Wireless equipment-makers and carriers stressed to FCC that more than 90 MHz earmarked in recent NTIA report for 3G is needed by industry, with several urging policy-makers to find way to clear 1755-1770 MHz now used by Defense Dept. In Bush Administration 3G viability assessment released last month, DoD agreed to clear most of 1710-1755 MHz but said freeing 1755-1770 MHz wasn’t tenable by 2008. NTIA Dir. Nancy Victory said this means that last 15 MHz is off table for “foreseeable future” (CD July 24 p3). But with varying degrees of urgency, numerous commenters told FCC decision is needed on pairing 1755-1770 MHz with block of spectrum in 2.1 GHz band, such as 2155-2170 MHz. Meanwhile, other industry segments that would be affected by relocations to make way for advanced wireless services at 1.7 GHz and 2.1 GHz also made case to FCC. NAB and Assn. Maximum Service TV (MSTV) urged that relocation of certain DoD operations to Broadcast Auxiliary Service spectrum at 2025-2110 MHz not diminish BAS operations. Mobile satellite service (MSS) operators cautioned against clearing entire 2110-2170 MHz for 3G services or using 1990-2025 MHz as relocation spectrum for displaced MDS operators.
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.
Qualified bidders for Aug. 27 auction of licenses in lower 700 MHz band made $64.5 million in upfront payments, down from nearly $154 million before Congress scaled back auction and allowed participants to opt out of competition for licenses, FCC said late Wed. Earlier this summer, Congress delayed June 19 date for upper and lower 700 MHz auctions. Bidding for smaller C- and B-block licenses in lower band was delayed until at least Aug. 19, with FCC ultimately setting Aug. 27 date for that remaining auction. New auction date for rest of spectrum hasn’t been set. Law stipulated that only bidders that could participate in remaining lower 700 MHz band auction this summer were those already qualified to take part in original lower band bidding. Based on that law, FCC Wireless Bureau allowed previously qualified bidders to leave auction altogether and receive return of down payments. Bidders choosing to stay could select additional licenses and supplement upfront payments. Based on original block of licenses that had been part of lower 700 MHz auction, including larger A-, B- and E- block licenses, Council Tree Wireless had made original upfront payment of $40 million, matched by Spectrum Holdings with same amount. Council Tree’s upfront payment, according to FCC public notice released Wed., has been revised to $6.5 million. Spectrum Holdings now has upfront payment totaling $10,000. Based on revised list of qualified bidders, highest upfront payment still is that of Council Tree. Of 125 remaining qualified bidders who chose to stay in lower band auction, only 12 made upfront payments exceeding $1 million, including Paul Allen-backed Vulcan Spectrum, $1.5 million, and Omega Communications, $3.3 million, compared with $18.9 million in original lower 700 MHz band application. Among authorized bidders for Omega is Mario Gabelli, chmn. of Gabelli Asset Management, whose media holdings have included stake in Black Entertainment TV. Spectrum Holdings, whose upfront payments went from $40 million to $10,000, had petitioned FCC for reconsideration of decision to allow previously qualified bidders to select licenses to pursue other than ones originally identified in their applications. Spectrum Holdings had filed petition for reconsideration, which recently was rejected by Wireless Bureau, at around time of July 3 deadline for seeking return of upfront payments.
U.S. Appeals Court, D.C., turned down request by Verizon Wireless to accelerate schedule of its challenge to FCC decision to retain small amount of deposits from Jan. 2001 NextWave re-auction and to hold carriers to their bid obligations until pending U.S. Supreme Court case plays out. On Fri., D.C. Circuit set out schedule that included Nov. 22 filing date for appellant brief, Dec. 9 for friend-of-court brief, Jan. 8 for FCC brief. Final briefs are due Feb. 27 and oral argument remains scheduled for April 15, 2003. Court granted permission for Salmon PCS, which has some financial backing from Cingular Wireless, to file friend-of- court brief. Verizon Wireless had filed motion, unopposed by FCC, to expedite court proceedings at D.C. Circuit, so final briefs would be filed by Aug. 30, with oral argument soon after that. Verizon Wireless had sued Commission earlier this year in D.C. Circuit and Court of Federal Claims over pending NextWave license obligations. In Court of Federal Claims, U.S. govt. has sought additional time, until Aug. 26, to respond to Verizon’s complaint, which was filed in April. Govt. already had received 60-day extension from June 4, making its response due today (Mon.). Verizon told Court of Federal Claims on Fri. that it opposed anything other than 2- week extension of time for agency to file. “We understand -- contrary to our expectation when we stated our nonobjection to a 14-day further enlargement -- even on August 26 the United States plans to file only a motion to stay proceedings, rather than a response that joins the issues in this action,” Verizon told court. Verizon reiterated its concerns that it must pay full $8.4 billion in its NextWave re-auction obligations if FCC ultimately prevails in Supreme Court appeal in reclaiming disputed PCS licenses from NextWave. “The FCC’s threat to require Verizon Wireless to pay the remaining $8.4 billion on 10 days’ notice freezes Verizon Wireless from taking the steps it would otherwise rationally take to meet its need for more spectrum to serve its growing business,” carrier said. “The licenses it sought to buy in the auction contract are unavailable because the FCC cannot deliver them.” In its filing at D.C. Circuit, FCC said it was seeking until Aug. 26 to file motion to stay proceedings, partly because there were 3 “procedurally complicated,” related court actions pending before D.C. Circuit, Court of Federal Claims and Supreme Court. Govt. said delay also was warranted because of high degree of coordination needed among and within Justice Dept. and FCC. Govt. said “Verizon’s action in this court is only the latest in a long series of litigation maneuvers which Verizon has undertaken in multiple fora,” which are tied to upcoming Supreme Court proceedings and D.C. Circuit decision. Supreme Court has scheduled oral argument for Oct. 8.
FCC Comr. Copps, speaking at first of 4 workshops being held by agency’s Spectrum Policy Task Force, said Thurs. he would like Commission to move quickly to notice of inquiry on potential policy changes once group released report in fall. “These are new times and we need new thinking,” he said at start of day-long workshop, which focused on unlicensed spectrum and experimental licenses. “I think the problems in the last 12 months demonstrate the cracks in our system and demonstrate that we need all the help we can get. There are insufficiencies in our auction process and they have become quite manifest over the course of the past 12 months.” Industry experts wrestled with how FCC could encourage innovation in unlicensed bands without either creating “free- wheeling” environment for interference or overly protecting incumbents from new competition. Several wireless developers urged FCC to facilitate set of protocols or etiquette rules, similar to ones that helped Internet develop, to address increasing use of unlicensed spectrum, which some panelists referred to as creating potential “meltdown” in certain crowded bands. Few panelists, however, called on FCC to provide new spectrum for unlicensed uses, with several experts pointing to ability of technology to develop more efficient uses for Part 15 and other unlicensed bands.
ICO and Globalstar technical proposals to use ancillary terrestrial component (ATC) with satellite systems are nothing more than plans to deploy 2 separate, plain vanilla mobile satellite services, AT&T Wireless said in ex parte filing at FCC Fri. “Although the prospect of obtaining spectrum for free can engender many promises,” it said, “before the Commission devalues previously auctioned spectrum and becomes a party to a massive public giveaway, it should carefully scrutinize whether the promises hold any water.”
FCC Wireless Bureau rejected challenge to revisions it made in lower 700 MHz auction procedures, saying statutory- mandated changes didn’t amount to new bidding rules under Sec. 309(j) of Communications Act. One of largest lower band bidders, Spectrum Holdings, petitioned FCC for reconsideration of decision to let previously qualified bidders select licenses to pursue other than ones originally identified in their applications. To select additional licenses, bidders must have provided information to FCC by July 26, with supplemental upfront payments due in same time frame. Legislation Congress passed in June indefinitely postponed most of 700 MHz auctions set for June 19, with exception of moving smaller C- and D-block bidding in lower band to date between Aug. 19 and Sept. 19. Law stipulated that only bidders that could participate in remaining auction were those that qualified to take part in original lower 700 MHz band auction. Bureau allowed qualified bidders to leave auction altogether and receive return of down payments and those that remained to select additional licenses and supplement upfront payments. Spectrum Holdings contended that part of notice that allowed selection of additional licenses and augmenting of payments violated Sec. 309(j) of Communications Act, which mandates that Commission allow adequate period before bidding rules are issued to permit notice and comment on proposals. In order released late Thurs., bureau said it previously sought comment on process of having qualified bidders set initial maximum eligibility by selecting licenses and making upfront payments. That procedure wasn’t changed in revised public notice, it said. “Rather the bureau merely modified the deadlines by allowing qualified bidders to select additional licenses and make supplemental upfront payments within a specific time period.” Bureau said: “These modifications do not amount to the issuance of new bidding rules within the meaning” of Sec. 309(j). It said its use of notice and comment period when creating mechanism for initial bidding eligibility didn’t require further notice and comment “before the bureau modifies deadlines for selecting licenses or submitting upfront payments, when other relevant concerns make such modifications appropriate.” Law itself that postponed most of 700 MHz auctions, except for licenses up for bid next month, doesn’t “limit the pre-existing discretion” that FCC has under Sec. 309(j) to modify dates for selecting licenses and making payments without comment, it said. “Recognizing that the bureau needs flexibility and discretion in this area in order to respond to changed circumstances and conduct an orderly auctions process, the Commission has granted the bureau broad authority to administer competitive bidding procedures,” order said. It reiterated bureau position that procedural changes were needed because bidders qualified to take part in original 700 MHz lower band auction couldn’t have anticipated changes in subsequently passed legislation when they made initial upfront payments. “The removal of 3 of 5 originally available license blocks significantly changed the availability of lower 700 MHz band spectrum licenses for the near future,” bureau said. “In light of the extraordinary changes in Auction No. 44 required by the Auction Reform Act, permitting qualified bidders to select additional licenses and supplement upfront payments may be the only way to permit a party that currently most highly values a particular license to bid on and win it in the auction, thereby promoting statutory objectives.” Thomas Jones, who heads Spectrum Holdings, said company still disagreed with FCC’s interpretation of law, but said company hadn’t made decision on whether to pursue legal action.
Bush Administration Tues. released long-awaited 3G viability assessment under which Defense Dept. agreed to clear most of 1710-1755 MHz but said freeing additional 15 MHz beyond that was untenable between now and 2008. Result is that report finds way to clear 90 MHz of spectrum for advanced wireless services at 1.7 GHz and in 45 MHz of 2110- 2170 MHz, which is occupied by nongovt. users. That’s less than 120 MHz that NTIA and other Executive Branch agencies had left on table last fall for 3G evaluation, after taking 1770-1850 MHz occupied by DoD out of consideration following Sept. 11 attacks (CD Oct 9 p3). While spectrum is less than originally sought by industry, private sector and govt. officials at Commerce Dept. briefing touted outcome as providing certainty that allocation decisions and auction could be held in 2004-2005 time frame. Also Tues., Commerce Dept. released draft bill to create spectrum relocation fund to pay incumbent govt. users for relocating and modernizing equipment. Commerce Secy. Donald Evans said 3G assessment strikes “a necessary balance between our country’s economic growth and national security, as well as public safety.”
FCC Comr. Abernathy, in speech in San Diego, stressed importance of Commission’s secondary markets proceeding as “an essential piece in our future spectrum policy.” Abernathy spoke Sat. to FCBA Seminar West on future of FCC’s licensed spectrum policy, following speech she gave last week on unlicensed spectrum issues. “We must have secondary markets that will withstand judicial scrutiny if the property-like rights-driven model is to succeed,” Abernathy said. “We must overhaul the antiquated Intermountain Microwave test, we must speed spectrum transactions that do not raise competitive concerns and we must facilitate spectrum leasing.” Intermountain test refers to 40-year-old case interpreting Sec. 310(d) of Communications Act for evaluating wireless ownership transfers. Case has been interpreted to mean that licensee must keep relatively tight hands-on control of licensed property, making spectrum leasing difficult. FCC announced rulemaking on secondary market policy for spectrum last year, including questions on how to update transfer of ownership evaluations to ease secondary markets. If spectrum sharing is possible, FCC “should treat the subset of rights available as a ‘virgin’ spectrum resource,” Abernathy said. That would be potential scenario for non-mutually exclusive applications, which cover spectrum that FCC doesn’t have to auction. So if domestic satellite use can be made available without harmfully interfering or creating efficiency losses to incumbent terrestrial licensee, FCC “should get those rights into the hands of commercial interests” once certain incumbency issues are addressed, Abernathy said. Among questions agency must ask on incumbents is what “bundle of rights” does current licensee have and whether incumbent holds rights to spectrum use proposed by new operator. Where sharing isn’t possible, FCC must ask whether incumbent should be forcibly moved or if proposed new rights should be granted to incumbent, Abernathy said. “When granted discretion, I begin with the presumption that relocation of incumbent service providers is complex, imposes costs on the economy, takes time and may undermine investment incentives,” she said. “Moreover, I am generally very reluctant to insert government into the marketplace on the basis of some asserted ‘better understanding’ of what is the ‘right’ service offering in a band,” Abernathy said. In cases where govt. has relatively high level of certainty that new use has higher value than current use and that incumbent “would not rationally exercise the rights if they were granted to them,” govt. may be justifiably able to forcibly relocate incumbents if there is: (1) Failure of secondary market. (2) Irrational holdout problem. (3) “Temporal urgency.” Problem of irrational holdouts “is why government has eminent domain,” Abernathy said. Point is to bar individual property holder from “irrationally’ blocking asset from evolving to its best use. “This can be a real problem even in fully functioning markets -- so the Commission should be prepared on rare occasions to step in and force a lone holdout out of a band,” she said. Agency should do that only “reluctantly” and on case-by-case basis, Abernathy said. In other cases, forcible relocation may be warranted when there is “temporal urgency,” she said. “Sometimes markets take time, and in extremely rare circumstances the Commission may need to intervene to enable some new service essential to the public welfare,” she said.
Three key rural senators wrote to FCC Chmn. Powell last week, rebuking agency for rule changes for Aug. 27 auction of lower 700 MHz C- and D-block licenses that they said ran counter to legislation that delayed Ch. 52-59 and Ch. 60-69 bidding. “Unfortunately, these modifications to the auction rules allow participants to change their original bidding intentions, and are directly contrary to the statutory language concerning Auction 44 and the intent of Congress in passing the Auction Reform Act,” said letter from Sens. Johnson (D-S.D.), Baucus (D-Mont.) and Enzi (R-Wyo.). Legislation signed by President Bush in June indefinitely delayed most of 700 MHz auctions that had been set for June 19, moving smaller C- and D-block bidding to Aug. 27 for lower band. Smaller configurations of those licenses have been particularly sought by rural carriers. Senators said in July 18 letter that “bottom line” was that legislation didn’t authorize FCC to allow bidders to increase their upfront payments or to change their short-form applications. In updated auction procedures released June 26, FCC Wireless Bureau said eligible pool of bidders for Aug. 27 auction would include carriers that had submitted qualified applications to participate in original lower band auction. It also allowed qualified bidders to select additional licenses by increasing their upfront payments.
Fire-sale values this year on wireless spectrum and equipment finally are creating financially attractive opportunities for rural telcos to lease capacity under 2- year-old FCC policies, panelists said Tues. at San Francisco convention of Organization for Promotion and Advancement of Small Telecommunications Cos. OPASTCO). They said leasing traditionally was prohibitively cumbersome to negotiate with licensees and FCC and exorbitantly expensive, especially considering network build-out. “You either own it or you can’t use it -- that was basically the situation with spectrum until quite recently,” former FCC Comr. Harold Furchtgott-Roth said. Although FCC rulemaking on secondary markets remains unfinished, the notice and related policy statement in 2000 gave regulators’ blessing to leasing, he said. He said would-be telcos needn’t worry much about lessors losing their spectrum because “typically unless something very odd happens, these things get renewed. Lawyer Caressa Bennet said risk of regulatory whiplash similarly was small. “The momentum at the FCC is to relax these rules,” she said. “Having people invested in this [spectrum leasing] makes it harder for them to do anything.” She said the FCC’s Spectrum Task Force should be encouraged to impose technology standards because excessive flexibility impeded manufacturers’ ability to reduce prices through mass production. Access Spectrum acquires capacity at auction and leases it, Pres. Mark Crosby said: “The Commission, I think, likes band management. It gets them out of some things -- licensing, compliance, ground rules -- and they get to hold one party [licensee] responsible.” He said carriers such as Winstar should be barred from leasing because they had conflicts of interest with telcos, and less commitment to leasing than specialized leasing firms such as his.