The total 4-MHz slice of frequency spectrum that was the subject of the FCC’s 800-MHz auction is the same spectrum that has been allocated for air-to-ground calling for the last 20 years. The original idea was for as many as five competitors to offer air-to-ground calling services in flight, but only three players eventually emerged–and none was able to make money. InFlight Phone, Claircom and GTE provided services for the airlines early on, and after successive mergers and bankruptcies Verizon Airfone (formerly GTE) was the only operator left in that spectrum.
Because of the high cost to place a call and the need to swipe a credit card to do so, airline passengers shunned the Airfone seatback handsets. As a result, this segment of the 800-MHz spectrum wasn’t being used the way the FCC originally envisioned. The agency recently took a hard look at the issue, deciding last December that modern technology perhaps could provide a rebirth for the spectrum.
The FCC’s idea was to divide the spectrum so that two competitors could provide broadband services. The cost and complexity of deploying separate nationwide air-to-ground networks, however, made many of the players uneasy, especially those who were directly involved in the original 800-MHz spectrum debacle.
The bidders quickly gravitated toward the idea that there would be one high-speed broadband license and one low-speed narrowband license, essentially giving the winner of the 3-MHz license a monopoly in the air-to-ground spectrum market, similar to the business environment that exists in small towns where a single cable tv operator competes with direct-broadcast satellite tv providers.
Verizon Airfone has two years from the date AirCell’s license is granted to vacate the 3-MHz spectrum and move its customers to the 1-MHz band. After that occurs, Verizon will have another two years before its 1-MHz license expires and the company is out of the business altogether. The FCC will monitor the process to ensure it happens on an expedited schedule. In the meantime, AirCell and Verizon can co-exist in the 3-MHz spectrum, allowing AirCell’s service to begin before Verizon has moved out, AirCell CEO Jack Blumenstein said.
“Our technology allows us to implement our service in a way that accommodates both our needs and the transition stage that Airfone has,” Blumenstein said. “We would expect to work with them on a friendly and compatible basis to make that work smooth for everybody.” He added that AirCell intends to encourage business relationships with wireless telecom companies in the future, including Verizon.
The spectrum license must be renewed every 10 years, but Blumenstein called it “fundamentally perpetual” because, like all wireless licenses from the FCC including
PCS and cellular, the 10-year renewal process is more or less a formality as long as the operator is meeting its obligations. And AirCell has every intention of holding the license for far longer than 10 years, Blumenstein said.