Few Surprises Seen in Dish Order Following Commission Release

"After reading this document in detail, the investment community can breathe a sigh of relief,” Wells Fargo said in a Tuesday research note. “We like what the FCC did NOT impose. There are no roaming or wholesale requirements, there are no restrictions or clawback related to a potential transfer/sale, and the FCC declined the ‘use it or share it’ clause."

More work remains. As part of the order (http://xrl.us/bn624j), the commission also approved an “Order of Proposed Modification,” which proposes that that MSS operators’ Ancillary Terrestrial Component (ATC) authority be replaced with full flexible use terrestrial authority. And the FCC released an accompanying notice of proposed rulemaking on rules for the AWS H block, which would make another 10 MHz of spectrum available for flexible use (http://xrl.us/bn6239).

The report and order recounts in some detail how the FCC got to where it is today on MSS spectrum. It recounted adoption of MSS rules for the 2 GHz band in 2000 and initial assignment of the spectrum to eight satellite operators, through the release of ATC rules three years later -- which allowed authorized MSS operators to augment their satellite services with terrestrial facilities -- to the current state of play. There’s now a recognition that “there remains little commercial use of this spectrum for MSS and none for terrestrial (ATC) service,” the order said. It acknowledged that getting more spectrum in the market for wireless broadband is critical. “A single smartphone can generate as much traffic as thirty-five basic-feature mobile phones, while tablets connected to 3G and 4G networks use three times more data than smartphones over the cellular network,” the order stated. “All of these trends, in combination, are creating an urgent need for more network capacity and, in turn, for suitable spectrum."

One of the most contested parts of the order has been what the FCC would do to limit interference to the upper H block, at 1995-2000 MHz. The order said it adopted “carefully calibrated, limited technical restrictions on AWS-4 operations in 2000-2005 MHz, the lowest five megahertz of the AWS-4 uplink band.” The order imposed increased out-of-band-emission limits below 2000 MHz, “reduced power limits for mobile terrestrial operations in 2000-2005 MHz” and added “requirements that a licensee of AWS-4 terrestrial rights or of 2 GHz MSS rights must accept harmful OOBE interference, if any occurs, from future operations in the 1995-2000 MHz band into the 2000-2005 MHz portion of the AWS-4 and 2 GHz MSS uplink bands and harmful overload interference, if any occurs, from operators in the 1995-2000 MHz band into the AWS-4 and 2 GHz MSS uplink bands."

The order acknowledged the restrictions are a negative for Dish. “DISH has stated that a required attenuation of 70 + 10 log10(P) dB below 2000 MHz would have a negative impact on operations in the AWS-4 uplink band,” the order said. “While this is correct, we seek to balance this negative impact on a portion of the AWS-4 uplink spectrum with the positive impact on the usability of the 1995-2000 MHz band, to obtain the most efficient use of both bands, and to maximize the overall public interest.”

Other restrictions are possible if harmful interference occurs after the H block and AWS-4 block are deployed. If the FCC determines “these limitations do not prevent an AWS-4 fixed or mobile transmitter from causing harmful interference, we shall, at our discretion, require the licensee of that transmitter to provide greater emission attenuation consistent with the typical treatment of Part 27 services,” the order said.

"We continue to believe the FCC action is a strategic victory for Dish, opening the door to entering mobile broadband or at least reaping spectrum benefit, but the restrictions are a tactical defeat for Dish versus Sprint, which wants to win the H block and combine it with its adjacent G block (1910-1915, 1990-1995 MHz),” Stifel Nicolaus wrote investors. Wells Fargo said the restrictions are a negative for Dish, but likely not critical. “As we have stated before, uplink spectrum is much less important than downlink,” the investment firm said. “In fact, the NPRM expressly states ‘it is not clear that the loss of some uplink spectrum would significantly diminish the utility (and economic value) of the paired AWS-4 spectrum.'"

The order adopted less-stringent build out requirements than had been proposed in an NPRM and doesn’t impose a “use it or share it” requirement. The NPRM proposed that Dish would have had to build out 30 percent of the AWS-4 spectrum in three years and 70 percent within each economic area within seven years. The FCC decided to give more leeway. The interim requirement is 40 percent coverage in four years. Rather than forfeiting its licenses if the benchmark isn’t met, the final benchmark will be accelerated from seven to six years.

"Extending the interim benchmark to four years will enable service providers and equipment vendors to deploy network infrastructure and devices based on the most advanced technologies, including the LTE-Advanced standard,” the order said. “This is analogous to the Commission’s decision in the 2012 [Wireless Communications Service] Order in which the Commission extended the proposed build-out requirements by six months to accommodate new technological developments.” The order said the FCC views seven years as a “reasonable timeframe for a licensee to deploy its network and offer widespread service.” The order noted that “no party suggested that a longer time frame would be necessary and, indeed, DISH stated that seven years is a reasonable period for a final build-out milestone."

The order also adopted a license term of 10 years for AWS-4 spectrum rights with subsequent renewal terms of ten years. “We find our decision consistent with the Commission’s adoption of ten-year license terms in most other Part 27 services,” the order said.

In another area in which the final order digresses from the wording of the NPRM, the FCC agreed to allow “de facto transfer” lease arrangements. Some commenters urged the FCC to bar de facto leasing arrangements, “arguing that it would be difficult for parties to such licenses to overcome the technical difficulties to reach workable sharing arrangements,” the order said. The FCC disagreed. “We find it in the public interest to apply the same comprehensive set of rules, policies, and procedures governing spectrum leasing arrangements between terrestrial licensees and spectrum lessees that we have adopted for other wireless spectrum bands to the AWS-4 band,” the order said. “This decision will encourage innovative arrangements and investment in the AWS-4 band."

Among other key policy calls, the FCC said it weighed various other proposals before adopting its proposed bandplan for AWS-4, with 2000-2020 MHz as the uplink band paired with 2180-2200 MHz as the downlink band. “Of the options available to us, it should enable the use of the spectrum for mobile broadband in the most expeditious and efficient manner,” the order said. “Setting the AWS-4 band as 2000-2020 MHz and 2180-2200 MHz mirrors the existing 2 GHz MSS band.”

The FCC decided that 10 MHz block sizes are optimal for LTE deployment, the order said. “We expect that use of wide, contiguous blocks of spectrum will support continued innovation and deployment of mobile broadband technologies,” it said. The “10 + 10 megahertz blocks allow for the possibility that multiple providers may make use of the spectrum (including through the operation of secondary markets), but can also be used as a single 20 + 20 megahertz block if a single operator controls both blocks in a market.”