Industry and govt. spectrum users agreed on need for more regulatory certainty and flexibility in govt. spectrum policy at NTIA Spectrum Management & Policy Summit Thurs. But at start of 2-day summit, panels struggled with how to define spectrum property rights, incumbent relocation, global harmonization, incentives for efficient spectrum use, accurate forecasts of future demand. FCC Chmn. Powell and NTIA Dir. Nancy Victory stressed renewed commitment of both agencies to engage in regular spectrum planning meetings. While overarching govt. goal is to develop national spectrum policy and improve spectrum management policy, Victory said NTIA was in “listening mode” to assess what was and wasn’t working under current policies. “This is clearly a significant moment in spectrum management,” she said, noting spectrum review outcome could involve changing “slightly or drastically” way bands are managed. Much of day-long discussion focused on thorny transitional issues that face govt. policymakers in areas such as how incumbents are treated when more flexible spectrum policies like sharing and leasing are introduced. “Our challenge is this: How do we fit new world-leading technologies into the U.S.’s own cramped spectrum allocation,” Commerce Secy. Donald Evans said.
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.
CTIA asked FCC to again delay 700 MHz auction now scheduled for June 19, citing “numerous contradictions and many uncertainties” that surround process. “While a June auction might be called an ‘auction,’ in reality it would be the U.S. government opening a casino and collecting the ante for a much bigger private auction to enrich broadcasters at the expense of rational spectrum policy and the welfare of American taxpayers,” CTIA Pres. Tom Wheeler wrote to FCC Chmn. Powell. Last year, FCC Wireless Bureau postponed planned Sept. 12, 2001, auction of TV Ch. 60-69 spectrum now occupied by analog broadcasters for 5th time. CTIA’s request for delay came one day after Pax TV Chmn. Lowell Paxson told reporters that if there were another delay in 700 MHz auction, there would be no voluntary clearing of that spectrum by analog TV stations to make way for nonbroadcast users (CD April 3 p5). Request also came as Cingular Wireless was floating plan to ameliorate interference issues faced by public safety users at 800 MHZ that would move those licensees to 700 MHz, necessitate delay in auction and require congressionally mandated certainty as to when broadcasters would move. FCC officials have emphasized in recent weeks that Commission is preparing for auction of Chs. 52-59 and Chs. 60-69 at 700 MHz. FCC faces Sept. 2002 statutory deadline for depositing proceeds from Ch. 52-59 auction into U.S. Treasury. In 2000, congressional leaders signaled their support for Ch. 60-69 auction’s slipping beyond statutory deadline of Sept. 30, 2000, for depositing proceeds from auction of that band. CTIA argued in its petition that Congress had given agency conflicting instructions. It has directed FCC to auction Ch. 52-59 spectrum by Sept. 30, but that deadline conflicts with Sec. 309 of Communications Act, which directs Commission to ensure parties have time to develop business plans, assess market conditions and evaluate availability of equipment for relevant services, CTIA argued. “The uncertainty of the band-clearing process does not allow carriers to properly assess market conditions and make rational business decisions,” group argued. “In situations where there is a statutory conflict such as the one that is present here, the conflict may be reconciled through reasonable statutory interpretation,” Wheeler wrote. “A reasonable interpretation of these conflicting statutes should lead the Commission to postpone both of the 700 MHz auctions to further its statutory and public interest spectrum management responsibilities.” CTIA also noted Administration’s budget proposal earlier this year would postpone 700 MHz auctions. Budget blueprint said that if upper band auction were moved to 2004 from 2001 and Ch. 52-59 bidding to 2006 from 2002, budget offset of $2.6 billion for fiscal 2002 would be provided. “The uncertainties surrounding both of the 700 MHz auctions increases the risk that the auctions will be skewed so that licenses are not awarded to the parties who value them most highly, and who will provide the services consumers most desire,” Wheeler said. Responding to Paxson’s “media alert” on possibility of another FCC postponement of auctions, Wheeler said: “Paxson’s hell-bent-for-auction attitude is so strong he objects to our filing even before it is submitted” to FCC. Broadcasters, he said, now want to use spectrum they promised to turn back “for personal enrichment by exploiting a carefully crafted legislative loophole.” Meanwhile, Cingular is proposing plan that would offer alternative to Nextel’s band reconfiguration scheme that would swap spectrum at 700 MHz, 800 MHz and 900 MHz for new capacity at 800 MHz and 2.1 GHz. Private wireless users have raised concerns about disruption to their services under Nextel plan. Cingular plan, which hasn’t been formally unveiled and is still under development, would move public safety operators to 700 MHz and put 800 MHz spectrum now occupied by public safety users up for bid, said Brian Fontes, Cingular vp-federal relations. “This plan is just a draft,” he stressed: “We are circulating it to a number of different people or groups seeking their comment.” Fontes called plan “realistic approach” to interference public safety users are experiencing at 800 MHz, saying it has benefits for commercial, public safety and private wireless users. Proposal also would require reallocation of affected spectrum for public safety and homeland security uses, he said.
Northpoint filed FCC application late Wed. to construct 2 DBS satellites and operate as satellite-terrestrial system that would make it “stronger competitor” to merged EchoStar- DirecTV DBS companies, CEO Sophia Collier said Thurs. “With a terrestrial system, we were a good competitor,” but with merged DBS companies it would be “hard for us to compete.” Despite industry speculation that Northpoint decided to integrate system because of concerns about auction, Collier said it wasn’t “a legal reason, but a business reason” that caused Northpoint to alter its business model. She said major system upgrade would allow Northpoint to increase capacity significantly, provide faster broadband service and incorporate modular set-top box architecture that would allow outside developers to offer new services once FCC approved license. Northpoint made public no details about satellites or financing, but said it would be financed by affiliates and founders.
ORLANDO -- One theme that emerged at CTIA Wireless 2002 here this week was need for more flexible federal spectrum policy, although govt. and industry officials pointed to new crop of questions raised by regulatory changes in that direction. “It’s an important concept and I congratulate the FCC for introducing it,” said Brian Fontes, vp-federal relations, Cingular Wireless. “However, I express a great deal of caution as you address the issue of flexibility that it doesn’t have the effect of reallocation,” he said on panel discussion. Flexible allocation issues have involved secondary markets proceeding at FCC, Spectrum Policy Task Force recently created by Commission and pending proceedings such as New ICO petition to deploy terrestrial services in mobile satellite service spectrum.
ORLANDO -- FCC Comr. Copps told Latin American Conference at CTIA Wireless 2002 here Wed. that U.S. and Latin America could benefit from “more consistent and more intensive dialog,” citing policy areas such as homeland security issues and cooperative efforts. On homeland security, he said making communications systems interoperable and providing for redundancy “is a challenge that faces all of us.” Conference, sponsored by Latin American Wireless Industry Assn. (Alacel) and Cibernet, focused on wireless challenges facing Latin American countries, including persistently low teledensity in some countries and sharp downturn in telecom investment. Telecom investment, which Copps called “crucial driver” of economic change, “is coming back sooner rather than later,” he said: “I think the path is beginning to turn a little bit. I think in the last couple of weeks or so there is a little more optimism.”
On issue of request by wireless carriers for more time to implement wireless local number portability (LNP), Peter Tenhula, senior legal adviser to FCC Chmn. Powell, said: “I personally believe you have to get pooling right first.” Verizon Wireless has asked FCC to exercise forbearance on Nov. 24 deadline for wireless LNP, citing challenges associated with implementation deadline of pooling on same date as porting. Other large wireless carriers have sought at least delay, and state PUCs have been urging Commission to keep deadline. Speaking on CTIA Wireless 2002 legal adviser panel Mon. on wireless LNP, Tenhula said: “We're going to go forward with that, it’s just a matter of when.” Priority should be implementing pooling correctly, because unless that’s done right, LNP can’t be carried out effectively, Tenhula said. Bryan Tramont, senior legal adviser to FCC Comr. Abernathy, said she had been on record as supporting “substantial” delay for carriers. She believes it’s in consumers’ interest and “consumer interest deserves attention,” he said. Tramont cited factors such as extent to which consumer churn has remained in wireless industry even though users can’t take their number with them when they switch carriers. Such “guideposts” point to greater consumer interest in issues such as better network coverage, he said. “We understand carriers’ concerns about doing LNP and pooling at the same time,” said Sam Feder, legal adviser to FCC Comr. Martin. Paul Margie, legal adviser to FCC Comr. Copps, said, “We are hearing from NARUC and they are hearing from consumers. I think this is something folks have known about for a long time.” On issue of spectrum cap, Tenhula said FCC had been examining potential guidelines that could be put in place on wireless merger reviews in light of cap that’s set to sunset Jan. 1, 2003. “The next step is to reach out to industry” for ideas, Tenhula said in response to question. He said that when Commission voted last fall to phase out cap by 2003 and lift it to 55 MHz in all markets in interim, it said it would consider guidelines for evaluation of wireless mergers on case-by-case basis. Economists at FCC have been looking at merger guidelines used by FTC and Justice Dept. to determine whether any of their aspects could be adapted for FCC to use when processing license transfer applications with mergers. Process still is taking shape, Tenhula said. “I don’t anticipate a need for a rulemaking process. I don’t think we are talking about substantive replacement rules. We are talking about guidelines” so industry players know what to expect, he said. On 700 MHz auction that’s scheduled for June, although Administration budget proposal would push that back again, he said FCC was preparing to hold auction on time unless Congress acted in time to change date.
ORLANDO -- NTIA Dir. Nancy Victory told CTIA Wireless 2002 show here that her agency was “on track” for completing “viability assessment” by end of spring on how to free up 120 MHz of commercial and govt. spectrum for advanced wireless uses. She cautioned: “It’s hard to know what we're going to end up with until the process is over. It may be we are not able to clear all 120 MHz of spectrum.” She told standing- room-only session here: “The idea was not necessarily to make an allocation decision.” Victory said evaluation was examining issues such as cost of relocating incumbent users and possibilities for replacement spectrum. Resulting proposal will look at “how fast you could clear it,” she said.
Citing tight capital markets, Dobson Communications CEO Everett Dobson told FCC Chmn. Powell Thurs. that Commission, by continuing to hold down payments for NextWave re-auction without interest, was “doing substantial and immediate harm to the public interest.” Dobson subsidiary DCC PCS had made $546 million in winning bids for 14 licenses in Jan. 2001 re- auction, results of which were overturned when U.S. Appeals Court, D.C., reversing FCC decision to cancel NextWave licenses for missed payment. Verizon Wireless last week also asked FCC again to “promptly” refund its entire $1.7 billion deposit from re-auction. U.S. Supreme Court agreed last week to hear oral argument in FCC’s appeal of D.C. Circuit ruling. Earlier this year, 12 winning bidders in re-auction, including Verizon and Dobson, had asked FCC for immediate refund of $3.1 billion in down payments after settlement agreement on licenses expired Dec. 31 when Congress failed to approve pact. While Verizon has sought full return of its down payment, Dobson said it believed both FCC and re-auction winners’ interests could be protected “by promptly refunding” all but 15% of each applicant’s down payments. “The Commission must be aware of the severe capital restrictions that currently face the wireless industry, many of whose members are Auction 35 winners,” Dobson wrote. Now most wireless carriers face capital market pressure to reduce leverage, he said. “Uncertain future” of NextWave spectrum means Wall St. is viewing this negatively by attributing little or no value to spectrum even though deposits are treated as expended funds, he said. “Indeed, in Wall Street’s view, the Auction 35 winners are, at this time, actually worse off for having won licenses in that auction.” Since carriers submitted joint request for return of down payments in Jan., they have collectively lost $29 million of additional interest and “unknown number of lost opportunities to expand existing services.”
FCC took first step Thurs. toward remedying interference problems for public safety users at 800 MHz by unanimously approving notice of proposed rulemaking (NPRM) that covered potential solutions. Proposal adopted at agenda meeting requested information on how much spectrum would be necessary to meet public safety needs. It seeks comments on band restructuring proposals by Nextel and National Assn. of Mfrs., as well as alternatives submitted by others. Most closely watched so far has been Nextel plan submitted to FCC last fall that would swap spectrum at 700 MHz, 800 MHz and 900 MHz for new capacity at 800 MHz and 2.1 GHz. NPRM tentatively concluded that increasing levels of harmful interference to public safety operations at 800 MHz “must be remedied.” Citing several recent moves Commission has taken to free up public safety spectrum, FCC Chmn. Powell said item showed “Commission’s redoubled commitment” to make sure users had adequate spectrum for critical needs in emergencies.
Ex-FCC Comr. Harold Furchtgott-Roth criticized Commission Mon. for not returning $3.3 billion in deposits that wireless companies such as Verizon Wireless paid for spectrum that was returned to its original owner, NextWave. Furchtgott-Roth said agency might have conflict of interest in retaining that money because interest was being paid to Telecom Development Fund, organization created by Telecom Act with board appointed by FCC. Fund gives financial help to start-up businesses using money from interest earned while auction monies, such as upfront payments, are being held by agency. Interest from NextWave deposits amounts to at least $100 million per year, assuming very low interest rate of 3%, he said. Furchtgott-Roth said there was nothing wrong with fund but it was questionable for FCC to deliberately hold onto that money, particularly since U.S. Supreme Court review of NextWave auction could delay resolution for at least year: “I don’t think there’s any doubt that [deposits] have to be returned.”