The Satellite Bcstg. & Communications Assn. (SBCA) told Congress that Northpoint wouldn’t “hesitate to dissemble and twist the facts in order to achieve its real goal of enriching itself by receiving spectrum for free from Congress.” Northpoint in a recent letter to Sen. McCain (R- Ariz.) gave information about who would benefit if Northpoint received spectrum outside of an auction. McCain later said the letter didn’t provide the requested information (CD Oct 30 p13). SBCA said Northpoint had argued repeatedly that it applied for spectrum at the same time as Hughes, but only Hughes would receive the spectrum without auction. SBCA said the statement was false: “The applications mentioned by Northpoint were not for the provision of DBS service and have, in fact, been withdrawn, meaning that Hughes will never ‘receive’ any ‘licenses’.” While certain licenses have been granted without auction, SBCA said the 500-license figure cited by Northpoint was “improperly inflated” because it included FSS applications that Northpoint wouldn’t compete against. Northpoint cited a prohibition on auctions for completely different satellite services to make its point, SBCA said, but didn’t “mention the many examples of terrestrial services like its own planned service, such as the wireless cable providers that already compete in the multichannel video program distributor (MVPD) market.” While Northpoint has cited reports claiming consumer savings of $2.78 billion annually with additional multichannel video distribution and data service (MVDDS) competition, SBCA said, it doesn’t explain why those benefits aren’t already realized through existing wireless cable services such as local multipoint distribution services (LMDS) and multichannel multipoint distribution services (MMDS). “The satellite TV industry has never opposed the emergence of these services for the simple reason that they posed no risk of electrical interference into its DBS service… Nevertheless… wireless cable has not been economically viable.” Separately, a Northpoint said EchoStar was increasing its capacity and avoiding auctions in a “crafty way” by placing programming on SES Americom’s AMC-2, an FSS satellite: “It is particularly curious that SBCA claims we misled you on the grounds that many of the 500 nonauctioned satellite licenses we cite are FSS licenses, when EchoStar is now using an FSS satellite to provide DBS service to consumers today.”
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.
Nextel criticized a waiver request by NextWave and Cingular that it said would enable Cingular to abandon obligations to pay nearly $170 million in interest on C- and F-block PCS licenses. The U.S. Bankruptcy Court, White Plains, N.Y., last month approved a $1.4 billion deal in which Cingular is buying 34 PCS licenses from NextWave. The deal leaves NextWave with a national spectrum footprint and the FCC receives $714 million. But Nextel said in a filing Wed. that under the Commission’s unjust enrichment rules, which set requirements for designated entities (DEs) that sell spectrum, Cingular couldn’t be assigned the licenses until the FCC was paid in full, including unpaid principal and all unpaid accrued interest. Nextel said that would raise the total to $884 million, including $687 million in outstanding principal and $197 million in unpaid accrued interest. “The Commission should deny this waiver request,” Nextel said. “The waiver request also flies in the face of statements by Cingular’s owners -- SBC and BellSouth -- that strenuously opposed proposals in a 1997 Commission proceeding that would have reduced the debt owed on C-block licenses.” Last month, Cingular and NextWave filed applications with the FCC to assign licenses as part of the proposed deal. The applications included a request that the agency waive parts of its unjust enrichment rules, which require DEs to pay penalties if they sell a license to a non-DE during a restricted period to compensate for advantages such as bidding credits or installment payment plans (CD Oct 1 p1). “Granting Cingular -- the second largest wireless carrier and clearly not a small business -- a waiver of these rules would do great harm to the integrity of the FCC’s auction process,” Nextel said. It urged the FCC to turn down the waiver request and condition the license transfers on Cingular’s paying the higher amount that Nextel contends is due. Nextel also said the agency should probe whether Cingular had the “requisite character qualifications” to hold the designated licenses. “As the Commission staff has recognized, in 2001 Cingular failed to cooperate in remediating serious interference caused by its operations to a public safety system,” Nextel said: “This egregious failure to address potentially life-threatening interference raises serious issues that warrant further Commission investigation.” It cited Cingular’s “failure to cooperate” in resolving interference to public safety systems in Anne Arundel County, Md., in 2002. As for what Nextel characterized as interest payments that Cingular would owe, it said rates of 6.25% to 6.5% applied to NextWave’s installment payments for the C- and F-block licenses it acquired in 1996 and 1997. Separately, Eldorado Communications and NY Telecom filed a petition asking the FCC to deny the licenses NextWave is selling to Cingular. It urged the agency to “expand the scope of this proceeding” to allow for public comment. Eldorado and NY Telecom have raised similar concerns in the past at the Commission on the transparency of proceedings involving NextWave’s licenses, including a settlement agreement among large wireless carriers, NextWave and the FCC that ultimately died. If the license transfer applications are granted, the filing said, “NextWave will walk away with more than $700 million as a result of assigning licenses originally set aside for small entities like Eldorado to one of the largest wireless carriers in the country.” A Cingular spokesman said the carrier was reviewing Nextel’s filing late Thurs. “On initial review, however, Nextel’s comments are totally without merit and appear to be motivated by Nextel’s unhappiness with Cingular’s objection to Nextel’s attempt to obtain spectrum for free through its spectrum swap scheme,” he said, citing the “consensus plan” backed by Nextel for alleviating public safety interference at 800 MHz.
Nucentrix Broadband Networks said Thurs. that Nextel was the winner in a bankruptcy court auction for its Multipoint Distribution Service (MDS) and Multichannel Multipoint Distribution Service (MMDS) licenses and other assets for $51 million. In July, Nextel also had won approval in a separate bankruptcy court for the MMDS and MDS spectrum of WorldCom for $144 million. Nucentrix said Nextel Spectrum Acquisition Corp. emerged the winner after a 2-day auction. The sale also includes certain spectrum and tower leases. The deal is subject to bankruptcy court approval. The proposed acquisition would increase Nextel’s fixed wireless holdings significantly because Nucentrix is the 3rd-largest holder of MMDS and ITFS spectrum in the U.S. Nucentrix said it held the rights to an average of 128 MHz of MDS, MMDS and ITFS spectrum covering 8.2 million households in more than 90 mostly medium and small markets in Tex., Okla. and the Midwest. The company said Nextel agreed to provide financing to fund Nucentrix’s operations as a debtor in possession under the bankruptcy code through the closing of the bankruptcy proceedings, expected in the 2nd or 3rd quarter of 2004.
A jury verdict issued Thurs. invalidated 2 patents awarded to Northpoint Technology, confirmed Northpoint and rival MDS America. Northpoint filed the lawsuit in the U.S. Dist. Court, Miami, in July 2001 and MDS filed a countersuit in Oct. (CD Oct 23/01 p8). MDS said the unanimous decision from the jury said the technology discussed in the patents “had been anticipated by articles published prior to the patent application date, but also that the technology itself was obvious to individuals of ordinary skill in the related field of work. Moreover, the jury found that similar technology had previously been used by others.” Northpoint CEO Sophia Collier said in a statement that the company intends to appeal the jury’s verdict, but the decision won’t affect Northpoint’s intent to “provide low cost competitive multichannel video and high speed data service to American families throughout the entire [U.S.].” MDS CEO Kirk Kirkpatrick said the company is pleased with the decision and it “paves the way for MDS America’s [multichannel video distribution and data service (MVDDS)] equipment to be used to provide new broadband wireless service… particularly to under-served rural areas.” Northpoint Vp Antoinette Bush said the verdict should have no effect on the “Northpoint amendments” attached to 2 Senate bills because the bills only deal with how MVDDS providers are licensed, which should be “the same way cable and satellite [operators] are licensed.” Kirkpatrick disagreed: “The whole point of this amendment is to bring service to the American public. What do they [Northpoint] bring to the table now?” Kirkpatrick said his company “looks forward to supplying MVDDS equipment to new U.S. licensees early next year.” Whether the company plans to participate in the auction will “depend on the bidding. We're still looking at acquiring spectrum for rural broadband,” he said.
Among the issues with which federal spectrum users are grappling as part of an interagency task force is whether there should be some form of Executive Branch oversight when differences arise on thorny policy issues, acting NTIA Dir. Michael Gallagher said Wed. President Bush in June created a task force to recommend how to stimulate more efficient spectrum use by federal customers. The next step the Bush directive set, which involves private sector input, will begin shortly and use the FCC’s Spectrum Policy Task Force report as a starting point, Gallagher told us.
Legg Mason said in a note to investors Mon. that FCC staffers appeared to be studying a compromise in the 800 MHz proceeding that was examining ways to mitigate interference to public safety users in the band. The firm said the plan under consideration at the agency could give Nextel less than the 10 MHz of spectrum at 1.9 GHz it had sought as part of a “consensus plan” devised by Nextel, public safety groups and some private wireless carriers. One possibility is that Nextel would get 4 or 6 MHz instead, perhaps at 1.9 GHz or maybe elsewhere, Legg Mason said. “In addition to giving Nextel less than the 10 MHz of spectrum that it seeks in the 1.9 GHz band, we believe the Commission is likely to require Nextel to increase its commitment to fund the relocation of public safety and private wireless operators in the 800 MHz band, either by placing a larger amount of money in escrow early on or agreeing to fund additional costs if necessary, or both,” it said. While cautioning that the proceeding still was being finalized, Legg Mason said the “latest staff leanings” would be good news for Nextel and the company probably would accept such a compromise. Nextel had said it submitted its plan to the FCC as a whole package, including the funding portion, but officials in recent weeks haven’t said how they would react if the FCC were to give them something less than what they wanted. One complicating factor for the FCC is that if it were to give Nextel up to 6 MHz at 1.9 GHz as part of a swap arrangement, “this may foreclose auctioning off the so-called G-band, which the wireless industry has sought to supplement its PCS services. This may mean that the FCC will look elsewhere for replacement spectrum for Nextel,” Legg Mason said.
The wireless lobby is pushing for a Senate amendment that would delay local number portability (LNP) past Christmas, the Consumers Union (CU) charged. It said the wireless industry was trying to include an amendment to the Senate Commerce Justice State (CJS) appropriations bill (S- 1585) that would delay the implementation of LNP for 60 days past the current Nov. 24 deadline. “This move is particularly disingenuous for the companies who have publicly told their customers they are prepared for November 24th while they are privately negotiating eleventh-hour deals to stave off competition,” CU CEO James Guest said: “Our question is simple: What are they afraid of? Competition?” CU said the amendment was an attempt to lock in customers to long-term contracts during the busy holiday season. However, it remained unclear whether the CJS bill would make it to the floor as a stand-alone bill. The Senate has several appropriations bills yet to consider and CJS has several controversial communications amendments already, including the 35% broadcast ownership cap and giving Multichannel Video Distribution & Data Services (MVDDS) access to spectrum without going through the FCC’s auction process (the so- called “Northpoint Amendment"). But Senate Commerce Committee Chmn. McCain (R-Ariz.) has dropped a hold on the bill, clearing it for the floor at any time. It still was unclear whether CJS would have to be wrapped into an omnibus appropriations bill, which sources said could be more difficult to amend. On Tues., several senators wrote the FCC praising the implementation of LNP requirements, but also expressing concern that the Commission hadn’t given proper guidance on wireline-wireless porting issues (CD Oct 29 p8).
The FCC issued rules Thurs. for the 1710-1755 MHz and 2110-2155 MHz spectrum bands, which it determined in Nov. 2002 could be used to offer an array of 3G services, including wireless broadband Internet access. The new rules include provisions for application procedures, licensing, technical operations and competitive bidding. “What we have done in the order is build a creative framework, so we will try to maximize the flexibility available to licensees in these bands,” FCC Wireless Bureau Chief John Muleta said. The FCC said the spectrum would be licensed by geographic areas under the Commission’s flexible, market-oriented Part 27 rules, and would be assigned by competitive bidding.
The FCC voted at its agenda meeting Thurs. to allow use of spectrum in the 71-76 GHz, 81-86 GHz and 92-95 GHz bands for commercial services such as high-speed, point-to-point wireless local area networks (LANs) and broadband Internet access. Those spectrum blocks, now used mainly for govt. and scientific purposes, are “well-suited for licensees to offer a broad range of innovative products and services,” the agency said.
GENEVA -- Although some European wireless carriers still are recovering from the hangover of 3G auctions that cost close to $100 billion, the message of operators and regulators at the ITU Telecom World 2003 show here is that full-blown next-generation services still are coming, just more slowly than expected.