Small Carriers Say Offering Smaller Spectrum Licenses Key to Success of Incentive Auction
Small carriers led by the Competitive Carriers Association are pressing the FCC to approve small spectrum licenses in the rules for the incentive auction of broadcast-TV spectrum, CCA President Steve Berry told us. He said most CCA members view economic area (EA) licenses as too large and believe some of the spectrum should be offered in the smallest license size generally sold by the FCC: cellular market area (CMA) licenses.
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CCA recently decided to adopt a position in favor of CMAs over EAs, Berry said. The FCC’s October NPRM noted the advantages associated with EA licensing. In the 700 MHz auction, the FCC offered EA and CMA licenses as well as much larger regional economic area grouping licenses.
"If we keep the auction to small geographic areas so that small carriers and everyone can bid on it, then I think you're going to get the highest value,” Berry said. “If all carriers had to bid for spectrum licenses based on EA’s, the small carriers would have to bid on spectrum blocks that are five times larger than their current network footprint. In other words, they would have to bid and win in areas they have no intention or capability of serving. This is equivalent to a regulatory execution of the small competitive carrier. If not corrected, this one FCC action of neglect could halt mobile high-speed broadband build out in rural America.”
Berry said it’s possible to sell both EAs and CMAs in the auction, but that would require additional work and additional modeling on the part of the FCC. “If you don’t have CMAs in there, you won’t have many regional and rural carriers being able to go to 4G LTE and be able to sustain a business model for very long,” he said. “And I can tell you the new chairman of the FCC will understand it immediately.” Berry was a top lieutenant for Chairman nominee Tom Wheeler when he was president of CTIA.
Ron Smith, CEO of Bluegrass Cellular, said small carriers are unlikely to bid in the incentive auction unless the FCC offers CMAs. “EAs are such a large size that they really preclude the smaller carriers from participating,” he said in an interview. “If we're focused on trying to provide broadband to all of America, the rural carriers ... and new entrants that may be able to do that, are not going to be able to do that when you have to purchase an EA level of spectrum.” EAs can be part of the auction “but don’t preclude CMAs that are the lifeblood of the small carriers,” he said. Smith said small carriers across the U.S. agree. “I think it’s universal,” he said. “I don’t know of any small carrier where an EA makes sense.”
Bluegrass Cellular has served a market located between major cities in Kentucky and Tennessee for 20 years, Smith said. “Under an EA concept, the only way I can serve my established rural area is to buy Louisville, Lexington and Nashville,” he said. “I don’t have the infrastructure in place to serve that. That is a dollar amount for a small carrier that goes beyond what makes economic sense for us to do.”
EAs and CMAs both have a long history at the FCC. EAs are larger, covering entire metropolitan areas. CMAs are much smaller licenses. For example, the state of Hawaii is made up of four CMAs for each of the major islands, and one EA. The FCC first offered EAs in 1997, in the 800 MHz Specialized Mobile Radio Service auction. It first offered CMAs in 1994, in the Interactive Video and Data Services auction. A commission map of EAs is at (http://bit.ly/18Wwpyu), of CMAs at (http://fcc.us/11yhlyE).
In a recent Senate Commerce Committee hearing (CD June 5 p3), Sen. Mark Warner, D-Va., a former wireless executive, noted the advantages of CMAs over EAs. CMAs would open the door for small carriers that “might be able to provide better customer service, better quality and quicker delivery of service” to bid in the incentive auction, Warner said. An FCC official said the agency would look closely at small carrier concerns as rules for the auction are developed, likely for a vote after Wheeler becomes chairman.