Negotiators were closing in Thurs. on deal on NextWave’s PCS licenses, with changes in areas such as carrier payment timelines and guarantees of when spectrum tab would be paid in full. Talks continued Thurs. morning at OMB on proposal in which NextWave would be paid $9.55 billion upfront that would be secured through 2002 legislative appropriations package, industry source said. Bankrupt carrier then would net $6.3-$6.5 billion, after first level of taxes were paid. One point of contention in final rounds of talks has been how Verizon Wireless’s request for additional time to make payments would be handled (CD Oct 1 p5), sources said. Under revised terms of deal now under consideration, 2-part payment process to govt. reportedly sought by Verizon would be scaled back to one payment to be made in May, source said. Verizon Wireless would have letter of credit to guarantee its full payment in that time, mechanism that other carriers could sign on to as well. Re-auction winners would agree to keep intact total of $16 billion that was bid for NextWave licenses at auction, including $10 million in new cash for govt. as well as $3 billion on hand from upfront payments required in Jan. re-auction.
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.
FCC will be “bending the law” if it allows broadcasters to take payments from wireless carriers for vacating Ch. 60- 69, Senate Commerce Committee Chmn. Hollings told FCC Chmn. Powell in letter Wed. Hollings warned against allowing private sector to set terms of spectrum transfers, saying that law required FCC to reassign 746-806 MHz band only through auction: “Allowing industry to negotiate private marketplace deals that dictate the governance and the transfer of spectrum and to earn profits on the spectrum through such arrangements is outrageous. Such action clearly violates the standards and mandates to which the FCC is required to adhere.”
Cingular Wireless and VoiceStream Wireless signed first- of-its-kind network-sharing agreement Mon. to let former start service in coveted N.Y.C. market in mid-2002. Joint venture agreement, which carriers said didn’t require FCC approval, in turn gives VoiceStream access to spectrum in Cal. and Nev., including top 10 markets of L.A. and San Francisco. Executives of both carriers predicted venture would save “hundreds of millions of dollars” in capital expenditures and operating expenses on network buildout plans. Similar network-sharing agreements have been reached in Europe, most notably 3G pact between British Telecom and Deutsche Telekom (DT), but Cingular-VoiceStream deal marks first of such scope for U.S. Companies didn’t disclose financial terms or provide more details about capital expenditure plans related to GSM network sharing. Both Cingular CEO Stephen Carter and VoiceStream CEO John Stanton stressed in conference call with analysts that transaction didn’t signal that U.S. carriers still didn’t need spectrum relief. “Both companies were looking for a quicker way to enter more markets,” Stanton said. “Spectrum is still scarce in the U.S. and this agreement does not change our view that additional spectrum needs to be allocated.”
FCC Wireless Bureau Mon. set June 19, 2002, for start of auction of Ch. 60-69 spectrum. New date is close to June 15 auction opener that Paxson Communications had sought for bidding on 747-762 and 777-792 MHz bands. Paxson Chmn. Bud Paxson had asked FCC last month to set mid-June to allow 7 months for band-clearing efforts by wireless bidders and analog TV incumbents. In July, bureau had postponed Sept. 12 start for spectrum, marking 5th time that bidding had been delayed. Other new dates set by bureau include: (1) April 30-May 8 filing window for short-form application. (2) May 28 for upfront payments. (3) June 14 for mock auction. New auction date followed FCC’s order last month that added flexibility to earlier policy designed to ease voluntary clearing of incumbent broadcasters in upper 700 MHz band. That order granted petition of Paxson-led Spectrum Clearing Alliance that had asked Commission to give incumbent broadcasters that gave up one of their channels to accommodate band clearing flexibility to continue operating in analog mode until Dec. 31, 2005.
Motorola praised introduction of legislation last week by House Telecom Subcommittee Chmn. Upton (R-Mich.) and Rep. Green (D-Tex.) that would shorten depreciation recovery period of spectrum license fees to 7 years from 15. Spectrum licenses typically run for 10 years. Provision was part of package that also would decrease to 2 years from 5 depreciation period for computer and high-tech office equipment. “The U.S. system for licensing spectrum -- the foundation of wireless services -- needs to be reexamined and improved,” Motorola Chmn.-CEO Christopher Galvin said. “Now, more than ever, there is an opportunity to innovate and create new technologies. However, rules and regulations need to be modified in order to accelerate the benefits of these powerful services to the public.” Galvin said wireless industry bid nearly $18 billion in recent C-block re-auction “and estimates for the cost of future auctions put our high- tech sector at a competitive disadvantage with our global counterparts.” He said: “With an economic recession looming, a lot of that investment would better serve the public interest accelerating innovation, capital spending and job creation in the public sector.”
In unveiling “new plan” for 3G, Bush Administration took off table -- for time being -- bulk of 1755-1850 MHz band occupied by Defense Dept. systems that had been under consideration for advanced wireless services. NTIA, FCC, DoD and other executive branch agencies outlined revised assessment of 3G spectrum that now focuses on potential use of 1710-1770 MHz and 2110-2170 MHz. Move had been expected, particularly in light of Sept. 11 terrorist attacks that increased political leverage of DoD for fending off efforts to relocate its spectrum (CD Oct 2 p1). NTIA said late Fri. that 1770-1850 MHz band was “not part of this assessment.” Overall plan falls short of overall amount of spectrum and band that wireless industry had been targeting, although CTIA lauded extent to which development provides 3G spectrum “sooner rather than later.”
Govt. analysis of how to obtain additional spectrum for 3rd generation wireless services appears to be veering -- for now -- away from entire 1755-1850 MHz band occupied by Defense Dept. systems, several sources said. Part of what is driving renewed interest in searching more intensely for 3G spectrum elsewhere is Sept. 11 terrorist attacks that have made it easier for DoD to fend off efforts to relocate its systems, sources said. But industry observers indicated that even before attacks, momentum was building for looking at other bands, with recent FCC order removing MMDS systems from relocation consideration for 3G providing increased impetus. One govt. official said interagency talks had yielded no final decision and situation still was fluid. Agency and industry officials involved in talks have been eyeing out-of-band pairing option that would involve 1710 to around 1770 or 1780 MHz and 2110 up to 2180 MHz. Announcement by Bush Administration on revamped 3G plan is expected as early as this week, although details still are being worked out and await final approvals at top govt. levels.
Paxson Communications Chmn. Bud Paxson urged FCC to set June 15 date for 700 MHz auction. That time frame would give parties about 7 months to begin band-clearing efforts at 700 MHz “and finalize band-clearing agreements,” he said, calling date “workable.” It also would give Commission time to begin processing band-clearing requests, petitions and applications, which “will be critical to the band-clearing efforts,” he said. Paxson lauded FCC order released last month that added flexibility to earlier policy designed to ease voluntary clearing of incumbent analog broadcasters in upper 700 MHz band. Order granted petition of Paxson-led Spectrum Clearing Alliance that had asked that incumbent analog broadcaster that gave up one of its channels to accommodate band clearing should have flexibility to continue operating in analog mode and convert to DTV up to Dec. 31, 2005. In July, FCC Wireless Bureau had postponed Sept. 12 auction of Ch. 60-69 spectrum for 5th time, without setting new date.
Group of thwarted PCS license winners in FCC’s Jan. re- auction of NextWave licenses is floating settlement proposal that would give bankrupt C-block winner $5-$7 billion for spectrum. Several news reports Fri. said U.S. Treasury would receive $10 billion as part of settlement, which isn’t final. NextWave originally bid $4.7 billion for 90 licenses in 1996. Re-auction of licenses, which FCC had cancelled for missed payment, brought $16.9 billion in Jan., of which $15.8 billion was for spectrum once belonging to NextWave. In July, 5 of largest re-auction winners, Alaska Native Wireless, Dobson Communications, Salmon PCS, Verizon Wireless and VoiceStream asked govt. to approve “immediate” settlement of NextWave licenses, with starting point for talks set at $4-$5 billion. That plan would have taken part of money due from winning re-auction bidders and paid it directly to NextWave in return for its dismissing its claims to licenses. Rest of money would go to federal govt. Wall St. Journal said NextWave could receive up to $11 billion from draft settlement, although actual number in play appeared to be lower than that. “Consistent with its corporate responsibilities, it has always been NextWave’s policy to explore ideas that might lead to a consensual resolution of existing issues and allow the company to complete pending bankruptcy proceedings, and we will continue to fulfill that responsibility,” NextWave Senior Vp Michael Wack said Fri. One source said Fri. that reports of settlement talks had surfaced within days of FCC’s asking for additional time beyond Sept. 19 deadline to seek review of U.S. Appeals Court, D.C., decision that had overturned Commission’s license cancellation decision in NextWave case. Chief Justice William Rehnquist has given govt. until Oct. 19 to file petition for certiorari (CD Sept 19 p2).
Last week’s terrorist attacks appear to have dimmed prospects, for now, of wireless industry’s obtaining quick decision on relocating military spectrum users for 3G wireless. While insiders continue to stress need for additional spectrum for advanced wireless services, several told us that if nothing else, logistics of defense agencies focusing on response to last week’s attacks meant that Pentagon policymakers attention was focused elsewhere. On other hand, several wireless industry officials said key role played by mobile communications in aftermath of attacks, including final calls from passengers on hijacked planes, underscored very publicly importance of adequate wireless coverage.