WASHINGTON -- Local telephone and cable companies lost an attempt in federal court Friday to bid without restriction on licenses to offer phone, television and Internet services through new wireless technology.
The court's decision, hailed by the Federal Communications Commission, is timely. The FCC plans to auction licenses for the new technology called local multipoint distribution service, or LMDS, starting Feb. 18.
The new wireless service is delivered in a way that closely resembles cellular phone service. But to receive phone, television or data services, customers need a small receiver dish in or near a window.
The United States Telephone Association, which represents local phone companies, was among the groups challenging the FCC's order, issued last year.
"USTA will use every means possible whether congressional, regulatory or judicial to correct this misguided decision," the organization said.
To encourage newcomers, the FCC barred cable and local phone companies from bidding on one of two licenses in markets where they already provide service.
Licenses they are not allowed to bid on are for a large slice of the airwaves, 1,150 megahertz. The ones that they can bid on are for a smaller, but still considerable band of 150 megahertz.
The FCC said, however, that companies could buy licenses from other parties after three years.
Local phone companies argued that the FCC's decision restricting them from bidding on the LMDS licenses was a departure from previous rules and should be overturned.
They argued that the FCC had not barred them from acquiring other licenses -- such as ones to provide cellular service and a new mobile phone service called personal communications, or PCS, in markets where they provide local phone service.
Disagreeing with their assessment, the United States Court Appeals for the District of Columbia turned down local phone companies' requests for the court to review the FCC's order.
"We find that the commission has adequately explained why it came to a different conclusion about LEC (local exchange carrier) eligibility in the case of LMDS than it reached in earlier cases involving different technologies," the court said.
The 1,150 megahertz license marks the single-biggest license for a company to occupy a swathe of the airwaves that the FCC has ever issued. A single license allows a company to simultaneously provide 16,000 phone calls and 200 video channels.
The FCC argued that this unprecedented capacity made it "extremely wary about the possibility" that local phone companies would not use LMDS licenses to offer services to compete against their local phone service.
Local phone companies "have not shown that the FCC's conclusion ... that the LECs (local exchange carriers) would likely resist competing against themselves in the telephone market is unreasonable," the court said.