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Forbes ASAP, April
11, 1994
Auctioning
the Airways
Imagine
it is 1971 and you are chair of the new Federal Computer Commission. This
commission has been established to regulate the natural monopoly of computer
technology as summed up in the famous Grosch’s Law. In 1956 IBM engineer
Herbert Grosch proved that computer power rises by the square of its cost
and thus necessarily gravitates to the most costly machines. According
to a famous IBM projection, the entire world could use some 55 mainframes,
time-sharing from dumb terminals and keypunch machines. The owners of
these machines would rule the world of information in an ascendant information
age. By the Orwellian dawn of 1984, Big Bre'r IBM would establish a new
digital tyranny, with a new elite of the data-rich dominating the data-poor.
As head of the computer commission, you launch a bold program to forestall
this grim outcome. Under a congressional mandate to promote competition
for IBM and ensure the principle of universal computer service, you ordain
the creation of some 2,500 mainframe licenses to be auctioned to the highest
bidders (with special licenses reserved for minorities, women and farmers).
To ensure widespread competition across all of America, you establish
seven licenses in each metropolitan Major Trading Area and seven in every
rural Basic Trading Area as defined by Rand McNally. To guarantee universal
service, you mandate the free distribution of keypunch machines to all
businesses and households so that they can access the local computer centers.
In establishing this auction in 1971, you had no reason at all to notice
that a tiny company in Mountain View, Calif., called Intel was about to
announce three new technologies together with some hype about "a
new era of integrated electronics." After all, these technologies—the
microprocessor; erasable, programmable read-only memory (EPROM); and a
one-kilobit dynamic random access memory (DRAM)—were far too primitive
to even compare with IBM’s massive machines.
The likely results of such a Federal Computer Commission policy are not
merely matters of conjecture. France pretty much did it when it distributed
free Minitel terminals to its citizens to provide them access to government
mainframes. While the United States made personal computers nearly ubiquitous
buying perhaps 100 million since the launch of the Minitel in the late
1970s the French chatted through central databases and ended up with one-quarter
as many computers per capita as this country, and one-tenth the number
of computer networks. Today, PC networks are leading the US economy to
world dominance while Europe founders without a single major computer
company, software firm or semiconductor manufacturer.
IT IS NOW 1994, and Reed Hundt, the new chairman of the Federal Communications
Commission, is indeed about to hold an auction.
Rather than selling exclusive mainframe licenses, the current FCC is going
to sell exclusive ten-year licenses to about 2,500 shards of the radio
spectrum. Meanwhile, a tiny company called Steinbrecher Corp. of Burlington,
Mass., is introducing the new microprocessor of the radio business.
In the world of radio waves ruled by the Federal Communications Commission,
the Steinbrecher MiniCell is even more revolutionary than the microprocessor
was in the world of computing. While Intel put an entire computer on a
single chip, Steinbrecher has put an entire cellular base station—now
requiring some 1,000 square feet and costing $ 1.5 million—in a box
the size of a briefcase that costs $ 100,000 today. Based on a unique
invention by Donald Steinbrecher and on the sweeping advance of computer
technology, the MiniCell represents a far bigger leap forward beyond the
current state of the art than the microprocessor did. What's more, this
MiniCell is in fact much superior to existing cellular base stations.
Unlike the 416 hard-wired radio transceivers (transmitter-receivers) in
existing base stations, the MiniCell contains a single digital broadband
radio and is fully programmable. It can accommodate scores of different
kind of cellular handsets.
Most important, the MiniCell benefits from the same technology as the
microprocessor. Making possible the creation of this broadband digital
radio is the tidal onrush of Moore's Law. In an antithesis of Grosch's
Law, Gordon Moore of Intel showed that the cost-effectiveness of microchip
technology doubles every 18 months. This insight suggested the Law of
the Microcosm— that computing power gravitates not to the costliest
but to the cheapest machines. Costing $ 100,000 today, the MiniCell will
predictably cost some $10,000 before the turn of the century.
In time, these digital MiniCells will have an impact similar to that of
the PC. They will drive the creation of a cornucopia of new mobile services—from
plain old telephony to wireless video conferencing—based on ubiquitous
client/server networks in the air. Endowing Americans with universal mobile
access to information superhighways, these MiniCells can spearhead another
generation of computer-led growth in the US economy. Eventually, the implications
of Steinbrecher's machines and other major innovations in wireless will
crash In on the legalistic scene of the FCC.
And that's only the beginning of the story.
Going on the block In May will be 160 megahertz (millions of cycles per
second) of the radio frequency spectrum, divided into seven sections of
between 10 and 30 megahertz In each of 543 areas of the country, and devoted
to enhanced Personal Communications Services (PCS).
Existing cellular systems operate in a total spectrum space of 50 megahertz
in two frequency bands near the 800 megahertz level. By contrast, PCS
will take four times that space in a frequency band near two gigahertz
(billions of cycles per second). Became higher frequencies allow use of
lower-power radios with smaller antennas and longer-lasting batteries,
PCS offers the possibility of a drastically improved wireless system.
Unfortunately, the major obstacle to the promise of PCS is the auction.
Amid the spectrum fever aroused by the bidding, however, new radio technologies
are emerging that devastate its most basic assumptions. At a time when
the world is about to take to information superhighways In the sky—plied
by low-powered, pollution-free computer phones—the FCC is in danger
of building a legal infrastructure and protectionist program for information
smokestacks and gas guzzlers.
Even the language used to describe the auction betrays its fallacies.
With real estate imagery, analysts depict spectrum as "beachfront
property" and the auction as a "land rash." They assume
that radio frequencies are like analog telephone circuit: no two users
can occupy the same spot of spectrum at the same time. Whether large 50-kilowatt
broadcast stations booming Rush Limbaugh’s voice across the nation
or milliwatt cellular phones beaming love murmurs to a nearby base station,
radio transmitters are assumed to be infectious, high-powered and blind.
If one is on the highway, everyone else has to clear out. Both the prevailing
wisdom and the entrenched technology dictate that every transmitter be
quarantined in its own spectrum slot.
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