To ensure robust competition in the wireless industry, the U.S. Government should ban the major telecommunications carriers from obtaining additional wireless spectrum and instead provide that critical spectrum to startups and new market entrants, a consumers group said Tuesday at a hearing in the U.S. Senate.

Jeannine Kenney, a senior policy analyst at Consumers Union, told senators that allowing a company such as AT&T to bid on available wireless spectrum would deal a death blow to competition in the wireless market. Ms. Kenney spoke at a Senate Commerce Committee hearing on Wireless Issues and Spectrum Reform.

She pointed out that if AT&T is successful in its proposed acquisition of BellSouth, the carrier— already the largest telephone service supplier in the country—will have sole control of Cingular, the largest wireless carrier in the U.S. (see Groups Plan AT&T Fight).

“AT&T will become far and away the largest provider of phone service and DSL, dominating the market for bundled services in local, long distance and wireless services within its 22-state market stretching coast to coast,” said Ms. Kenney.

AT&T has spent the past 18 months or so rolling out a fiber-optic network that will carry multi-channel video to compete with cable TV. Ms. Kenney believes the network will give AT&T an unassailable position as the country’s largest provider of DSL, phone service, wireless phone service, and TV service distribution.

“Its market power will dwarf even the largest cable companies,” she said. “An integrated voice, video, broadband, and wireless provider with such sweeping market control will have little incentive to discipline prices or tolerate competition.”

Competitors will have little incentive to compete with AT&T even for the price-sensitive, low-end consumer because the carrier will have the bundling power—offering packages of services—to eviscerate any new company entering the market, she said.

“The centrality of Cingular to this merger demands full congressional scrutiny of increasing signs that wireless consolidation is solidifying regional dominance, and leading toward, at best, a duopoly that will undermine robust competition and inflate prices,” said Ms. Kenney.

Intel Inside the Senate

Intel pressed the senators to adopt market-based spectrum policies that will drive the development of WiMAX, a wireless technology that promises to add a third broadband connection to the American home to compete with cable and DSL.

“WiMAX can be used to distribute signals to Wi-Fi hotspots, or it can be used as a longer-reach fixed service,” said Kevin Kahn, Intel’s senior fellow and director of its communications technology laboratory. “WiMAX has enormous potential for benefiting consumers, but it cannot fulfill that potential without spectrum reforms.”

Shares of AT&T rose $0.15 to $27.27 in recent trading, while shares of Intel climbed $0.10 to $19.83.

The U.S. has the opportunity to review how it licenses and uses wireless spectrum, in part because recent improvements in digital technology have allowed for much more efficient use of analog spectrum, but the laws have been slow to catch up.

For instance, the U.S. Senate only last year passed the Digital Transition and Public Safety Act, which governs the transition of TV spectrum from analog to digital (see Senate Sets Spectrum Standard).

The transition will free extensive amounts of spectrum that will be auctioned off to mostly commercial interests in two years. The auction of this critical, valuable commodity is expected to raise between $4 billion and $10 billion (see Consumers Rip Digital TV Law).

Naturally high-tech firms have taken a keen interest in the business of spectrum reform.

Less than three weeks ago, a powerful coalition of some of the most influential companies in high tech called on the U.S. Congress and the Bush administration to adopt a wireless spectrum policy that accommodates the growing importance of the nation’s valuable airwaves (see CEOs: New Wireless Policy).

The Technology CEO Council announced a 10-point plan it believes will help the U.S. government depoliticize policymaking regarding spectrum distribution. The group is asking the government to factor in recent technological and commercial demands on the nation’s airwaves and to try to balance those needs with the needs of emergency first responders.

The council, a 17-year-old coalition of chief executives, includes Motorola’s Edward Zander, IBM’s Samuel Palmisano, Intel’s Paul Otellini, and Hewlett-Packard’s Mark Hurd, among others. It was formerly known as the Computer Systems Policy Project.