ITFS licensees see upsides, downsides in new wireless boom
Originally published in Current, Aug. 2, 1999By Steve Behrens
Pubcasters, colleges and other nonprofits that have licenses for ITFS video channels will soon face complicated decisions about their close relationships with commercial "wireless cable" operators.
With MCI WorldCom and Sprint buying up much of the wireless-cable industry since April, there's sudden hope that wireless cable's microwave frequency band will become commercially viable after it largely failed as a platform for competing against ordinary wired cable systems.
The two telecom giants say they'll offer Internet service and other digital telecom services that bypass local phone companies, using a combination of their own commercial channels (MMDS) and leased ITFS channels. They'll convert the wireless cable systems from one-way analog to two-way digital, probably using multiple transmitters in the style of cellular systems.
To make this happen, ITFS licensees will need to approve the rebuilding of systems that most share with wireless cable. Since the early 1980s they have typically leased out three-quarters of their capacity to wireless operators, which use the ITFS channels to supplement commercial microwave channels of their own.
On the upside, the nonprofits may get a free digital conversion that would let them offer wireless Internet for schools on their own ITFS channels, plus expanded capacity through digital compression, while gaining more prosperous and stable tenants on the other channels.
"We're looking for more varied use of bandwidth--not only video, but also Internet," says Jack Parris, new g.m. of KUAT in Tucson, who oversees 16 ITFS channels used by colleges, schools and the wireless operator People's Choice TV, recently bought by Sprint.
On the downside, however, ITFS licensees could become ensnared in rebuilt systems that permanently marry them to their tenants, for richer or poorer, in fiscal sickness or health.
"Most ITFS licensees will be better off making the transition to two-way," says John B. Schwartz, head of nonprofits that operate 11 ITFS systems in Denver and elsewhere. But Schwartz warns that ITFS operators could be so intertwined in a complex system of shared equipment controlled by a telecom tenant that they would have no ability to operate independently--or return to the old one-way set-up.
"Everybody is thinking, 'What if the next guy goes broke, leaves the channels half-built and subleased?'" remarks Michael Kelley, a former CPB Board member who directs George Mason University's ITFS service in Fairfax, Va.
"If you have a license, but haven't implemented a full system, this is a great opportunity to stand back and figure out what you really want to do," says Steven Schaffer, of Schwartz, Woods & Miller, who has many ITFS clients.
But licensees now using ITFS face an "extremely difficult" task of technical and business planning to make sure they can maintain service with the shift to two-way digital, says Schaffer. At a minimum, the FCC requires ITFS licensees to maintain the equivalent of 20 hours a week of educational service per channel. Schaffer advises ITFS clients to keep a quarter of their capacity for educational use.
Schwartz is suggesting that ITFS licensees add their names to leases for transmission sites and for "backhaul" hookups between cells.
And when a wireless operator wants to go digital, South Carolina ETV has made sure that its contract requires the tenant to pay for digital conversion of the numerous school and college ITFS receive sites, says Bill Hopkins, v.p. of school services. Operators will also have to pay royalties per subscriber.
It's not surprising that ITFS licensees would be dreaming up contracts to protect themselves from their wireless tenants. Many wireless cable systems have failed. They typically could offer only 33 channels of HBO, CNN, and so on (20 of them leased from ITFS licensees), while cable was offering 54 or more channels, Kelley observes. And when DBS services arrived with 150 channels, wireless operators lacked the capital to go digital.
In the Washington area, CAI Wireless Systems has been "treading water," not actively marketing their services, Kelley says. "They were waiting for somebody with money to buy them up."
In April, MCI WorldCom did. Now, MCI-owned CAI Wireless is eager to go digital in the D.C. area, according to Kelley, and to compress the programming from its ITFS landlords down from four channels to one.
Along with CAI Wireless, MCI WorldCom has also bought SkyTel Communications, Wireless One (then in bankruptcy) and PrimeOne Tele-TV. Sprint, meanwhile, has purchased People's Choice TV Corp., American Telecasting Inc., Videotron USA, Transworld Communications and, last week, WBS America LLC.
The chance to buy WBS America looked so good to Sprint that it paid $54 per household in the area, Schwartz observes. That's $54 for every local household, not subscribing household.
Last month in New Orleans, the annual convention of the trade association, Wireless Communications Association International, was the "coming out party" of a new industry -- "coming out of the ashes" of wireless cable, says association President Andrew Kreig.
Sprint and MCI WorldCom were prominent at the convention for the first time, touting their still-incomplete plans. Sprint will use wireless frequencies along with fiber-optic lines to assemble a competitor to local phone companies, offering Sprint ION (Integrated On-Demand Network). For a flat $100-150 a month, ION will let customers make a phone call, hold a videoconference and send a fax at the same time they're doing a fast download from the Internet. MCI WorldCom similarly said it will use wireless to carry Internet connections for small-business and residential customers.
More on wireless cable and ITFS Web page posted Aug. 7, 1999
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