reap. And that has made Republicans more amenable to Democratic demands that the government subsidize analog-to-digital converter boxes for households that can't afford new digital TVs.
A few years will pass before the spectrum comes available, but it could set off a gold rush among companies seeking to meet demand for wireless services. The market for wireless data, ranging from broadband to TV on cell phones, could jump from $7.6 billion this year to $38 billion in 2014, according to Kagan Research LLC. Cellular carriers, cable giants, satellite-TV companies, and broadband startups all need more elbow room on the air. The frequencies potentially up for grabs are among the best available, carrying signals for miles and traveling through walls. "They can leap tall buildings in a single bound," says Charlie Townsend, CEO of Aloha Partners, a wireless broadband startup in Providence.
Freeing up the spectrum could improve the chances of wireless emerging as a third broadband competitor to the Bells, which offer DSL and fiber-optic-based services, and cable companies, with their high-speed modems. In 2002 federal regulators sold a small portion of the airwaves used by analog TV broadcasts. The big winners -- Aloha and Qualcomm Inc. -- provide a glimpse into the businesses that bidders for the spectrum might pursue. Aloha, for instance, wants to use its airwaves to build broadband services in rural and suburban communities now ignored by the Bell and cable companies. It will launch a trial in Tucson shortly to sell broadband access at prices ranging from $30 to $75, depending on speed. Aloha will target small-business users.
Gaining access to more spectrum could also help other wireless broadband players competing with the Bells and cable companies. News Corp.'s DirecTV, for example, now markets broadband via satellite to bolster its competitive arsenal against cable -- but the dish technology that links consumers' PCs to the satellite uplink still causes some delays. It could use some airwaves to provide a cheaper, faster terrestrial wireless link.
Other competitors could emerge with the impending rollout of WiMax, a new wireless broadband standard that can carry data 10 or more miles in open countryside. Opening up the TV airwaves could allow small startups to mount a cost-effective WiMax alternative to today's big broadband players. Craig O. McCaw's ClearWire Inc., which is already offering wireless broadband, declined to comment on whether it will bid for the TV spectrum. But those frequencies, with their long-ranging signals, would probably let wireless companies cover more territory with fewer transmission towers, lowering the cost of building up the network.
Still, startups eyeing the spectrum will face deep-pocketed competitors. Wireless and cable giants -- and even Hollywood studios -- could gobble up the spectrum to deliver next-generation services, such as TV viewing on cell phones. Qualcomm, which acquired airwaves in the 2002 auction, will launch a service for wireless carriers next year to deliver TV clips from the likes of ABC News, ESPN, the Weather Channel, A&E, and other programmers to cell phones. Inspired by the success of such services in South Korea and Japan, Qualcomm is pouring $800 million into its MediaFLO USA Inc. subsidiary to push this initiative. More spectrum could prove useful if it comes on tap. "If you like TV, you'll probably like having TV programming available all the time," says MediaFLO general manager Jeff Lorbeck.
Cellular carriers, too, may want to own this service. They'll have a chance to bid for new airwaves for advanced voice and data services in an auction as early as next year, but they may still want a shot later at the airwaves vacated by the TV guys. Why? Operating their mobile TV in a channel separate from the frequencies they use for voice services would avoid straining capacity.
Cable operators could also see the new airwaves as a way to shore up their business models. Cable doesn't own any wireless phone services -- and thus could take a while to match the package of TV, Internet, land-line, and mobile-phone services that their Bell competitors are readying. Comcast (CMCSA ), Time Warner Cable (TWX ), Charter Communications (CHTR ), and Cox Communications have formed a consortium to help formulate a wireless strategy. It could include over-the-air delivery of both voice and TV services using the newly available spectrum.
None of the cable giants will comment on whether they will bid for the spectrum. And in the fast-evolving wireless world, 2009 is a generation away. But if the airwaves long monopolized by local TV are finally unlocked, life is certain to get ever more mobile.
By Catherine Yang in Washington, with Heather Green and Tom Lowry in New York