Additional money to fully fund the FCC’s Secure and Trusted Communications Networks Reimbursement Program and a short-term extension of the FCC’s expiring spectrum auction authority both remain under consideration as additions to a planned continuing resolution to extend federal appropriations past Sept. 30, but talks remain highly fluid, lawmakers and lobbyists told us last week. Senate Commerce Committee ranking member Roger Wicker, R-Miss., Communications Subcommittee Chairman Ben Ray Lujan, D-N.M., and other committee leaders left open the possibility of a short-term auction authority renewal as a stopgap, telling us they hadn’t reached a deal during the August recess on a broader spectrum legislative package.
Wireless Spectrum Auctions
The FCC manages and licenses the electromagnetic spectrum used by wireless, broadcast, satellite and other telecommunications services for government and commercial users. This activity includes organizing specific telecommunications modes to only use specific frequencies and maintaining the licensing systems for each frequency such that communications services and devices using different bands receive as little interference as possible.
What are spectrum auctions?
The FCC will periodically hold auctions of unused or newly available spectrum frequencies, in which potential licensees can bid to acquire the rights to use a specific frequency for a specific purpose. As an example, over the last few years the U.S. government has conducted periodic auctions of different GHz bands to support the growth of 5G services.
T-Mobile, as expected, dominated the 2.5 GHz auction (see 2208300021), winning 7,156 licenses for $304.3 million, covering 2,724 counties, the FCC announced Thursday. But T-Mobile wasn’t the only bidder -- the FCC said 63 bidders won a total of 7,872 licenses. The auction had gross proceeds of $427.8 million. Among other large carriers, Cellular South bid $11.9 million for 38 licenses. Verizon won nine licenses for $1.5 million. AT&T and Dish Network didn’t get any licenses. AT&T had made an upfront payment of only $1,000, versus $20 million by Verizon and $25,000 by Dish. PTI Pacifica was the second-highest bidder, at $17.7 million. TeleGuam Holdings bid $16.6 million for the mid-band spectrum. By number of licenses won, the No. 2 bidder was North American Catholic Educational Programming Foundation, with 107, followed by Evergy Kansas Central with 54. “This really was T-Mobile’s auction,” Recon Analytics’ Roger Entner told us: “Everyone else either got the scraps that T-Mobile didn’t want or watched how it unfolded.” Down payments by winning bidders are due Sept. 16, final payments Sept. 30, the agency said. The FCC’s auction authority expires Sept. 30, absent action by Congress. “With most of the available spectrum in the 2.5 GHz band located in rural areas, this auction provides vital spectrum resources to support wireless services in rural communities,” the FCC said.
On one of the big spectrum inquiries of the summer, most commenters agreed the FCC can do more to address spectrum offshore needs, though there was little consensus on what the agency should do. One big area of disagreement is the role unlicensed should have. Replies were due Friday on a notice of inquiry commissioners approved 4-0 in June (see 2206080055) and most were posted Monday in docket 22-204. In initial comments, carriers urged caution (see 2207280032).
Backers of a bid to fully fund the FCC’s Secure and Trusted Communications Networks Reimbursement Program believe appropriations legislation, including a likely continuing resolution to extend federal payments past Sept. 30, is the most viable vehicle for formally allocating the additional money, due to concerns about delayed action on the House-passed (see 2207280052) Spectrum Innovation Act (HR-7624). Senate Commerce Committee leaders are grappling during the August recess with how to respond to HR-7624, which would allocate some proceeds from a proposed auction of the 3.1-3.45 GHz band for rip and replace reimbursements, given disagreements on spectrum policy priorities (see 2208090001).
The Joe Biden administration could be poised to take an action the Donald Trump White House tried but wasn’t able to complete and release a national spectrum strategy, industry officials familiar with the administration’s work on the issue told us. That follows what could be key meeting in May at the Aspen Institute. FCC Chairwoman Jessica Rosenworcel and NTIA Administrator Alan Davidson participated in the two-day session, which focused specifically on a national strategy.
Senate Commerce Committee Chair Maria Cantwell, D-Wash., and other panel leaders are hopeful they can use the August recess to negotiate a deal on a spectrum legislative package before Congress returns after Labor Day, or at least decide whether to seek a stopgap FCC spectrum auction authority renewal in hopes of reaching a consensus later. Panel Democrats and Republicans divided along party lines (see 2208020076) during a Communications Subcommittee hearing last week on whether they back the 18-month authority extension included in the House-passed Spectrum Innovation Act (HR-7624).
T-Mobile plans to buy 600 MHz licenses it has been leasing from Columbia Capital for $3.5 billion, the carrier said in an SEC filing. The deal requires approvals from regulators, including the FCC, but is expected to get them easily, especially since T-Mobile is already using the spectrum covered by the leases. The first stage of T-Mobile’s 5G build used its 600 MHz spectrum. T-Mobile Chief Financial Officer Peter Osvaldik said at a financial conference Tuesday the company doesn’t expect the deal to close for at least a year.
Senate Commerce Committee Democratic and Republican leaders divided along party lines during a Tuesday Communications Subcommittee hearing on their preferences for extending the FCC’s spectrum auction authority, the dominant focus during the panel, as expected (see 2208010030). Communications Chairman Ben Ray Lujan, D-N.M., strongly backed a longer-term renewal than the House proposes in its Spectrum Innovation Act (HR-7624). Commerce ranking member Roger Wicker, R-Miss., and Communications ranking member John Thune, R-S.D., back HR-7624’s proposed 18-month renewal.
Major U.S. tower companies, buoyed by the ongoing 5G buildout, had positive Q2s, in contrast with major wireless carriers, with AT&T and Verizon both navigating rough waters during the quarter (see 2207270054). SBA Communications, the last of the big three tower companies to report, released results Monday.
The FCC’s 2.5 GHz auction started slower than other recent 5G auctions and had little upward movement Monday, after three rounds. The auction hit $115.3 million Monday, after opening Friday at $103.5 million (see 2207290045). “Demand at the start of this auction is very tepid, with excess demand as a percentage of aggregate demand starting at roughly 37%, which puts this auction at the low end of prior auction starts,” blogged Sasha Javid, BitPath chief operating officer, about the start of the auction. “Perhaps this slow start is not surprising,” he said. “This 2.5 GHz auction is far from a typical spectrum auction.” The FCC is selling overlay licenses, which means many winners will have to negotiate with educational broadband service incumbents “if they want to use their entire license,” Javid said: “By my estimate over 80% of the MHz-POPs in these overlay licenses are encumbered (including both incumbents and all pending tribal licenses). This could explain why both Los Angeles and Cook County (Chicago), the two most populated counties in the country have demand below supply at the county level.” Another factor, some 27.5% of the U.S. doesn’t have any licenses available for sale, he said. “This is because the FCC decided against selling overlay licenses in any county where every category of license was fully-encumbered when measured by area,” he said. T-Mobile holds long-term leases with most incumbents EBS licensees and “has an information asymmetry advantage over other auction participants. … Because these leases are confidential, other bidders will not know how long they may be precluded from accessing or re-leasing parts of their licenses currently encumbered by these T-Mobile leases.” New Street’s Jonathan Chaplin predicted in a weekend note to investors the auction will likely hit $3.4 billion, less if Congresses approves a 15% book alternative minimum tax on spectrum licenses (see 2204050083). He predicted the auction will likely end in September. “We have a long way to go,” Chaplin said: “The spectrum is useless to Verizon, AT&T and Dish [Network]; their only interest in the auction is pushing up the cost for T-Mobile. Smaller carriers and [wireless ISPs] may actually have a use for some of the licenses, but these companies won’t have the resources to outbid T-Mobile for any licenses that T-Mobile views as important." But Digital Progress Institute President Joel Thayer noted widespread interest in bidding. “It's a credit to the FCC's ability in shepherding this proceeding along and I'm glad to see that we are going to unleash 2.5 GHz,” Thayer emailed: “This auction is particularly going to be helpful for T-Mobile to be an even stronger alternative to the ‘big two,’ which is great for consumers.” Thayer sees Verizon and AT&T as potentially more interested in 12 GHz, a band being looked at for 5G. Two more rounds are on tap Tuesday.