Bits Blog: T-Mobile to Pay $308 Million for More Spectrum

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U.S. Pushes Agencies to Free Up Spectrum

Without additional airwaves for consumer and business use, administration officials say, the “skyrocketing demand of consumer and broadband business users” for wireless service for smartphones, tablets and other devices will soon outgrow the supply.

For consumers, the initiative could allow cellphone and wireless broadband companies to eventually increase the reliability of their networks, meaning fewer dropped calls and shorter delays in loading video and other large files.

It also could create jobs, the administration says. It cites industry studies reporting that since 2007, more than 500,000 jobs have been created in what is known as the App Economy — the business of creating and selling applications and programs that take advantage of faster Internet speeds and more advanced devices.

The administration said it would invest $40 million in the next year and $60 million more over the next five years to find ways for government agencies to share lightly used airwaves that are under federal control with private wireless communications companies.

Mr. Obama directed federal agencies to make more capacity available by enhancing the efficiency of their spectrum use and to recommend ways of using financial or other incentives to increase sharing of airwaves by government agencies.

“The number of wireless devices is exploding, and that means increasing demands on the spectrum upon which they all rely,” Gene B. Sperling, director of the National Economic Council, said in a White House blog post on Friday. “The federal government helps manage that resource, and we know we can do a better job of unleashing innovation by ensuring more of it is shared, unlicensed for innovations like Wi-Fi, and better used by our departments and agencies.”

One roadblock to that seemingly unlimited growth potential, however, is the reluctance of some parts of the government to part with any of their vast holdings of the nation’s electromagnetic spectrum — the airwaves used by cellphone and wireless communications companies.

In 2010, Mr. Obama directed government agencies to work to free up 500 megahertz of spectrum from federal and private sector sources. Those efforts have been embraced by numerous federal departments, administration officials say.

But a few others, including the Defense Department, have expressed wariness not only at sharing or giving up any of their designated frequencies, but even at revealing the amount and location of airwaves they control. Doing so could compromise national security, Pentagon officials say.

An administration official cited one hypothetical example where an executive department might use a certain frequency for about 12 hours a week of training activities. One agency might be willing to confine its use to prescribed hours, and allow commercial users to share the airwaves at other times, while another department might say it needs the flexibility to be able to use the airwaves at any time.

The Defense Department has said it supports the president’s goals of freeing up spectrum, but noted that an increasingly electronically armed military had its own rising needs for spectrum. The administration emphasized that any new plans to free spectrum should not interfere with “mission-critical capabilities” of military and other government departments.

Nevertheless, the intransigency of some departments has frustrated lawmakers.

“I have long called for a thorough inventory of all public spectrum assets in order to gauge usage and improve efficiency, and have been frustrated by how this debate has dragged out over the past four years,” Senator Mark Warner, a Virginia Democrat, said Friday. “Federal agencies should have the spectrum they need to protect the public, but no one should be warehousing spectrum.”

The Commerce Department has identified more than 300 megahertz of spectrum controlled by the federal government that could be set aside for other uses. The remainder of the 500 megahertz defined as the goal by the administration would come from the so-called incentive auctions that were authorized as part of the 2012 Middle Class Tax Relief and Job Creation Act.

That law provided for the government to share the proceeds of auctions of newly cleared spectrum with television broadcasters who would willingly sell some or all of their spectrum licenses.

Perhaps the most interesting and highly charged recommendation in the president’s directive is one ordering recommendations for incentives that could be used to persuade government departments to share or give up spectrum.

A study released last year by a presidential advisory council on science and technology recommended that the government create a “synthetic” currency that could be used to entice federal agencies. The system would in effect increase an agency’s budget if it gave up or shared its airwaves.

Commissioner Jessica Rosenworcel of the Federal Communications Commission, who has also been advocating such a system since joining the agency in May 2012, about the time the advisory council’s report was released, said federal spectrum policy should be built “on carrots, not sticks.”

“Our traditional three-step process for reallocating federal spectrum — clearing federal users, relocating them, and then auctioning the cleared spectrum for new use — is reaching its limits,” she said. The new initiatives, however, “are a significant step toward meeting the country’s spectrum needs.”

F.C.C. Has Yen for Broadway’s Wireless Spectrum

An hour before curtain at “Mamma Mia!” at the Winter Garden Theater on Broadway, Craig Cassidy, the head sound man, starts his nightly ritual of testing the wireless microphones that the performers wear hidden in their white spandex bell bottoms.

The run-throughs by Mr. Cassidy ensure that the microphones are transmitting on their assigned frequencies, a narrow sliver of the nation’s airwaves. The same process takes place every night at nearly four dozen other Broadway theaters, where an inadvertent twist of a dial can put a cordless microphone on the wrong frequency — wreaking havoc if it should send the harmonies of Abba in “Mamma Mia!” into the speakers of a performance of “Wicked” across the street.

“It’s quite a juggling act we have to perform in this area to coordinate the use of all of those microphones,” Mr. Cassidy said.

But Broadway producers are alarmed that this carefully balanced system is about to crumble. The Federal Communications Commission is considering plans to force the users of cordless microphones — not only Broadway producers but also megachurches and the National Football League — to move to a less desirable spot on the nation’s airwaves. The F.C.C., backed by Congress, hopes to auction most of those prime airwaves now used by singers, preachers and coaches to data-gobbling smartphone companies, potentially for billions of dollars.

“We’ve been doing this for years,” said Colin Ahearn, a sound assistant on “Mamma Mia!”

“We found out how to make it work. Then the government comes along and says, ‘Hey, we can make some money from it.’ That’s not right.”

The F.C.C. counters that the airwaves are public property and that theater owners have long gotten preferential access to the frequencies. The commission also points out that the first $7 billion raised by the auction is to build a nationwide public safety communications network, and that many members of Congress have urged the commission to sell everything it can to raise money to reduce the nation’s deficit.

Still, Broadway producers say that moving to a new spot on the airwaves, or spectrum, will compromise the sound quality of “Mamma Mia!” hits like “Dancing Queen,” and “The Name of the Game,” making the melodies less full and rich. They say a failure of a wireless intercom could endanger a performer or crew member and that they will be forced to buy expensive new equipment or risk having their transmissions overwhelmed by smartphones that use the same airwaves.

“It is easy for other users of the same spectrum to overpower wireless microphones,” the Broadway League said in comments filed at the F.C.C. That interference “could devastate the sound and stagecraft at major productions, potentially causing physical harm to actors and production workers, serious artistic and cultural losses and — considering the importance of live entertainment to the American economy — significant financial damage.”

The N.F.L. has also told the F.C.C. to back off, citing the need for the use of hundreds of wireless microphones at its games. “Despite N.F.L.’s best efforts to manage its wireless microphones on its increasingly scarce spectrum,” the football league wrote in a letter to the F.C.C., “N.F.L. has received numerous recent reports of wireless microphone interference during games, rendering coaches unable to communicate plays to their quarterbacks and referees unable to consult one another on calls.”

Wireless microphones are one of a number of consumer gadgets — including baby monitors, Wi-Fi routers, garage door openers, television remote controls and electronic car key fobs — that enjoy unlicensed access to the airwaves and which have contributed billions of dollars to the economy. The gadgets can operate without an F.C.C. license, unlike a cellphone company, which must buy a license to operate on a certain segment of the airwaves, or television broadcasters, which operate free on assigned public airwaves.

European Mobile Stocks Fall After Costly Spectrum Auction

BERLIN — Shares of four big European cellphone operators fell Monday after they paid more than twice what investors had been expecting in a spectrum auction in the Netherlands, raising concern that a damaging bidding war could sap the industry.

The Dutch auction began Oct. 31 and ended Friday, raising 3.8 billion euros, or $5 billion, for spectrum that the companies plan to use for high-speed service using Long Term Evolution, or LTE, technology. But analysts warned that the sale, to be followed next year by a much larger spectrum auction in Britain, could herald a new round of expensive infrastructure levies that might restrict operators at a time when their sales have been stagnating.

The winners were KPN, the former Dutch monopoly; Vodafone, the British mobile group; the German company T-Mobile; and the Swedish operator Tele2.

LTE supports all of the typical high-speed applications, including audio and video streaming and Internet browsing, but is much faster, cutting download times and significantly expanding the capacity of existing networks to handle increases in data traffic.

After the bidding, KPN, which is owned in part by the Mexican communications mogul Carlos Slim Helú, canceled its dividend for 2012 and lowered its projected investor payout for 2013 to cover the 1.35 billion euros the company spent in the auction.

On Monday, the first day of stock trading after the completion of the auction, shares of KPN fell nearly 15 percent in Amsterdam, the steepest drop in more than a decade. Shares of Vodafone were down 1.7 percent by the close of the day in London. Shares of Deutsche Telekom, the parent company of T-Mobile, fell 0.3 percent in Frankfurt, and shares of Tele2 declined 1 percent in Stockholm.

“The money raised in the Dutch auction was a lot more than investors were expecting,” said Phil Kendall, an analyst at Strategy Analytics in Milton Keynes, England. “The concern now is that the sums will now be so great the technology will be unprofitable.”

Mr. Kendall said mobile operators were eager to obtain additional spectrum because extensive bandwidth had become increasingly critical to handle the explosion of mobile Internet data, which is testing the capacity of some carriers’ grids and causing overloading.

“Really, for many operators, the only way they will be able to differentiate themselves from other operators is by having enough spectrum to manage the demand on their services,” Mr. Kendall said. “That is why there is such intense interest in buying more frequency.”

More radio spectrum, or wireless network capacity, is crucial to delivering the high speeds advertised for LTE, which theoretically can produce download rates of up to 300 megabits per second on a wireless connection. Such speeds and the expanded capacity of the networks are considered essential to support the rapid expansion of the wireless Internet, as well as the increasing use of mobile grids for robotic communication between devices.

Speeds on the first generation of LTE networks activated in Germany, South Korea, Sweden and the United States have averaged much less, generally 10 to 25 megabits per second, in part because operators do not have enough spectrum to exploit the technology’s full potential.

The Dutch auction also raised the specter of another costly round of infrastructure fees on the cellphone industry similar to those in 1999 and 2000, when operators paid billions for the first European 3G mobile licenses.

Investors were concerned that the Dutch prices could set a precedent for auctions planned in Britain and perhaps Poland next year, as well as others that will be held across Europe over the next five years, as bandwidth is freed up and sold by national governments to wireless carriers. Germany, which held its latest spectrum auction in 2010, has indicated that it may hold another in 2016.

Those license sales in 1999 and 2000, engineered in most cases by governments to extract the maximum from mobile operators, led to large profit write-downs by operators including Vodafone and Telefónica, which owns the carrier O2.

With completion of the Dutch auction, the focus will now shift to Britain, where the sector’s regulator is planning to begin its spectrum auction in January.

All four British mobile network operators are expected to bid: Everything Everywhere, the venture of Deutsche Telekom and France Telecom; Vodafone; O2 U.K.; and 3, a unit of Hutchison Whampoa. The former landline monopoly BT has not ruled out a potential bid, which could further raise the stakes.

Matthew Howett, an analyst at Ovum, a research firm in London, said the British auction could raise £2 billion to £4 billion, or $3.2 billion to $6.5 billion.

“The £2 billion to £4 billion range that is widely touted is based on similar auctions elsewhere in Europe,” he said. “There is nothing to suggest that the U.K. should be any different. It’s possibly the most competitive market in Europe and all existing operators will want to make sure they walk away with spectrum to feed the almost insatiable appetite we in the U.K. now have for data.”

This article has been revised to reflect the following correction:

Correction: December 17, 2012

An earlier version of this article erroneously stated the amount paid by KPN for spectrum in the auction. It was 1.35 billion euros, not $1.35 billion.

DealBook: Sprint Offers $2.1 Billion for Clearwire and Its Spectrum

Yuriko Nakao/ReutersMasayoshi Son, left, the founder of SoftBank, and Daniel Hesse, Sprint’s head, announcing their deal in October.

9:19 p.m. | Updated

With the help of a deep-pocketed new partner, Sprint Nextel is ready to spend money to shore up the future of its wireless network.

The telecommunications company offered on Thursday to buy out the part of Clearwire, the wireless network operator, that it doesn’t already own for $2.1 billion. The bid values Clearwire at about $4 billion.

Sprint agreed less than two months ago to sell a majority stake in itself to SoftBank, a major Japanese cellphone service provider.

Under the terms of its proposal, Sprint will pay $2.90 a share for Clearwire, according to a regulatory filing. Sprint, which already owns 51.7 percent of Clearwire, needs the approval of both SoftBank and a substantial portion of Clearwire’s minority shareholders.

Clearwire said in a regulatory filing on Thursday that its board had formed a special committee to consider Sprint’s offer.

Shares in Clearwire have slumped more than 85 percent since they began trading over five years ago. But they leapt nearly 15 percent on Thursday, to $3.16. That suggests that investors believe a higher offer may be forthcoming.

The Sprint offer could benefit both companies. For Sprint, buying all of Clearwire would lock up spectrum that Sprint could use to build out its newest data network.

Long the No. 3 cellphone service provider in the country behind Verizon Wireless and AT&T, Sprint has moved aggressively to bolster its position within a consolidating industry. Sprint’s deal with SoftBank gives it a well-heeled partner willing to infuse $20.1 billion into the company.

The Clearwire deal could also help fend off a newly revitalized T-Mobile USA, which has announced plans to merge with the smaller MetroPCS.

A deal would also give Clearwire, which has struggled for much of its existence, some much-needed cash — up to $800 million — after paying off some of its heavy debt obligations. The company reported having $1.2 billion in cash as of Sept. 30, which it expected to last about a year.

Formed with much promise as a next-generation wireless service provider, Clearwire has instead flailed after betting on WiMax, a high-speed wireless data standard that failed to gain traction.

A union of Sprint and Clearwire had long been expected. Soon after the SoftBank deal was announced, both Daniel R. Hesse, Sprint’s chief executive, and Masayoshi Son, SoftBank’s founder, intimated that acquisitions were in Sprint’s future.

“This is a scale game,” Mr. Hesse said in an interview in October.

Clearwire’s shares rose immediately after the SoftBank investment was announced, fueling speculation about a bid from Sprint. A few days later, Sprint increased its holdings in Clearwire, buying shares from Craig O. McCaw’s Eagle River Holdings. The transaction gave Sprint a majority stake in Clearwire.

Sprint is working to build out a Long Term Evolution, or LTE, network that can support the latest smartphones like the iPhone 5. Clearwire owns spectrum that is similar to the radio band that SoftBank uses, potentially creating a path for devices that can be used in both the United States and Japan.

And while Sprint has long been the biggest stakeholder in Clearwire, it hasn’t been able to exert full control over one of its most important partners.

Some of Clearwire’s smaller shareholders, including the investment firms Mount Kellett Capital Management and Crest Financial, have cautioned the company against selling out to Sprint for too low a price.

Mount Kellett has suggested that Clearwire consider selling a portion of its spare spectrum to other telecommunications companies, like AT&T or T-Mobile. And Crest Financial said on Thursday that it was willing to take steps as drastic as petitioning government regulators to block Sprint’s deal with SoftBank, in an effort to win a higher price.

An analyst at BTIG Research, Walter Piecyk, estimated that Sprint would need to pay at least $5 a share to secure Clearwire.

But Sprint already has a fair amount of leverage over its smaller partner. It already controls a majority of Clearwire’s voting shares and is its biggest customer. And having posted a string of losses, Clearwire is running out of cash to keep itself afloat.

Sprint has already been in discussions with its major partners in Clearwire — a group that includes the cable operators Comcast and Bright House as well as the chip maker Intel — to convince them that its bid represents a big premium over Clearwire’s October trading position. It is also betting that those companies are eager to shed a losing investment.

Together, they control more than 12 percent of the total votes in Clearwire. Winning them over would put Sprint significantly closer to the roughly 75 percent of the vote it will need to buy control of the company.

DealBook: Clearwire Is Sought by Sprint for Spectrum

Ken Lambert/The Seattle Times, via Associated PressCraig McCaw, founder of Clearwire, in 2006.

Sprint Nextel has moved to protect one of its most valuable assets — access to a big chunk of spectrum — just as it is preparing to become a more aggressive force in wireless, with the backing of SoftBank of Japan.

The company, the No. 3 cellphone provider in the United States, disclosed on Thursday that it had offered to buy a stake in Clearwire from its founder, Craig O. McCaw, the cellphone pioneer, effectively giving it majority control of the struggling broadband company.

Sprint already relies on Clearwire to handle data demands for some of its customers, and the smaller network’s big block of wireless spectrum could be useful in building out its own next-generation cellphone network.

“We believe it is a strong signal that Clearwire’s future could likely be increasingly aligned with Sprint’s strategy,” Michael Rollins, an analyst with Citigroup, wrote in a note to investors.

Sprint and SoftBank announced on Monday a deal that involves the Japanese telecommunications giant buying a 70 percent stake for $20.1 billion as well as providing an immediate cash infusion into Sprint.

While the Clearwire maneuver is not directly connected to that deal, it is a signal of intent from the American cellphone company, whose recent ambitions to challenge the market leaders Verizon Wireless and AT&T have been limited by a debt-laden balance sheet.

Sprint has already been converting much of its existing infrastructure into a Long Term Evolution network, which uses a faster data technology used by the newest smartphones.

A portion of Clearwire’s spectrum, which is similar to the radio band that SoftBank uses, could eventually be turned into an LTE highway for devices that work on the networks of both Sprint and its Japanese partner.

While the agreement with Mr. McCaw appeared to come together with surprising speed, Daniel R. Hesse, Sprint’s chief executive, said in an interview on Thursday that his company had already made it known to its partners in the company, which include Intel and Comcast, that it would be interested in buying their stakes if they were willing to sell.

Sprint already owns more than 48 percent of Clearwire, but the agreement with Mr. McCaw’s investment vehicle, Eagle River Holdings, buying class A and class B shares from it for $100 million, will push that stake to more than 50 percent. Under the terms of agreements among the Clearwire investors, Eagle River must offer the other companies the right to buy into a portion of its shares.

Both Intel and Comcast have received that offer, giving them 30 days to decide.

Perhaps the most important aspect of the agreement with Mr. McCaw, from Sprint’s perspective, is that the board seat held by Eagle River would be filled by Clearwire, adding a third independent director on the 13-member board.

Sprint would still control seven board seats. But having more independent voices could keep Clearwire more aligned with the network operator’s interests. Other strategic investors in Clearwire have also named directors. Agreements among the strategic investors require that certain important business decisions be approved by 10 of Clearwire’s 13 directors.

“Sprint would sleep better at night knowing that the board was still controlled by Clearwire,” said Craig Moffett, an analyst with Sanford C. Bernstein.

Shares of Clearwire tumbled 10.18 percent on Thursday, to $2.03, as investors’ hopes for a more conventional takeover were dashed.

Mr. Hesse stressed that the Eagle River transaction was not required for the closing of the SoftBank deal, and that he was not currently planning to further change Clearwire’s governance.“Our interest is aligned with the public’s,” he said.

But Mr. Hesse acknowledged that his company had previously been constrained in the strategic moves that it could make because of its heavy debt load and limited cash. “It’s been very tough sledding for us because we have been the poor kid on the block,” he said. “We have seen a number of opportunities pass us by over the years.”

Last month, Time Warner Cable said it planned to sell its 7.8 percent interest in Clearwire. Sprint passed on buying that stake at the time, but Mr. Moffett said that the company would have loved to have reached a deal if possible.

Mr. Hesse may now be feeling emboldened after having struck the deal with SoftBank. The Japanese company plans to inject $8 billion directly into Sprint as part of its effort to take control of the American carrier, which can be used for corporate moves like acquisitions.

It isn’t clear whether — or when — Sprint will try to buy out its remaining partners in Clearwire, though a person close to one of the other strategic investors said that any decision would ultimately come down to the price.

Neither Mr. Hesse nor Masayoshi Son, the founder and chief executive of SoftBank, would comment on other moves, including potential takeovers. People briefed on the matter have said that Sprint had considered bidding for MetroPCS, a smaller American cellphone service provider that plans to merge with T-Mobile USA.

Mr. Son has intimated that he envisions Sprint as a potential vehicle to buy other service providers. The enlarged T-Mobile has been suggested as a possible target. In an interview on Thursday, he emphasized that his ambition is to create one of the world’s biggest mobile Internet companies.

And Mr. Hesse said on Thursday that he still anticipated being a part of the deal-making in the American cellphone service industry.

“This is a scale game,“ he said, adding that he believes regulators would favor transactions that fortified competitors to Verizon Wireless and AT&T, which currently tower over the rest of the industry.

But first their transaction must pass muster with American regulators, including the Justice Department and the Federal Communications Commission. It must also be reviewed by the Committee on Foreign Investment in the United States a government panel that determines whether a deal would pose a threat to national security.

Neither Mr. Hesse nor Mr. Son said that they expect any problems with the committee review, and that they have not heard from any legislators regarding potential issues with Sprint having a foreign owner.

And while a joint venture of SoftBank obtains network equipment from Huawei and ZTE, two Chinese telecommunications equipment makers criticized by the House Intelligence Committee earlier this week as being threats to national security, Mr. Son said that he is mindful of keeping the American government happy.

He said that Huawei and ZTE currently supply only a small part of his company’s total equipment, and that he is mindful of the multiple government agencies that currently have contracts with Sprint. “We will respect whatever the American government wants,” he said.

F.C.C. Backs Plan on Reclaiming Spectrum for a Wireless Auction

WASHINGTON — The government took a big step on Friday to aid the creation of new high-speed wireless Internet networks that could fuel the development of the next generation of smartphones and tablets, and devices that haven’t even been thought of yet.

The five-member Federal Communications Commission unanimously approved a sweeping, though preliminary, proposal to reclaim public airwaves now used for broadcast television and auction them off for use in wireless broadband networks, with a portion of the proceeds paid to the broadcasters.

The initiative, which the F.C.C. said would be the first in which any government would pay to reclaim public airwaves with the intention of selling them, would help satisfy what many industry experts say is booming demand for wireless Internet capacity.

Mobile broadband traffic will increase more than thirtyfold by 2015, the commission estimates. Without additional airwaves to handle the traffic, officials say, consumers will face more dropped calls, connection delays and slower downloads of data.

The F.C.C. will issue proposed rules for what it calls incentive auctions — the sale of airwaves that are voluntarily given up by broadcasters in exchange for a portion of the auction proceeds.

A proposal detailing the program will be released next week, officials said.

The commission will seek public comments over the coming months.

“In this flat, competitive world, capital and talent can flow anywhere,” Julius Genachowski, the F.C.C. chairman, said before the vote. “We’re in a global bandwidth race. It’s similar to the space race in that success will unleash waves of innovation that will go a long way toward determining who leads our global economy in the 21st century.”

The auctions are not expected until 2014, but commission officials and Congress have estimated that the process could generate $15 billion in proceeds. About $7 billion of that would be set aside to build a nationwide emergency communications network for public safety officials, a yet-unfulfilled recommendation of the 9/11 Commission.

The auction proposal received widespread acclaim from wireless companies, Internet trade groups and telecommunications experts — just about everyone, that is, except television broadcasters. Most broadcasters want to retain their airwaves, and they have disputed a brewing shortage of spectrum.

Industry lobbyists note that broadcasters gave up significant amounts of airwaves several years ago in the conversion of television signals to digital from analog format. That spectrum was auctioned in 2008, with no compensation to broadcasters, and industry officials grumble that many of the buyers of those airwaves have not used them yet.

Gordon H. Smith, a former Republican senator from Oregon who is president of the National Association of Broadcasters, said on Friday that he thought the high expectations for the auction “may be premised on the mistaken belief that broadcasting is an industry in decline.”

Some major broadcast groups, including CBS, which owns more than two dozen broadcast channels around the country, have said they do not intend to give up their broadcast spectrum.

But Mr. Genachowski said he believed there were many small broadcasters, particularly independent, individually owned stations in urban areas, whose low profit margins and lack of original programming made them more likely to give up spectrum in the auctions.

Also casting some wariness on the auction details were the commission’s two Republican members, who warned against making the auction rules so complicated that they exclude potential bidders, lessening the chances the auctions will raise enough money for the public safety network and other uses.

Robert M. McDowell, a Republican commissioner, said that the agency must remain open to public and industry recommendations about how best to structure the auctions and the movement of broadcasters to new places on the electromagnetic spectrum.

“In the past, regulatory efforts to over-engineer spectrum auctions have caused harmful, unintended consequences,” Mr. McDowell said.

The auction process will have three parts. In the first, the F.C.C. will conduct a reverse auction to determine which holders of broadcast television licenses will submit bids to voluntarily give up their spectrum rights in exchange for payment.

In addition to seeking the broadcasters that will give up their licenses and go off the air, the agency will also consider whether to allow alternatives, like agreeing to allow broadcasters to share spectrum with another station or to move from a UHF television channel to VHF, which occupies different spots on the dial.

A second portion of the process involves repacking — essentially moving and squeezing together the remaining airwaves so they occupy a smaller portion of the spectrum band, known as UHF. Once those bands of newly available spectrum are identified, they would be auctioned in the traditional format, going to the highest bidders.

Those three parts can be conducted either consecutively or concurrently, and the F.C.C. is seeking comment on that approach as well.

The F.C.C. also voted to begin a review of its mobile spectrum ownership policies, specifically whether it should revise its limits on how much spectrum any one wireless telecommunications company can own in a geographic area.

The F.C.C. now limits companies to holding no more than one-third of an area’s available airwaves. Big wireless companies have said those rules, put in place more than a decade ago, should be changed to allow bigger holdings by dominant carriers.

Smaller wireless companies, however, say the F.C.C. should keep limits while also changing its counting method to give greater weight to the most attractive spectrum bands, on which signals travel further and more easily through obstacles like buildings.

F.C.C. Considers New Spectrum Rules for Wireless Companies

Not so in the air across the continent, where the Federal Communications Commission has long set limits on how much of the airwaves one company can control.

Now, pushed by small and medium-size telecommunications companies, the government plans to begin setting new rules to govern how much of the airwaves, or spectrum, a single carrier can hold. A big goal for those small companies, which compete with the behemoths Verizon and AT&T, is a measure that would give greater importance to so-called beachfront spectrum.

Those are the highly sought-after airwaves that travel farther between antennas and pass more easily through buildings, making them especially attractive in urban areas where the largest, most profitable clusters of mobile device users congregate.

It may sound esoteric, but the issue is known to every cellphone user who has experienced a dropped call or a smartphone browser stuck endlessly loading a Web page. After years of limiting companies to no more than one-third of the available airwaves in a given territory, the F.C.C. on Friday will begin the rule-making process on whether new technologies require limits to be redrawn, recalibrated or perhaps removed.

The F.C.C.’s decision, which probably will not be final for about a year, will have broad effects on consumers and companies. It plays a part in another matter the agency is expected to consider on Friday: rules for auctioning off newly reclaimed airwaves.

In that effort, the commission is aiming to take back portions of the airwaves used by the military or by television broadcasters. It is offering cash incentives for companies to give up their spectrum. The airwaves would be auctioned, with a portion of the proceeds going back to the original private-sector license holders.

By giving more weight to the best-performing spectrum, the F.C.C.’s overall limits could increase competition by restricting the big companies from buying too much of the airwaves, said Matt Wood, policy director for Free Press, a consumer advocacy group. “It is not the sheer amounts that matter,” he said. “It is where it is located on the radio dial that makes certain spectrum more valuable to a wireless company’s business.”

Some wireless company executives disagree, saying that the fact that some airwaves can travel farther than others is meaningless in a large city like New York, where so many users are congregated that a company already has to put in extra towers to keep airwaves from being overloaded. Overloading, of course, results in dropped calls.

Nevertheless, the quest for new rules is being welcomed by large and small mobile phone companies alike, each looking for a competitive advantage. Public interest groups that often oppose the companies’ efforts to trade spectrum also favor changes.

“There are a lot of competing interests here,” said Walter G. D. Reed, a partner at Edwards Wildman Palmer in Providence, R.I., who has worked on telecommunications issues. And the F.C.C.’s challenge is how to allow companies like AT&T and Verizon expand their businesses while ensuring that smaller carriers do not get shut out.

Wireless industry executives say that they would welcome almost any new standards because that would remove the uncertainty cast by the agency’s past practice of weighing potential spectrum deals case by case.

“Spectrum policy in this country needs to be built on a full factual record and rational economic policy,” Joan Marsh, vice president for federal regulatory issues at AT&T, said in an interview. “Carriers need a clear and reliable understanding of when and under what circumstances spectrum acquisitions will be permitted, something we do not have today. This proceeding will provide the vehicle to meet both goals, and take spectrum policy out of merger-specific proceedings and place it in an industrywide rule-making, subject to judicial review.”

The F.C.C. staff has circulated its proposals to the five-member commission, but the agency would not discuss the possible outcomes before the Friday meeting.

This article has been revised to reflect the following correction:

Correction: September 29, 2012

An article on Wednesday about the Federal Communications Commission’s consideration of new rules governing wireless airwaves, or spectrum, described incorrectly the groups to which the agency will offer cash incentives in exchange for their giving up portions of spectrum they control. The cash payments, which will come from the proceeds of public auctions of the spectrum, are available only to companies, mainly broadcasters, that give up spectrum — not to the military and other government agencies that currently control wireless airwaves. (The F.C.C. is also trying to secure spectrum controlled by the military and those federal agencies.)

F.C.C. Considers New Spectrum Rules for Wireless Companies

Not so in the air across the continent, where the Federal Communications Commission has long set limits on how much of the airwaves one company can control.

Now, pushed by small and medium-size telecommunications companies, the government plans to begin setting new rules to govern how much of the airwaves, or spectrum, a single carrier can hold. A big goal for those small companies, which compete with the behemoths Verizon and AT&T, is a measure that would give greater importance to so-called beachfront spectrum.

Those are the highly sought-after airwaves that travel farther between antennas and pass more easily through buildings, making them especially attractive in urban areas where the largest, most profitable clusters of mobile device users congregate.

It may sound esoteric, but the issue is known to every cellphone user who has experienced a dropped call or a smartphone browser stuck endlessly loading a Web page. After years of limiting companies to no more than one-third of the available airwaves in a given territory, the F.C.C. on Friday will begin the rule-making process on whether new technologies require limits to be redrawn, recalibrated or perhaps removed.

The F.C.C.’s decision, which probably will not be final for about a year, will have broad effects on consumers and companies. It plays a part in another matter the agency is expected to consider on Friday: rules for auctioning off newly reclaimed airwaves.

In that effort, the commission is aiming to take back portions of the airwaves used by the military or by television broadcasters, offering cash incentives for companies or other groups to give up their spectrum. Those airwaves would be auctioned, with a portion of the proceeds going back to the original license holder.

By giving more weight to the best-performing spectrum, the F.C.C.’s overall limits could increase competition by restricting the big companies from buying too much of the airwaves, said Matt Wood, policy director for Free Press, a consumer advocacy group. “It is not the sheer amounts that matter,” he said. “It is where it is located on the radio dial that makes certain spectrum more valuable to a wireless company’s business.”

Some wireless company executives disagree, saying that the fact that some airwaves can travel farther than others is meaningless in a large city like New York, where so many users are congregated that a company already has to put in extra towers to keep airwaves from being overloaded. Overloading, of course, results in dropped calls.

Nevertheless, the quest for new rules is being welcomed by large and small mobile phone companies alike, each looking for a competitive advantage. Public interest groups that often oppose the companies’ efforts to trade spectrum also favor changes.

“There are a lot of competing interests here,” said Walter G. D. Reed, a partner at Edwards Wildman Palmer in Providence, R.I., who has worked on telecommunications issues. And the F.C.C.’s challenge is how to allow companies like AT&T and Verizon expand their businesses while ensuring that smaller carriers do not get shut out.

Wireless industry executives say that they would welcome almost any new standards because that would remove the uncertainty cast by the agency’s past practice of weighing potential spectrum deals case by case.

“Spectrum policy in this country needs to be built on a full factual record and rational economic policy,” Joan Marsh, vice president for federal regulatory issues at AT&T, said in an interview. “Carriers need a clear and reliable understanding of when and under what circumstances spectrum acquisitions will be permitted, something we do not have today. This proceeding will provide the vehicle to meet both goals, and take spectrum policy out of merger-specific proceedings and place it in an industrywide rule-making, subject to judicial review.”

The F.C.C. staff has circulated its proposals to the five-member commission, but the agency would not discuss the possible outcomes before the Friday meeting.