Airwaves Giveaway Gets Static

WASHINGTON — The Clinton administration has offered to give away a huge, valuable block of the radio spectrum to help several billionaire entrepreneurs, including Microsoft Corp. Chairman Bill Gates, resolve a dispute over their competing wireless telephone and Internet services.

The proposal by the Commerce Department’s National Telecommunications and Information Administration will largely benefit a company owned by Gates and cellular telephone mogul Craig McCaw by removing an important obstacle to their plans for a $9-billion network of 840 communications satellites blanketing the globe.

But it involves the government’s giving away a block of the radio airwaves that many communications experts say should be placed up for auction--and that could bring in billions of dollars to the Treasury.

The arrangement would give Associated Communications LLC of Alexandria, Va., and Kirkland, Wash.-based Teledesic Corp. control over more than twice the portion of the radio spectrum now controlled by all of the country’s radio and television stations put together.

“This spectrum is public property,” said David Mallof, president of WebCell Communications Inc. of Washington state, which hopes to compete for a similar portion of the spectrum in coming federal auctions of the public airwaves. “It is a matter of clear congressional intent and legislation that public auctions are the appropriate means of awarding frequencies when more than one party is interested in using them.”

The controversy all but ensures that the proposed deal will draw considerable fire when it comes up for formal approval by the Federal Communications Commission soon.

At the center of the arrangement is a conflict between Teledesic, the venture owned by Gates and McCaw, and Associated Communications, a company that is also proposing to establish a large wireless telephone and Internet system.

Teledesic has long contended that transmissions by Associated Communications over the radio frequencies Associated owns would interfere with its own transmissions. Under the deal negotiated by McCaw, members of the FCC staff and Associated President Alex Mandl, a former president of AT&T; Corp., Associated would relinquish its portion of the 18-gigahertz radio band to Teledesic.

In return, the government would grant Associated an even larger portion of the 24-gigahertz band.

FCC approval would allow Associated’s owners--the billionaire Berkman family of Pittsburgh, Pa., and entrepreneurs Rajendra and Neera Singh of Alexandria, Va.--to move their fledging services out of Teledesic’s way. Teledesic would pay Associated an undisclosed sum to cover, among other things, the cost of re-engineering its wireless equipment to operate on the new airwaves.

“I wasn’t personally involved in this decision,” said Larry Irving, executive director of the National Telecommunications and Information Administration. “I just told my people to find a fix that makes everybody happy.”

The NTIA also indicated in a March 5 letter to the FCC that the deal would help eliminate potential interference between Associated’s equipment and government satellite Earth stations whose operations are critical to national security. Teledesic’s proposed system, the agency said, wouldn’t cause the same interference.

Government officials say the giveaway is justified because the 24-gigahertz band is technically less desirable for wireless transmission than the 18-gigahertz band Associated would be relinquishing. When Associated got its original licenses in 1990 and 1991, all such licenses were awarded for free. Auctions of designated public airwaves did not begin until 1994.

Associated and Teledesic are vying to provide what some telecommunications experts say could be a new generation of mobile communications services--high-speed digital voice and data links for users with small hand-held units.

Associated already has licenses to offer wireless telephone service and Internet access in Los Angeles and 30 other big markets. It is seeking to compete for additional licenses to build a network that covers the entire country.

But Teledesic and some other competitors have complained that the company has done little or nothing to develop services in the markets where it now is licensed.

Associated disputes the charge, although the company’s general counsel, Larry Harris, acknowledged that it serves fewer than 1,000 subscribers in all 31 markets.

Nevertheless, he said, “we have met every licensing requirement mandated” by the FCC.

Meanwhile, Teledesic also has drawn skepticism concerning its plans for a global satellite network that would connect even the most remote villages at data-transmission speeds 60 times faster than today’s computer modems.

Although global telephone giant British Telecommunications, among others, has acknowledged holding talks about investing in Teledesic, other potential investors, regulators and scientists believe that the firm faces considerable and costly technical, financial and political obstacles.

But Teledesic spokesman Bob Ratliffe said the airwave settlement with Associated--if approved by the FCC--would put the company on track to become fully licensed by the commission this summer to use the airwaves. Teledesic needs that approval to put pressure on the international bodies that will decide this fall whether to grant rights to use the same portion of the spectrum around the globe. “We’re still on target” to meet the goal of launching Teledesic by 2004, he said.