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Thursday May 03 03:50 PM EDT

Moving Toward a 1-Phone Future

By Bruce Stewart

(The Industry Standard)

The Federal Communications Commission (news - web sites) unanimously gave its approval last week for top European telco Deutsche Telekom, which is partly owned by Germany, to purchase VoiceStream Wireless, the sixth-largest wireless operator in the U.S. Then on Tuesday, the merger's nine-month regulatory process culminated with the U.S. Committee on Foreign Investment announcing that it had finished its review and would take no further action on the merger.

The $34 billion stock-and-cash deal may have significant implications for U.S. wireless phone users, but it has been rife with controversy from its inception. Last year, a group of 30 U.S. senators signed a letter to the FCC (news - web sites) opposing VoiceStream's sale, claiming that the sale would violate federal law by putting U.S. interests at the mercy of a foreign government.

The law in question states that foreign companies with more than 25 percent government ownership can acquire U.S. telcos only if federal regulators deem the sale to be in the public interest. (The German government now owns 60 percent of DT, but its stake will drop to approximately 45 percent once the VoiceStream deal is consummated, and it has agreed to eventually eliminate its holdings in DT.) Both the FBI (news - web sites) and the Justice Department (news - web sites) have weighed in on the subject, and DT has agreed to ensure that law enforcement agencies will be able to perform legally authorized wiretaps of domestic calls, as well as calls that begin or end in the United States.

Not only will the deal help VoiceStream build out its network in the U.S., it will also increase U.S. competition in mobile services, according to an FCC statement issued last Wednesday. VoiceStream Chairman and CEO John Stanton echoed these sentiments. "The American wireless consumer wins under today's announcement by the FCC," Stanton stated in a company release on April 25. He added that VoiceStream will be in a strong position "to be a leader in providing advanced high-speed always-on GPRS wireless data services."

The Bellevue, Wash.-based VoiceStream has been picking up steam: It had 4.4 million customers as of March 31, and this week announced the launch of its GSM (global system for mobile communications) wireless services in Chicago. This puts GSM services in all of the major U.S. cities, except New Orleans, which VoiceStream hopes to be in by the end of the year.

GSM is the predominant wireless technology used in Europe and Asia, and the fact that VoiceStream also uses this system made it especially attractive to DT. Mobile phone operator Powertel, which provides GSM service to 1 million customers in the southeastern U.S., is also part of the deal, as VoiceStream will acquire the smaller GSM operator prior to being absorbed by DT. "Combined, VoiceStream, Powertel and Deutsche Telekom will be able to offer expanded seamless services to customers, using the same technology platform GSM," Stanton said.

VoiceStream expects to maintain its name in the U.S. market, and in addition to offering high-speed GPRS (general packet radio service), it will focus on allowing customers to use a single wireless phone both in the U.S. and abroad. The companies expect the deal to close by the end of the month.

With GSM already working in 168 countries and accounting for almost 70 percent of the total digital wireless network, it's no surprise that its presence is being felt here in the U.S. The fantasy of having one phone that works all around the world may be getting closer to reality.

-- Moving toward a (one@phone.future), May 04, 2001