Wireless and broadcasting industries and their regulators were caught offguard Wed. when Bush Administration seemed to propose mysterious multibillion-dollar initiative to hasten broadcasters’ departure from analog spectrum. White House buried section in tables in back of “budget blueprint,” which otherwise didn’t mention FCC or telecom issues even once. By end of day Wed., our sources still were trying to figure out exactly what policy shift was being contemplated. White House and OMB didn’t return calls for explanation. Fuller budget book with line items and explanations isn’t expected until April.
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.
While differing on some details, wireless carriers and equipment makers in comments last week urged FCC to make additional spectrum available for 3rd generation and advanced services. Among most pointed recommendations were those of equipment vendors such as Ericsson, Motorola and Qualcomm, which pointed FCC toward spectrum now occupied by federal govt. users in 1.7 GHz band as ideal for 3G. Motorola urged Commission to alter auction process so that part of proceeds could be used to help pay for relocating incumbents. In move that may require legislative change, Motorola said that would avoid pitfall of current system “where the true costs of relocating incumbents only becomes known to successful bidders after the auction.” Several commenters stressed need for FCC to make more spectrum available on faster timeline than that laid out under several agency proposals.
Dept. of Defense (DoD) and wireless industry remain apart on some technical issues regarding how bands occupied by military users could be altered for 3rd-generation uses. Govt. and industry officials, at meeting hosted by NTIA Thurs., emphasized that analyses of bands that could be used for additional 3G spectrum were continuing, with final FCC and NTIA reports due late next month. “We still have a lot of work to do,” Motorola’s Steve Sharkey said. “We have at least an idea of where the paths to move forward are.” Meanwhile, Congressional Budget Office (CBO) raised budget projections for proceeds from FCC spectrum auctions through 2007, with rosier outlook attributed to interest in 3G.
Original C-block bidder Airadigm is awaiting answer to petition for reinstatement of its PCS licenses, which FCC cancelled after carrier missed payment after entering bankruptcy in July 1999. Petition still is pending before agency nearly one month from oral argument before U.S. Appeals Court, D.C., March 15 in litigation involving NextWave, bankrupt C-block bidder that also had its licenses cancelled for nonpayment. Airadigm has pointed out that only similarity between it and NextWave is that both are C-block bidders that entered Chapter 11 protection and missed installment payment for licenses. Because of disparities such as fact that Airadigm is offering service and NextWave isn’t, question is whether 2 carriers potentially could be treated differently by Commission. Proceeding raises complex web of legal issues for FCC, making outcome uncertain, industry observers said. At press time, item on Airadigm petition wasn’t yet circulating on 8th floor. Meanwhile, group of large carriers asked Commission to put off Airadigm decision longer, citing how circumstances had changed since NextWave litigation began.
CTIA Pres. Thomas Wheeler said Tues. that wireless carriers were eyeing 1.7 GHz spectrum occupied by military users as “first choice” for obtaining more spectrum for 3rd-generation services. He and former FCC Chmn. Reed Hundt, now senior adviser with McKinsey & Co., spoke at New America Foundation lunch on wireless spectrum shortage. Turning to 1755-1850 MHz band would add to “global harmonization” of wireless bands used beyond U.S., Wheeler said, and 2500-2690 MHz band occupied by Multichannel Multipoint Distribution Service operators would be “2nd choice.” FCC and NTIA are looking at both bands as potential source of additional spectrum for next-generation services such as 3G.
Several wireless carriers told FCC that any steps to pave way toward development of secondary wireless market should rely on simple leasing rules, not existing limits such as spectrum cap restrictions. They strongly urged agency not to apply spectrum cap or unjust enrichment rules to lease deals. One theme among smaller carriers is that leasing arrangements can give them entree to truly compete in auctions because they could use proceeds from transactions to build out markets while retaining license ownership. Commenters on notice of proposed rulemaking (NPRM) on secondary wireless markets differed on details, including how regulatory requirements of original licensee should apply to lessees.
Mark Crosby, longtime pres. of Industrial Telecom Assn., is stepping down to head Access Spectrum, separate guardband bidding unit set up last year by ITA, Motorola, others. He also will remain senior policy adviser to ITA. ITA spokesman said move was “strategic shift” designed to “make sure Access Spectrum succeeds as a healthy source of frequency coordination for ITA.” ITA “already has been molded,” allowing Crosby to concentrate on unit that as band manager paid $69 million for 19 licenses in guardband auction, spokesman said. Crosby, who joined ITA’s predecessor Special Industrial Radio Service Assn. as intern 31 years ago, has been pres. for 26 years. He will be succeeded by ITA Exec. Dir. Laura Smith, ex-FCC staffer who moved to ITA in 1998. Smith worked at FCC for 8 years in Mass Media and Wireless bureaus.
Deutsche Telekom (DT) disputed reports that timeline of proposed mergers with Powertel and VoiceStream had slipped. Spokesman in Germany said company didn’t set midyear closing target until it filed proxy statement with SEC Fri. Filing said wireless merger wasn’t expected to close until “at least” May 31. Some analysts had expected wireless transaction to close in April or even earlier after remaining regulatory hurdles were cleared, including FCC approval. Germany’s DT made offer somewhat sweeter with new provision that would increase shares VoiceStream stockholders would own by 0.75%, raising number of shares that would be exchanged for DT stock.
Look for new FCC Chmn. Powell to act fairly early in his tenure to institute measures to improve Commission’s operations, his senior adviser Peter Tenhula said Thurs. at ComNet’s annual “Town Meeting” panel moderated by attorney Richard Wiley. Asked by Wiley what regulatory initiatives Powell would undertake first, Tenhula said question was hard to answer because Powell’s first priority may be to improve agency’s operations. He said some 80% of FCC’s agenda is “reactive instead of proactive,” such as responding to petitions for rulemaking or acts of Congress, and Powell thinks agency “should be prepared to act on those quickly and efficiently.” Nearly everyone who came in to see Powell and his staff in his first week complained about “process,” such as delays in getting action or items becoming “stuck” in pipeline, Tenhula said.
In latest round in U.S. Appeals Court, D.C., involving cancelled NextWave C-block licenses, company filed reply brief this week reiterating arguments that FCC’s cancellation of licenses for missed payment wasn’t allowed under law “and is outrageous on the facts of this case.” Oral argument in Appeals Court is set for March 15. Last year, 2nd U.S. Appeals Court, N.Y., granted FCC petition in NextWave case, concluding agency had acted as regulator and not creditor when cancelling company’s licenses. NextWave has argued that 2nd Circuit’s ruling didn’t decide merits of case, which it said was left to D.C. Circuit. “In abruptly and retroactively cancelling NextWave’s licenses, the FCC disregarded its own regulations; ignored controlling provisions of the Bankruptcy Code; and repudiated more than 18 months of its own conduct, including numerous explicit statements and in-court representations that the licenses remained in NextWave’s possession,” NextWave brief said. “The FCC’s litigation position is directly inconsistent with its past statements and conduct, which repeatedly assured NextWave, its investors and creditors that NextWave was protected by the same legal rules that Congress created for everyone,” said Theodore Olson, who will argue for NextWave in oral argument. Opponents, including CTIA, AT&T Wireless, BellSouth, CTIA, Dobson Communications, Sprint PCS, Verizon Wireless and VoiceStream, filed brief Jan. 24 weighing in on side of FCC. They argued that court lacked jurisdiction “because NextWave failed to preserve any challenge at the Commission to the automatic cancellation of its licenses.” They also contended that 2nd Circuit already had concluded that U.S. Bankruptcy Code couldn’t “trump” regulatory purview of FCC to condition licenses on timely payment. “This case is about an entity that entered an FCC auction knowing full well it would have to pay the price if it won and then simply did not pay -- hiding instead behind the bankruptcy laws,” opponents said. Meanwhile, speaking at Comnet Conference & Expo in Washington Thurs., Verizon Wireless CEO Dennis Strigl, said one reason carrier praised FCC decision Wed. to postpone 700 MHz auction until Sept. was that by then court was expected to have ruled on NextWave case. By time Aug. filing date comes around for auction, “we should know the answer to that litigation,” he said. Verizon Wireless was by far largest winner of licenses in just- completed PCS auction, for which most of spectrum up for bid came from cancelled NextWave licenses. Results of auction are conditioned on outcome of litigation, so if NextWave ultimately prevails in court, it would win back licenses that were up for auction.