Broadband Wireless: Industry and Economic TrendsRelating to WCS Spectrum

Craig Wireless International Inc.

June 22, 2000

PricewaterhouseCoopers LLP is a Canadian member firm of PricewaterhouseCoopers International Limited, an English company limited byguarantee.

Table of ContentsPage

1.0 Introduction ...........................................................................................................12.0 Background and History.......................................................................................13.0 WCS Today ............................................................................................................3

3.1 Mobile Wireless Services.......................................................................................33.2 Fixed Wireless Services .........................................................................................53.3 WCS and MMDS...................................................................................................8

4.0 Trends Driving Broadband Access Services .......................................................84.1 Growth of High Speed Internet and Other IP-network Based Applications...94.2 The Rise of Demand for Symmetrical Traffic .................................................10

5.0 Market Response Considerations ......................................................................125.1 Broadband Access Technologies ........................................................................125.2 Vendor Support ...................................................................................................135.3 Availability of Spectrum .....................................................................................14

6.0 The Road Ahead for WCS..................................................................................15

Appendix A: FCC WCS Auction WinnersAppendix B: Evolution of Mobile Wireless Technologies and StandardsAppendix C: Description of Key Vendors

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1.0 IntroductionIndustry Canada recently issued a formal notice announcing a consultation paper on proposalsfor revisions to the spectrum policy for services in the 2285-2483.5 MHz frequency bands.1The proposals advanced in this consultation paper are in response to requirements that includeinnovative wireless access and LAN services for the Internet. It is not surprising therefore, thatthese proposals have generated significant interest within the wireless communications servicescommunity in Canada.

This Report, prepared by the Wireless Practice of PricewaterhouseCoopers, traces the historyof Wireless Communications Services (WCS) spectrum in North America and explores theeconomic demand and supply trends driving the evolution of new services in the 2.3 GHzfrequency band.

2.0 Background and HistoryIn North America, Wireless Communications Services (WCS) refers to the potential servicesthat were expected to evolve as a result of the Federal Communications Commission (FCC)decision in 1996 to reallocate the 2305-2320 and 2345-2360 MHz bands for newradiocommunications services.2 Consistent with the FCC’s Order in November 1996, thesefrequency bands were to be assigned through a competitive bidding process. At the time, theFCC proposals for the 2305-2320 and 2345 to 2360 frequency bands were not directed at aparticular service requirement. Rather, they were designed to permit the provision of thebroadest range of fixed, mobile radiolocation and broadcasting-satellite services possible,within FCC spectrum allocation guidelines.

The FCC expected that WCS spectrum would play a broad and potentially important role in therapidly evolving wireless industry. At the time, it was thought that WCS would most likely beused to provide a variety of mobile services including an entire family of new communicationdevices with advanced two-way data capabilities. In anticipation of some of today’s 2G and3G services, the FCC expected that WCS systems would be able to communicate with othertelephone networks to provide new applications and a range of geographical location basedservices that would be able to pinpoint a subscriber in any given locale.

In our view, the FCC most appropriately expressed its optimism with respect to WCS spectrumthrough its statement that: 1 In March 2000, Industry Canada issued Notice No.DGTP-003-2000-Proposed Revisions to the Spectrum

Utilization Policy for Services in the Band 2285-2483.5 MHz.2 This FCC Decision, Part 27, the Wireless Communications Service ( WCS) Memorandum Opinion and Order

(MOO) was associated with the GN Docket No. 96-228, released April 2, 1997.

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“The FCC’s auction of WCS licenses will help kick off an entirely new industry”.3

The WCS auction was held in April 1997 and contrary to initial expectations, generated onlyUS$13.7 million in revenues, for the 128 licenses awarded. This amount represented a tinyfraction of the $234 million in initial up front deposits and an even smaller fraction of the $1.8billion that the US Congress had estimated would be raised.

It is generally agreed that the disappointing result was due to a number of technical andoperational concerns unique to this specific auction. However, from the perspective offinancial return the result can also be seen as an indication that market participants did not havewell-developed business cases for specific applications at the time.4 To some degree, this isconfirmed if we examine the auction winners listed in Appendix A. As can be seen from theparticipation of Bell South and other PCS players, mobile applications were expected to play alarge role in the use of WCS spectrum. To date however, new mobile applications have notemerged in this band and Bell South along with other auction participants have yet to introduceany mobile services using this spectrum.

In summary, although the FCC may have reasonably expected that the reallocation of WCSspectrum in the 2.3 GHz band would drive the next generation of new and enhanced mobileservices, this has not been the case. It appears that a combination of business plan uncertainty,the technical interference guidelines imposed by the FCC and perhaps most importantly theavailability of more suitable spectrum, have all served to direct the evolution of nextgeneration mobile services towards bands other than WCS. 5

3 www.fcc.gov/wtb/wcs/wcsfctsh.html.4 It should be noted that the FCC was driven by a tight schedule imposed by Congress. Many bidders did not

have enough time to figure out how they could use the spectrum or to understand the auction process. Inaddition several companies that had paid to participate and/or who expected to spend much more for thespectrum changed their minds when new and more restrictive interference guidelines were adopted by the FCC,in a period immediately proceeding the auction.

5 According to the Strategis Report, World Wireless Broadband 2000, it is the technical limitations with regard tointerference that restrict the ability of a WCS licensee to provide mobile telephony services.

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3.0 WCS TodayToday it is clear that the FCC's auction of WCS licenses did not succeed in kicking off anentirely new mobile wireless industry, let alone one based on new advanced portablecommunication devices, exciting two way mobile data and video applications or innovativegeographical location services. Further, if we examine both the regulatory, technological andapplication evolution taking place today in the mobile wireless industry, it is obvious that withrespect to WCS spectrum at least, this is not likely to change in the future. At the same timehowever some interesting and innovative applications of WCS spectrum have started to emergein the rapidly expanding next generation network, fixed wireless environment.

3.1 Mobile Wireless Services

In the United States, Cellular Mobile Radio Service was first introduced in 1983 when 800MHz spectrum was allocated by the FCC to cellular operators. Industry Canada followed suitin 1984, also allocating spectrum in the 800 MHz range. As was the case in the United States,first-generation cellular technology allowed licensees to basically provide analog voiceservices.

As demand for digital services evolved, the FCC in 1995 allocated spectrum for personalcommunications services (PCS), to be offered in competition with traditional cellular services.The FCC allocated 120 MHz of radio spectrum in the range of 1,850-1,990 MHz. Once againIndustry Canada followed suit, also granting PCS licences to new competitive serviceproviders. In addition to digital voice services, PCS operators offer enhanced services such asshort messaging services (SMS), data services, voice mail, Caller ID, Call Return, and limitedweb browsing for such services as e-mail, stock quotes and weather updates.

Most recently, with subscriber bases growing steadily, PCS operators have requested increasedspectrum allocations to meet not only the demand for current second generation (2G) services,but also to offer, what are referred to as future 2.5 (2.5G) or third-generation services (3G).6

Globally, governments are attempting to respond to these requirements. In Canada forexample, Industry Canada has decided to license additional PCS spectrum and to expandaggregation limits so that any PCS licensee will be able to aggregate up to 55 MHz of spectrumin the 1850-1990 MHz band.7 It is interesting to note that at the time of this decision theDepartment specifically stated that future spectrum allocations for PCS would have to take into

6 Recently, carriers have begun to make a distinction among 3G technologies, preferring to refer to an

intermediate stage or 2.5G, which applies to technologies that will enhance speed and capacity, but will notnecessarily provide all of the capabilities that will be provided by 3G technologies.

7 The PCS bands 1850-1990 MHz in both Canada and the US are identical.

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account the actions of other administrations and the outcome of the WorldRadiocommunications Conference (WRC) that was scheduled to take place in May 2000.8

In addition to the debate on spectrum allocation, standards for the next generation of wirelesstechnologies (3G) and services are also currently under discussion by equipment makers,operators and governmental bodies throughout the world. These standards which are describedin Appendix B will significantly influence the timing, availability and data speeds associatedwith the specific services provided by various service providers.

Figure 1 below illustrates the various paths towards 3G mobile services technology evolutionand corresponding broadband services data speeds. 9

Figure 1: Wireless Data Technology Evolution and Timeline

The International Telecommunication Union (ITU) World Radio Conference (WRC)concluded on June 2, 2000. Following much discussion and considerable controversy it wasdecided that a multiband approach would allow the most flexibility in the deployment of 3Garound the world. The final agreement identifies the frequency bands that may be allocated fornext-generation wireless services. This includes spectrum around 1.7 GHz, currently used inthe U.S. for military applications and the 2.5 GHz band currently allocated in the for MMDSand IFTS in North America.

8 As most nations are attempting to harmonize their mobile spectrum policies for greater international

compatibility it is expected that the results of the recent WRC in Istanbul will figure prominently in the futurespectrum allocations for 3G mobile services.

9 Crédit Suisse First Boston; US Wireless Telecommunications Services;Industry Update; May 2000

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It is interesting to note that the WRC did not reference the use of 2.3 GHz for new 3G mobileapplications at all.10 This suggests that the WCS spectrum at 2.3 GHz will now evolveuniquely for fixed services, including those described by Industry Canada in its recentConsultation Notice as innovative wireless access and LAN services for the Internet.

3.2 Fixed Wireless Services

Although, mobile wireless services have not and are not likely ever to utilize the WCSspectrum at 2.3 GHz in North America the use of this spectrum for fixed wireless applicationsappears to be very different. First the fixed wireless market in general is now growing at anaccelerated pace. In a recent Strategis Report: World Wireless Broadband 2000, total annualfixed wireless service revenues are forecasted to grow by nearly 270% in 2002 and by over150% in 2001. This Report specifically references emerging growth at frequencies below 10GHz, which include in the U.S. both the MMDS and the WCS spectrum bands.

Other forecasts are also very optimistic about the growth of fixed wireless services as well.These forecasts assume growing demand for fixed wireless as an alternative to high speed T-1and ISDN lines, as well as cable modems and DSL.

Figure 2 below illustrates one forecast of projected worldwide growth in subscribers forbroadband fixed wireless services.

Figure 2: Projected Worldwide Broadband Fixed Wireless Subscriber Growth

0.20.9

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9.4

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5

7.5

10

Subs

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ers

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2000 2001 2002 2003 2004 2005

Source: Allied Business Intelligence

10 The potential allocation of spectrum at 2.5GHz is problematic in North America, given its current use for

MMDS and MCS operators. It is therefore considered unlikely that this spectrum will be used for 3G services inthe US and Canada.

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Co-incident with the rising evidence of growing market acceptance and demand for fixedwireless services, there has been increased market activity by major players such as AT&T,Sprint and MCI WorldCom. These service providers all intend to use fixed wireless spectrumto deliver integrated services to the consumer as well as the small and medium business marketsegment. This is reflected in the recent acquisition activity associated with the purchase ofMMDS property holders in the U.S. and in many cases, by extension, WCS property owners aswell.11 As a result today we see AT&T, MCI and Wireless One among the service providersusing with WCS.

AT&T

In March of this, AT&T began offering residential customers in Fort Worth Texas, high speedInternet access. The service was provided as part of a bundled service that includes local andlong-distance voice services. Known as Project Angel, AT&T promotes the service throughwhat it refers to as the nation's first wireless local communications company. According to Mr.R. Blasi, Manager, Corporate Affairs, AT&T is rolling out its Project Angel platform at thistime using 1.9GHz PCS spectrum for the wireless connection. He advised however that thecompany intends to use its WCS spectrum for the planned service rollout in the future. AT&Twill use WCS spectrum for both fixed wireless upstream and downstream applications whileretaining the PCS spectrum strictly for mobile applications. According to Mr. Blasi, AT&T isenthusiastic about the potential for WCS as their testing has been very successful and therehave been no problems with inference. In addition, Mr. Blasi indicated that to date AT&T hasfound that the WCS spectrum provides superior line of sight performance.12

To deliver the service, AT&T transmits signals between a base station and a small antennaplaced on the exterior of the customer's home, connected to a control unit inside. Up to fourphones lines are possible, and families can connect up to five PCs in a LAN. The system wasdesigned by AT&T with equipment from a variety of vendors, none of which AT&T isprepared to name at this time.

MCI WorldCom

AT&T is not the only major carrier to deploy WCS spectrum in the US. At the present timeMCI WorldCom through its ownership of companies such as CAI Wireless is using WCSspectrum for the upstream delivery of applications to its MMDS customers. It is ourunderstanding that MCI WorldCom is deploying these hybrid configurations in JacksonMississippi, Memphis Tennessee, and Baton Rouge Louisiana, with plans to expand to othermarkets using the same technology arrangements.

11 In 1999, Sprint spent over $1.2 B on MMDS properties in the U.S. including Videotron USA, People’s Choice

TV, and American Telecasting. At approximately the same time, MCI WorldCom purchased CAI Wireless andfour other MMDS spectrum holders.

12 Satellite inference has been cited as a concern by some potential service providers, particularly for marketsclose to the US-Mexican border.

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Wireless One

Another extremely interesting application of WCS spectrum is that associated with servicesplanned by Wireless One.13 The Company is an MMDS operator in 39 markets with frequencyrights in an additional 28 markets throughout the South and Southeast US. As well, WirelessOne of North Carolina, a 50% joint venture, holds additional spectrum in 13 North Carolinamarkets. In total, the Company holds radio frequency spectrum covering approximately 9.2million households. The company offers a high speed Internet access service to small andmedium size business in seven markets - Baton Rouge, LA, Memphis, TN, Jackson, MS,Columbus, GA, and Birmingham, Huntsville and Tuscaloosa, AL. Of particular interest, theservice utilizes WCS frequencies for the upstream path, providing a two-way wireless systemcapable of 10 Mbps downstream and 1.5 Mbps upstream.

Looking to the future, the company has also conducted extensive IP Telephony trials over itstwo-way broadband wireless architecture. In a recent article Mr. Ahmad Shokri, senior vice-president of operations and engineering was quoted as saying that Wireless One has combinedtwo new technologies and proved that it works. 14 According to a recent report by Strategis thetrial systems deemed successful by company executives, delivered Internet, fax and IP voicetraffic over a unified network.15

Nucentrix

Not only is WCS spectrum now on the radar screen of large Tier 1 Service Providers but alsosome of the smaller Tier 3 and 4 Service Providers in the U.S. as well. Nucentrix BroadbandNetworks is an example of a fixed wireless service provider serving third- and fourth-tiermarkets. The Company offers high speed wireless access to consumers as well as medium andsmall businesses including SOHOs. In addition to Internet access the company offers e-mail,news groups, web design and web hosting.

Nucentrix controls 200MHz of MMDS spectrum, which passes 7.2 million line-of-sighthouseholds in 87 markets, as well as 20MHz of WCS spectrum in 19 markets.

13 Note Wireless One has also recently been acquired by MCI Worldcom.14 Mr. Shokria, in an article by Nancy Gohring entitled MMDS Heats Up also indicated that Wireless One could

have used MMDS in both directions but didn’t have the spectrum at the time.15 Strategis Report April 2000; World Wireless Broadband: LMDS, MMDS and Broadband WLL.

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3.3 WCS and MMDS

Clearly a new market for WCS in the U.S. is now emerging. The market is a fixed wirelessmarket for local access services that are essentially the same as those provided using MMDS.As a complement, WCS is also being used today as a return path by service providers that findtheir existing spectrum insufficient. 16

Given its proximity to MMDS and its demonstrated ease of use from a technical perspective,WCS appears to be ideally positioned to provide wireless cable and other MMDS operatorswith the extra spectrum required to competitively deliver new broadband or Internet accessservices.

4.0 Trends Driving Broadband Access ServicesIn the past, wireless broadband applications were focused primarily on traditional networkbackhaul or dedicated point-to-point applications. Today however, fixed wireless networkplatforms are increasingly deployed to provide multi-point access for broadband applicationsfor services such as corporate data or high speed Internet access. This shift in focus reflects anumber of trends enhancing the economic feasibility of fixed wireless technologies forbroadband access services.

Technology developments are increasingly reducing costs and enabling wirelesscommunications to achieve greater spectrum efficiency and better quality of service. At thesame time the rapidly evolving demand for broadband services appears to exceed the speedwith which wired technologies can be ubiquitously employed. These factors are creating aunique window of opportunity for fixed wireless alternatives.

16 It should be noted that in Canada equivalent MMDS services are provided by service providers referred to as

either MCS or MDS operators.

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4.1 Growth of High Speed Internet and Other IP-network Based Applications

As illustrated below, the demand for high speed Internet access has soared in recent years andovertaken the growth of dial-up access. In Figure 3, the accelerated shift towards high speedaccess is clearly highlighted where the annual growth rate identified above for broadbandaccess is expected to be 80% between 1998-2003 compared to 8% for dial-up access.

Figure 3: Broadband is Driving Growth in Consumer Internet Access Spending

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Source: Forrester, 1999

While these are U.S. figures, Canada is expected to follow a very similar trend. This isreflected in the following table where as identified, high speed Internet penetration amongCanadian adults (18 years plus) is expected to be 28.1% of Internet users in 2003.

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Table 1: Canadian Adult Internet Penetration: Narrowband vs. Broadband

2000 2001 2002 2003 2004Internet Penetration (18 years +) 39.0% 45.9% 52.7% 59.6% 63.2%Annual Growth Rate 17.6% 15.0% 13.0% 6.0%Narrowband Penetration (Dial-up) - % ofInternet users 86.0% 78.4% 74.5% 71.9% 69.7%

Broadband Penetration (Cable and ADSL) %of Internet users 14.0% 21.6% 25.5% 28.1% 30.3%

Cable 13.3% 19.4% 20.4% 12.1% 12.4%ADSL 0.7% 2.2% 5.1% 16.0% 17.9%

Sources: eMarketer, IDC, Yankee Group, and PwC Analysis

4.2 The Rise of Demand for Symmetrical Traffic

The demand reflected in forecasts such as the above have traditionally assumed an everincreasing use of asymmetrical applications for most consumer and small business traffic. Ithas been generally expected that consumers will send small text messages requiring littlebandwidth and receive pictures graphics and video in return. Both ADSL and satellite Internetaccess services have assumed this fundamental demand characteristic. However if we considermany of the new and emerging high bandwidth multi-media applications and the potentialwidespread distribution of these applications by the public, then the utility of smallasymmetrical broadband pipes will become virtually obsolete. In this new environment ADSLwill not suffice and T-Is or multiples thereof will still be too expensive. Clearly there will be agap in the market for cost effective symmetrical broadband access services for consumers aswell as small and medium business users.

One of the new applications driving this trend towards symmetrical distribution is the growthof the MP3 audio file format and Internet search tools such as Napster, typically used bystudents for distributing and exchanging these files. In some cases use of Napster has createdvirtual traffic jams overloading local University networks. For example, in February 2000, theAssociated Press, reported that the University of Arizona became one of the hundreduniversities in the United States to ban Napster. At the University, since the end of December,Napster had accounted for 25 to 55 percent of the traffic on the residence computer network.

In Canada, some schools have followed suit blaming caches of MP3s for service disruptions incomputer service ranging from service slowdowns to system crashes.

Changes in traditional applications are also driving a shift towards symmetrical applications.For example, e-mail traffic, which in the past was typically text only, can now includeanimation, the distribution of jokes, often in cartoon format or with pictures. With digitalvideo cameras consumers can upload their own pictures and send them to friends and family.

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This is now being extended to video clips and even digital movies as well. We expect thatsophisticated web site design is now within the capability of consumers and small business.These users may be expected to send very large files in the creation of their applications in thefuture.

Tables 2 and 3 below list additional examples of the emerging applications that are driving thegeneral demand for high speed access today and most importantly shaping future demand forsymmetrical broadband access in the years to come.

Table 2: SME – Emerging Applications

SME- Emerging ApplicationsEmerging

ApplicationIndustry Example Example

Movie/ Entertainment Working database sharing from multiple officelocations. For example a film could be shotdigitally and placed on a database. The filmcould be downloaded from the database atanother location and edited and uploaded backon the database. This process could continuefrom various office locations. This will requiresymmetrical Internet access.

e-Business

Automotive Working database sharing from multiplelocations. Downloading and uploading large carspecification drawings. This will requiresymmetrical Internet access.

Web Casting Government Elected officials can meet without being at asingle location. This will require symmetricalInternet access.

Commercial Data Health Care Sending and receiving medical data and videosuch as X-rays, and Laproscopy surgery. Thiswill require symmetrical Internet access.

Web Conferencing Professional Service Exchanging large files during a web conference.

Remote Training Education Broadcasting interactive employee training viathe internet. There is also an emerging demandfor multiple broadcast-quality video streams.

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Table 3: Residential Emerging Applications

Residential Emerging ApplicationsEmerging Application Example

Internet TV Video broadcast via the internet.

Interactive TV Ordering videos via the internet and/or from cablecompany

Digital TV Digital broadcast Television will require increasedbandwidth.

Personal Video Recorders (PVRs) Consumer can record video, pause liveprogramming, and skip commercials.

Video on-demand (VOD) Ordering video from cable company and/or internetprovider.

Mulitservice bundles Digital TV and pay-per-view, second-line voice andenhanced voice services.

Digital Home Video Sending digital home video from a residential PCwill require symmetrical Internet access.

Digital Photography Sending digital photographs to a photo shop for hardcopy print.

5.0 Market Response ConsiderationsThere are a number of supply side considerations that are also expected to influence the fixedwireless market for broadband access services. These include the availability of alternativewireline service options, the timely availability of cost effective technologies to support fixedwireless service operators and of course the availability of scarce spectrum resources.

5.1 Broadband Access Technologies

The limitations of cable and DSL technologies to meet the needs of all residential and SOHOconsumers for broadband access are increasingly evident. In many areas demand exceedssupply or as is the case with DSL, may not be technically feasible for implementation due tothe location of the subscriber. For small and medium business TI or T-3 services are often

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available, although they are costly and not easily scaleable for bursty or occasional highbandwidth use applications.

Table 4 below summarizes the current broadband platform technologies in use in NorthAmerica today and highlights the options available for broadband access distribution.

Table 4: Broadband Platform Services

As highlighted by the above, fixed wireless technologies offer an alternative platform for thedelivery of broadband services and are increasingly being used to satisfy broadband accessrequirements. As a result both new entrants and traditional carriers are acquiring spectrumlicences for various fixed wireless frequencies, including WCS. These service providers, manyof whom are acquiring spectrum through mergers or acquisitions, view wireless in the contextof a portfolio of technologies that will collectively be used to extend a nationwide orgeographical service area, broadband access footprint for their subscriber services.

5.2 Vendor Support

As companies such as AT&T and MCI WorldCom increasingly exploit fixed wireless MMDSand WCS spectrum, it is anticipated that technology costs will decrease and functionalityenhancements will follow. It is the presence of these major service providers that PwC expectswill provide the impetus that vendors require, in order to adapt their current products anddevelop new products for this market.

At the present time there are a number of equipment vendors that develop and manufactureequipment for MMDS/WCS operators. These include vendors such as California Amplifier, acompany that designs and manufactures a broad range of microwave communication products,including MMDS and WCS equipment. The company is currently supplying WCS bandlicensees in the United States.

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Transystem International is another diversified company that develops and manufacturesproducts for fiber-optics communications, cable television and microwave communications.This company is providing transceivers and head end upstream receivers to a number of WCSlicensees in the United States.

As well, there are vendors in the marketplace such as Spike Technologies. This is a companythat not only develops and manufactures broadband wireless systems in the 2.3 GHz band butone that operates systems in the MMDS and WCS bands as well.17 Spike Technologies havestated that they are ready to introduce a new two-way point-multipoint 2.3 GHz product line.This product line is apparently based on a unique spectrum re-use design that can significantlyincrease the utility of even small increments of spectrum such as those available to WCSspectrum holders.18

These vendors are monitoring the WCS marketplace closely and are prepared to react quicklyto new demand requirements. With this level of support from the vendor community it isevident that the conditions are now in place for continued and accelerated rollout of WCS aspart of the expansion of MMDS equivalent services in North America.

5.3 Availability of Spectrum

It appears clear that the demand for broadband access is accelerating faster than anticipated orforecast even a year ago. It seems equally clear that the role that fixed wireless access willplay in satisfying that demand has also crystallized over the last 18 months. It followstherefore that not only must technology evolve to support the greater utilization of existingspectrum but also that governments in North America must make additional spectrum availableas well.

In Canada and the United States, existing MMDS and MCS operators are limited to thespectrum already allocated and today many service providers find themselves with insufficientspectrum. In Canada, the recent allocation of MCS spectrum left many applicants without thespectrum they were seeking or required to successfully advance their business plans. Whilesome operators have moved to expand their spectrum holdings through acquisitions, others arecontemplating or actively providing services using unlicensed frequency bands. Whileunlicensed frequencies carry a stigma of unreliability, in today’s spectrally restrictedenvironment these systems have increasingly attracted attention. A number of serviceproviders using unlicensed frequencies are expected to be active participants in new spectrumauctions and to migrate to licensed bands when possible in the future.

17 Appendix C provides a more comprehensive overview of the vendors discussed in this section.18 In an interview with PwC on June 9th, 2000, Mr. Christian Piorino, Marketing Manager, Spike Technologies

expressed the view that 2.3GHz products are very similar to MMDS with only minor radio changes required.

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Regulators in North America must balance competing requirements and act in a timely mannerto alleviate pending spectrum shortages that could limit the opportunities for fixed wirelessoperators. In Canada, additional spectrum is available in the 2.3 WCS and 3.4 GHz bands andcould be allocated for this purpose. In fact, in Canada, the government has already signaled itsintention to auction 3.4 GHz spectrum. Certainly making this spectrum available would helprelieve the spectrum constraints experienced by many existing and potential service providers.Allocating additional spectrum in this and other frequency bands such as the WCS band at 2.3GHz cannot help but ensure that overall demand for broadband access is met while fosteringcompetition in this rapidly emerging industry.

6.0 The Road Ahead for WCSThis Report has traced the history of Wireless Communications Services (WCS) spectrum inNorth America and explored the economic demand and supply trends driving the evolution ofnew services in the 2.3 GHz frequency band.

Since first proposed for auction in 1996 by Congress in the U. S., the allocation of WCSspectrum at 2.3 GHz has been controversial. When assigned by the FCC, it was anticipated thatin addition to fixed wireless applications, WCS would most likely be used for a wide variety ofnext generation mobile services. However, the power density limits imposed by the DARSband, immediately adjacent to the two WCS bands has made it extremely difficult if notimpossible to do so. To date, no mobile services or applications have emerged using WCSspectrum and given the most recent ITU decisions are not likely to ever do so in the future.

What has emerged however and what will likely continue to emerge is a requirement for theuse of WCS spectrum to supplement MMDS operators in the U.S. or their equivalentMDS/MCS operators in Canada. These service providers are increasingly facing a spectrumshortage, driven by a number of factors outlined earlier in this report.

MMDS operators in the U.S. are responding to the now well-established demand by theirsubscribers for bundled services, with a service set that implies not just Internet access but highspeed access as well. At the same time, this need is evolving rapidly towards a requirement forhigh speed symmetrical Internet access for both residential and business subscribers. For thesame reasons that ADSL will not suffice to meet this demand, neither will the highlyasymmetrical configurations established by fixed wireless operators be sufficient.

As a result, in the future, WCS spectrum will increasingly be used as an alternative or as acomplement to MMDS spectrum in the U.S. With technology evolving based on spectrum re-use even the relatively small bands of WCS spectrum assigned can provide significant relief tospectrum constrained service providers that wish to offer their subscribers a competitive andcost effective bundle of services that includes high speed Internet access.

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In Canada, given Industry Canada’s desire to align and harmonize spectrum frequencies withthe U.S. we would predict a similar potential use in the future for WCS spectrum, in the2.3GHz frequency band.

Appendix A

FCC WCS Auction Winners

Appendix A-1

Appendix A: FCC WCS Auction Winners

Comcast WCS Communications Inc.$50,516,344$1,479,48515 (two 10 MHz, including Indianapolis, Memphis,Tenn.; thirteen 5 MHz)2 (both 10 MHz)

PCSCO Partnership$36,350,037$1,600,0008 (all 10 MHz, including Boston, New York,Philadelphia, Pittsburgh, Washington)

BellSouth Wireless Cable Inc.$33,409,545$6,194,60818 (eight 10 MHz, including Atlanta, Tampa, Fla.,Louisville, Ky., Nashville, Tenn., New Orleans; ten 5 MHz)4 (two 10 MHz/two 5 MHz)

Metricom Inc.$25,000,000$1,447,0643 (all 10 MHz, including St. Louis, Portland, Ore.,Seattle)5 (two 10 MHz/three 5 MHz)

Omnipoint Data Co.$12,500,000$85,9919 (five 10 MHz, including Cleveland, Detroit, Chicago,Kansas City, Mo., Denver; four 5 MHz)

Bal\Rivgam L.L.C.$12,200,000$625,6025 (three 10 MHz, including Los Angeles/San Diego,Milwaukee, Minneapolis; two 5 MHz)

Appendix A-2

Triad Cellular Corp.$7,000,000$17,0612 (both 5 MHz)1 (5 MHz)

McLeod Inc.$3,005,000$44 (all 5 MHz)

Telecorp Management Corp.$3,000,000$64,8733 (two 10 MHz, including Houston, Jacksonville, Fla.;one 5 MHz)

CFW Communications Co.$1,620,000$233,0003 (one 10 MHz, Columbus, Ohio; two 5 MHz)

Appendix B

Evolution

of

Mobile Wireless Technologies and Standards

Appendix B-1

Appendix BEvolution of Mobile Wireless Technologies and Standards19

2G TECHNOLOGY STANDARDS

TDMA (Time Division Multiple Access)

TDMA is estimated to offer a three-to-one gain in system capacity for cellular systems. TDMAmakes use of a time-share concept in which one analog channel is separated into three non-overlapping separate time-based channels. As a result, a single channel has three time slotsassigned to it, enabling three separate conversations to take place. The way TDMA works isthat the signal or conversation of interest is extracted by turning the receiver on only during thetransmission of the desired signal. Hence, all users must be synchronised with the base stationto within a fraction of the time when their conversation will take place.

CDMA (Code Division Multiple Access)

CDMA is a digital cellular over-the-air interface and networking standard, which is based onspread-spectrum technology. CDMA allows multiple users to transmit simultaneously over thesame radio frequency. With CDMA, each conversation is digitized and then tagged with acode. The mobile phone is instructed to decipher only a particular code, so that it can selectthe right conversation off of the air. The process of CDMA can be compared with one inwhich a person who speaks a foreign language can pick out the only other person at a crowdedparty speaking the exact same language, while tuning out all of the other people. In a cellularsystem, a CDMA phone can evaluate all of the cell sites near it and select the best signalwithout intervention by the mobile transfer switching office or MTSO. The CDMAtechnology allows for very fast, “soft” hand-offs. (That is, the customer will likely not realizewhen he or she has changed sites because the transition is a very smooth one.) CDMA uses themost advanced networking technologies currently available. CDMA portable handsets requirelower radio frequency power requirements, which enable the phones to transmit at significantlyreduced power levels, saving battery life and increasing talk time. CDMA capacity increasesover analog are in the range of 6-10 times.

GSM (Global System for Mobile Communications))—

Initially developed to support a standard approach to digital cellular communications inEurope, the GSM protocol is now being used throughout the world in more countries than anyother technology. Although GSM has met with tremendous success throughout the world, itmade its debut in 1996 in the United States. GSM was originally not defined at the 800-900

19 The information is drawn and/or extracted from Crédit Suisse First Boston; US Wireless Telecommunications

Services; Industry Update; May 2000.

Appendix B-2

MHz level in the United States; therefore, existing carriers that upgraded their networks had toupgrade to either TDMA or CDMA. However, armed with new spectrum at the 1.8-2.0 GHzlevel, many of the larger PCS players in the United States — such as Pacific Bell MobileServices (owned by SBC), BellSouth Mobility, VoiceStream, and Powertel — now use GSM.All GSM phones have a 13 kilobyte (kbps) vocoder. GSM offers wireless providers capacitygains of three to five times existing analog capacity.

iDEN (Integrated Digital Enhanced Network))—

Although the technology was originally developed based on the fact that most SMR spectrumwas non-contiguous, iDEN technology handles a smaller amount of spectrum in a veryefficient manner and is the most widespread technology in use among ESMR operatorsthroughout the world because it allows for several services to be integrated into a singlehandset. iDEN is a two-way, digital, radio technology that makes use of low-power, multisitetransmitter/receiver configuration that permits frequency re-use. Originally developed byMotorola in 1991, the first generation was referred to by several different names, includingMIRS (Motorola integrated radio system), six-time slot TDMA, and first generation iDEN.Although based on the TDMA technology format, the first generation iDEN technology wasdifferent in a number of ways from the TDMA technology being deployed by some cellularoperators and PCS licensees in the United States. First implemented in Los Angeles in 1994,MIRS used TDMA technology to put six simultaneous conversations into one traditional 25-kHz UHF radio channel (in the 806-821-MHz band). However, this did not work well becausethe handsets originally used only a 4.2 kbps vocoder, and the company was attempting to getsix simultaneous conversations over one channel. The new iDEN technology became availableduring the second quarter of 1996, put only three simultaneous conversations on a channel, andincreased the vocoder to 8 Kbt, which has resulted in better voice quality. Nextel is still usingsix-time slot TDMA technology for the two-way dispatch function in the reconfigured iDENtechnology platform, which carries up to six voice and/or control paths per channel.

Cellular Digital Packet data (CDPD)

CDPD refers to an IP-based packet network that is essentially a data overlay onto an analognetwork. AT&T and the RBOCs have CDPD networks, but may also have the ability to run acircuit switched data solution on a CDMA network. At this point, analysts do not believeoperators would build out a CDPD network from scratch (except maybe on a limited basis insome areas) because it would be too costly and would not afford the same kind of data speedsand capacity that could be gained with other technologies; however, if one has a CDPDnetwork in place already, it will handle data applications at speeds of around 9.6-19.2kbps.

Appendix B-3

2.5G TECHNOLOGIES

General Packet Radio Service (GPRS)

GPRS is typically referred to as the 2.5 G standard for companies employing GSM, which isnot optimal for data (slow speeds of 9.6kbps). GPRS is a relatively less expensive way ofenabling a GSM network with a data overlay; GPRS is expected to be available at some pointtoward the end of 2000/beginning of 2001 and should enable speeds in the range of 115kbps.VoiceStream has talked about its intention to move to this standard when it becomes available.

1XRTT

This refers to what is essentially CDMA’s 2.5G standard, and it is expected to be availablesometime in mid-2001. This technology should enable speeds in the range of 115-144kbps.Sprint PCS and Verizon Wireless will migrate to this technology in mid-2001 when it becomesavailable.

Enhanced Data Rates for Global Evolution (EDGE)

EDGE will unite the time-sharing technologies, which are TDMA, GSM, and iDEN. GPRS hasbeen referred to enhanced CDPD, and now EDGE is being referred to as enhanced GPRS. IfGPRS is a 2.5G technology, then EDGE could be thought of as a 2.75G technology. EDGEshould allow for speeds in the range of 384kbps, and should be available in 2002. AT&Tintends to migrate to this technology, but in the meantime, will provide wireless data using itsCDPD network.

High Data Rate (HDR)

HDR is referred to as Qualcomm’s answer to EDGE. Analysts place HDR in the category of a2.75G technology as well. However, this technology is expected to provide high speeds withregard to fixed wireless applications, which could be attractive to an operator like Sprint whoalso has MMDS spectrum. HDR is expected to provide mobile data speeds in the range of384kbps, and 2.4Mbps in terms of fixed wireless. HDR should be available around 2002.

Appendix B-4

3G TECHNOLOGIES

Wideband Code Division Multiple Access (WCDMA)

There are likely to be two actual 3G standards, and WCDMA is one of them. WCDMA islikely to be in the widest use throughout the world simply because it is CDMA that isbackward-compatible to GSM. Since most of the world is GSM, it is expected that manycountries’ operators will naturally migrate to WCDMA. Additionally, carriers in the UnitedStates that have migrated to GPRS or EDGE can migrate to WCDMA because of the backwardcompatibility to GSM. WCDMA is expected to provide speeds in excess of 2MBps, and shouldbe available in 2003-05.

CDMA2000 or 3XRTT

This is the other likely 3G standard. Qualcomm developed this standard, and expects that itwill allow for speeds of approximately 2.5MBps. This standard can be migrated to by thosethat presently use first generation CDMA technology such as Verizon or Sprint PCS. 3XRTTuses a 5MHz channel and will likely support applications that are more advanced.

Appendix C

Description of Key Vendors

Appendix C-1

Appendix C: Description of Key Vendors

Manufacturers Summary for 2.3 Ghz band

Listed below are two manufacturers of WCS band two way MMDS equipment. It isinteresting to note that the current crop of transceivers only uses the 2305 to 2320 MHz portionof the band. Though, it would probably be possible to have the output band extended.

CALIFORNIA AMPLIFIER460 Calle San PabloCarmarillo, CA90312Phone: 408-844-9393www.calamp.com

Overview

California Amplifier, designs and manufactures a broad line of amplifiers, downconverters,antennas, modems and integrated products used primarily in conjunction with broadbandcommunications. The Wireless Access Products business unit produces two-way wirelesssolutions for voice, video, telephony and networking applications and provides receptionsolutions for the Wireless Cable (MMDS) industry and markets MultiCipher(tm), a proprietarybroadband encryption technology for conditional access of multichannel television systems.The Company's Satellite business unit produces reception components for DBS/DTHtransmissions as well as consumer and commercial grade products for both C and Ku bandapplications. Micro Pulse, the Company's antenna subsidiary, designs and manufacturesantenna components for a broad range of GPS and wireless applications. California Amplifierwas incorporated and began business in July 1981.

Since 1990, the company has designed products including the Beambender (a short-rangeMMDS signal repeater), a patented Yagi antenna with integrated low noise downconverter(LNBY), and MultiCipher(tm), whole-house wireless cable conditional access system.

California Amplifier has established property position in the design and development ofoutdoor electronics for delivery of video, voice and data services. Over 24 patents have beenissued or are pending, in the fields of microwave circuit design, antenna design, mechanicalpackaging for demanding outdoor environments, integration of modems into microwaveelectronics and distribution of signals to the customer premises.

Appendix C-2

Products

• Wireless access products- Stand Alone Transceivers, Planar Transceivers, and PassiveAntennas; and

• Satellite Products.

Ownership

Public Company- Trades on the NASDAQ, ticker symbol CAMP.

Broadband Wireless Positioning

The company's work in two-way wireless products began in 1994. Initial products focused onthe 2.4GHz unlicensed bands. In 1995, California Amplifier introduced the first two-wayMMDS transceiver that, in conjunction with broadband modems purchased from third parties,allowed licensees of this spectrum to offer services for high speed Internet and telephonyservices.

In 1999, California Amplifier expanded its business of providing Low Noise Block Converter -Feeds (LNBFs) for reception of DBS signals through its acquisition of the Gardiner productlines. The company is now the primary supplier of LNBFs to the U.S. DBS industry.

Manufactures MDS and MCS equipment including antennas and transceivers. Supplying both2.15/2.5 and 2.3/2.5 Ghz transceivers to a number of WCS band licensees in the United States.

2.3 Ghz Transceiver Output Specifics:

• IF Input Frequency 28.062 - 40.062 MHz• RF Output Frequency 2305 - 2317 MHz• Gain 28 +/- 5 dB• Output 1-dB Compression Point +24 dBm Min.• Power blanking input threshold -50 dBm Min

Appendix C-3

SPIKE TECHNOLOGIES

Overview

Founded in 1995, New Hampshire's Spike Technologies develops, manufactures and operatesbroadband wireless systems operating in the MMDS, WCS, 3.4 GHz to 3.7 GHz, and 5.8 GHzU-NII bands. Systems have been deployed in Venezuela and Ghana while Third-RailWireless, a subsidiary, operates an MMDS network in Nashua, NH.

Spike's PRIZM BDS is a point-to-multipoint system utilizing a proprietary sectoringtechnology to achieve 22 independent antenna sectors and a frequency reuse factor of 11.Deployed applications include voice and data as well as video services with systemdevelopment for 24 GHz, 38 GHz and LMDS bands currently underway.

Products

• Broadband Wireless Networks; and• MMDS, WCS and 3.4 GHz to 3.7 GHz Frequency Bands.

Ownership

Private

Broadband Wireless Positioning

The PRIZM BDS 2300 and 2400 systems - including base station through CPE products - arepoint-to-multipoint broadband wireless access systems operating in the WCS (2300) andMMDS (2400) bands, with plans for deployment in the 24 GHz, 38 GHz and LMDS bands.

PRIZM BDS systems are designed to provide voice and data as well as video services.System features include:

• ATM Base Station Interface;• Ethernet CPE Interface;• QPSK through QAM64 Modulation; and• Scaleable Sectorization: 4 - 22 Sectors.

The PRIZM BDS 5800 operates in the unlicensed 5.725 GHz to 5.825 GHz U-NII band.Given power constraints, the system has a range of 3 miles, covering an area of 28 sq. mi.In Nashua, NH, the Company's CLEC - Third-Rail Wireless - has been providing voice,video, data and high speed Internet access since mid-1998. Deployments in Caracas andMerida Venezuela provide broadband access and telephony while an installation in Ghanaoriginally providing ATM-bank interconnection also provides telephony and broadbandInternet access.

Appendix C-4

TRANSYSTEM INTERNATIONAL (TSI)

TSI- USASanta Clara, CAPhone Number: 805-897-9000www.transystem.com.tw

Overview

TSI is headquartered in the Science-Based Industrial Park in Hsinchu, Taiwan, It also has aregional sales office in the U.S. and China. The TSI-USA subsidiary, based in Santa Clara,California, is100% owned by TSI, Hsienchu Science Park.

TSI is a technology-based and customer-oriented international company. TSI specialises in theareas of Fiber-Optics communication, CATV, and Microwave Communication Products. TSItargets niche markets and sets its Goal on the global markets. TSI also acts as a strategicpartner in developing End-of Line monitor for CATV network application.

Products

• Integrated MMDS Down Converter;• Addressable MMDS Down Converter;• MMDS Two-Way Transceivers, including 2.15/2.5 and 2.3/2.5 GHz Transceivers;• C-Band Transceiver;• HFC Network Monitoring;• Fiber Optic Mulitiplexer; and• Antenna.

Ownership

Public

Broadband Wireless Positioning

Manufactures MDS and MCS equipment including antennas and transceivers. Supplying both2.15/2.5 and 2.3/2.5 Ghz transceivers and Head End upstream receivers to a number of WCSband licencees in the United States.

2.3 Ghz Transceiver Output Specifics:• IF Input @ 28.1 ~ 43.1 MHz• RF Output @ 2305 ~ 2320 MHz

Appendix C-5

2.3 Ghz Receivers:• 12 : Input @ 2305 ~ 2320 MHz• Output @ 28.1 ~ 43.1 MHz or other by customer specified order

Appendix C-6

VYYO

20400 Stevens Creek Blvd.Suite 800Cupertino, CA 95014Tel: 408-863-2300Fax: 408-863-2329www.vyyo.com

Overview

Vyyo is a global provider of broadband wireless access systems used by telecommunicationsservice providers to deliver wireless, high speed data connections to business and residentialsubscribers. Their systems have a point-to-multipoint architecture based o the Internetprotocol. Vyyo’s MMDS and LMDS systems allow wireless operators competing with DSLand cable modem technology to bridge the last mile.

Products

Vyyo’s systems consist of a wireless hub located at a wireless base station and a subscriberwireless modem. Each hub sends and receives data traffic to and from wireless subscribermodems. The company’s network management system manages and controls the traffictransmitted over their broadband wireless system. Vyyo’s wireless modems connect to PCs orLANs located in residences, small/home offices, and medium sized business. Using Vyyo’spoint-to-multipoint system, service providers can roll out network services quickly with aminimal initial investment and can then expand their networks by adding wireless hubcomponents & end-user wireless modems as the number of subscribers grows. In the futurethe system will provide voice and multimedia services over the same wireless spectrum.

MMDS Point-to-Multipoint Systems• V251 Wireless Modem• V3000 Wireless Hub

LMDS Point-to-Multipoint Systems• V251 Wireless Modem• V3000 Wireless Hub

Point-to-Point Wireless Modems• V245 Broadband Bridge System• V447 Broadband Bridge System• V4000/4200 Frequency Transverter Series

http://www.vyyo.com/

Appendix C-7

Ownership

Vyyo Inc. is a private company established in 1996, with headquarters located in Cupertino,California. Vyyo is incorporated in Delaware.

Broadband Wireless Positioning

Vyyo’s experience in designing shared bandwidth communications systems using TDMAtechnology is the foundation of their offering in the point-to-multipoint broadband wirelessaccess market. The company’s system architecture is IP-based to support IP communicationstraffic, and their primary systems component, the MAC, is optimized for IP traffic. Vyyo’scurrent generation systems are based on the cable industry's DOCSIS standard that have beenadapted and enhanced for use in the wireless environment.

Vyyo provides broadband wireless access systems directly to independent wireless operators,such as Sioux Valley Wireless & to system integrators, such as ADC Telecommunications,who have deployed Vyyo’s systems as part of their end-to-end network solution for broadbandservice providers. Vyyo has over 21 systems operating in the U.S., Canada & Latin America.

Appendix C-8

WAVECOM ELECTRONICS INC.

222 Cardinal CrescentSaskatoon, SK CANADA S7L 6H8Phone: (306) 955-7075Fax: (306) 955-9919www.wavecom.ca

Overview

WaveCom Electronics Inc., headquartered in Saskatoon, was founded in 1988 as a Cable TVand wireless Telecom project design company. Since that time, the company has progressed tobecome a leading designer and manufacturer of state-of-the-art products for CATV andwireless telecom markets - both foreign and domestic.

Products

MMDS/WCS Transceiver – The TR2326 is an MMDS/WCS transceiver for use in wirelesssystems. The TR2326 integrates an LNA, downconverter, upconverter, power amplifier, RFand IF diplexers to provide a one-box solution for two-way wireless communications.

28 GHz Upconverter - The TM5000 has been designed for the LMDS base station market. Itconverts L band signals to 27 to 30 GHz range and has a built-in 1-Watt amplifier. Localoscillator that phase locks to an external 100 MHz reference is an integral part of theupconverter.

31 GHz Downconverter - The RM5000 has been designed for the LMDS base station market.It converts the received 31 to 31.3 GHz signal to L-band using and XTAL lockable LO. A 4 dBnoise figure LNA is built-in.

MMDS Power Amplifier with a built-in Modulator - The MA4060B has been designed forthe 2 GHz MMDS base station market. Two channels with modulator and HPA along with therequired power supply are packaged in a 3U chassis. AMVSB and QAM modulations areavailable. Other modulations are planned.

Appendix C-9

Ownership

Private

Broadband Wireless Positioning

WaveCom's Research and Development division is committed to keeping WaveCom on thecutting edge of the CATV and telecom markets through the continual upgrading and expansionof WaveCom's product catalog. Working closely with manufacturing and marketing, R&D hasdesigned and modified products for WaveCom's many customers, including companies suchas: EarthVision Systems, Nortel Networks, Diva Systems, and Cisco Systems.

IntroductionBackground and HistoryWCS Today3.1Mobile Wireless Services3.2Fixed Wireless ServicesAT&TMCI WorldComWireless OneNucentrix

3.3WCS and MMDS

Trends Driving Broadband Access Services4.1Growth of High Speed Internet and Other IP-network Based Applications4.2The Rise of Demand for Symmetrical Traffic

Market Response Considerations5.1Broadband Access Technologies5.2Vendor Support5.3 Availability of Spectrum

The Road Ahead for WCSAppendix AFCC WCS Auction WinnersAppendix BEvolutionofMobile Wireless Technologies and StandardsAppendix BAppendix CDescription of Key VendorsMMDS Point-to-Multipoint Systems