Call For Cell License Bids

A government auction of valuable chunks of airwaves could mean new choices for cell phone service and better coverage in areas with heavy traffic.

The Federal Communications Commission auction, starting Tuesday and expected to last several weeks, will help address the exploding demand for wireless phones and other devices, expected to grow in the years ahead.

The 422 licenses that go on the auction block cover areas including much of the East Coast, large pockets of California, Texas and the Great Lakes region. That could help big carriers like Verizon Wireless, AT&T Wireless and Sprint PCS handle traffic in high demand areas and during peak calling hours.

"Everyone who uses a wireless phone knows the frustration of a dropped call," said FCC chief William Kennard. The auction could help address that problem and encourage innovation in offering new services, he said. "Consumers will see the immediate benefits."

The auction already appears to be the most competitive in the agency's history, with 87 companies participating and more than $1.8 billion in upfront payments collected. Analysts estimate the auction could bring in $10 billion to $18 billion for the licenses, mostly found in the 1900 MHz range.

Large companies are likely to use the new licenses they win — offered in cities like New York, Los Angeles, Seattle and Boston — to address the capacity problems on their high-traffic network. Growing wireless businesses could use the auction to fill in gaps as they go national.

Smaller entrepreneurs have some licenses set aside just for them. That means they can offer specialty services in rural or less dense parts of the country.

Ultimately, consumers could see more carriers with nationwide networks, offering one-rate calling plans with no roaming. Two-way messaging and Internet services could also grow.

David Bishop, an analyst with the Yankee Group, expects that in the short term, companies that win licenses will focus on bolstering their existing networks, rather than offering new data services.

"There are obviously companies that have shortages and deficiencies in certain markets," Bishop said. "I think you'll see improved quality of service going forward, because of better coverage and capacity."

The auction comes amid insatiable consumer appetite for cell phones and other wireless devices. In five years, an estimated 148 million Americans will be cell phone subscribers, gabbing an average of 233 minutes a month, according to the Strategis Group.

At the same time, cell phones and other handheld devices are evolving into mobile personal computers that can roam the Internet, display video and provide constant e-mail access. Recent auctions in Europe have garnered staggering amounts for licenses to offer high-speed wireless Internet service, with one in Germany fetching $46.2 billion.

U.S. companies may take a more tempered aproach after seeing the frenzied bidding overseas, experts say. Wireless businesses here also have been swapping licenses to get more airwaves space where they need it.