Rosenworcel Says Incentive Auction Rules Must Guarantee No Carrier Buys All Spectrum Licenses

For the past 10 years the commission has had a policy on spectrum holdings “that has not been a cap but a screen,” Rosenworcel said. “It’s my hope in the upcoming auctions that we will first and foremost follow the law. The Communications Act requires us to make sure that we think about economic opportunity and competition when we develop our auctions” and the law authorizing the auctions had a similar goal, she said. “It’s my hope that we'll have opportunities both for incumbents and new entrants alike,” she said. “In the end, no, I don’t think a single carrier, for instance, can walk away with all the spectrum we auction."

Rosenworcel said she’s optimistic the auction will take place as projected next year. “I'm confident that I can be ready to do these auctions in 2014,” she said. “I actually have some confidence in the agency’s ability to do so, too.” She said the FCC’s record on auctions is “pretty tremendous,” with 80 auctions held and more than 36,000 licenses issued to date. Auctions also have added more than $50 billion to the U.S. Treasury, she said. “I think, as my kids would say, that’s not too shabby,” she said. “We have tremendous experts who know how to work with auctions and come up with good policies.”

Rosenworcel said the commissioners have several proposals before them that would restrict bidding in the auction as part of the rules. “My office is looking at them,” she said.

Rosenworcel was asked to what extent the FCC can move forward on the incentive auction as it waits for the confirmation of Tom Wheeler as chairman and Michael O'Rielly for the Republican slot formerly held by Robert McDowell. “I hope it doesn’t take awhile,” she said. “But I would also say that time marches on and technology is advancing and I think the agency has its work to do and it needs to proceed.” Rosenworcel, a former aide to Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., said she knew O'Rielly “just a little bit” and looked forward to working with him. “I did spend five years working on Capitol Hill, it’s a great privilege, but what I learned is the Senate moves when the Senate moves,” she said.

Touching on another key issue, Rosenworcel said she’s still considering whether the spectrum should be sold in smaller Cellular Market Area (CMA) licenses or in just the larger Economic Area (EA) licenses. Some smaller carriers have said they will likely sit out the auction if the FCC offers just EA licenses. “I think it’s something that we're going to have to take a look at,” she said. “I understand the simplicity of using Economic Areas.”

The FCC needs to protect consumers when retransmission consent disputes occur, like the one settled Monday between Time Warner Cable and CBS (CD Sept 2 Special Bulletin). Consumers get a dark screen instead of programming and “that’s not a good thing by any measure,” Rosenworcel said. “We shouldn’t want that to happen for extended periods of time. I think that consumers, honestly, deserve a refund if that happens for a long period of time. I think if it happens for an extended period … the FCC should look at its good faith authority under the Communications Act and try to help do something about it.”

Rosenworcel also expressed strong support for expansion of the E-rate program in schools. In June, President Barack Obama urged the commission to make high-speed Internet available to enough schools and libraries to connect 99 percent of American students (CD June 7 p7).

Only about 14 percent of public schools were connected at the time the E-rate program started, compared with more than 95 percent today, Rosenworcel said. “I would say the issue is not connection, it’s capacity,” she said. “We need to make sure those connections are really high capacity for the broadband age.” Rosenworcel noted that based on research by her office, about half of E-rate schools are connected at 3 Mbps or less, which is “not a speed you're going to use for the most innovative teaching tools, not a speed you can use to watch high-definition streaming video.” In South Korea, she said, 100 percent of schools are wired and that nation is moving to all-digital textbooks by 2015, and in nations such as Uruguay every student has a laptop.

Some congressional Republicans have sharply criticized moves to expand the E-rate program (CD July 19 p1), but Rosenworcel said she did not expect a big fight. “I don’t think education or infrastructure issues are partisan,” she said. E-rate was part of the Telecom Act of 1996, she observed. “It was something that was developed in a bipartisan way,” she said. “I think it has a strong record of support in a bipartisan way.” Rosenworcel said the goal should be 100 Mbps in every school by the 2015 school year and 1 Gbps by the end of the decade. “If we do that and we make that capacity available nationwide we're going to send a signal to markets, to device manufacturers, to content creators,” she said.

Taking on USF contribution reform may be inevitable for the FCC, Rosenworcel said. In 2011, the FCC revised how funds are distributed but now how they are collected. “I think it’s an important issue and one we'll have to consider in time,” she said. She said USF is now based on a fee on long-distance phone calls. “I think there’s an argument that the ways we're using our networks are changing over time and the networks we're supporting are changing over time,” she said. “So going into that conversation I think it would be good for us to look at a connections-based system that doesn’t distinguish between specific types of communications, but I'm open to other ideas and suggestions too.” Asked if changing the USF will be hugely controversial since new services would have to pay into the USF, Rosenworcel said she isn’t sure. “I don’t know that it is a prudent thing to do to continue to focus on discrete services, communications technologies are evolving so rapidly,” she said.

Rosenworcel explained why she favors delaying an auction of H-block spectrum until it can be paired with AWS-3 spectrum for a bigger auction (CD Aug 19 p1). Rosenworcel said she hopes that by delaying an auction until late 2014, the FCC will bring in more revenue and help pay much of the cost of FirstNet before the incentive auction. She said her position has some support among Wall Street analysts.

Rosenworcel was asked whether her fellow commissioners were receptive to her arguments on the H block. “I hope so because I think it’s the best spectrum policy and it’s the best policy for first responders under the law,” she said. “What you want to make sure and do is attract a lot of bidders when you hold an auction. … If we fund FirstNet early we'll have a lot more flexibility when it comes to offering incentives in the incentive auction down the road.”

Rosenworcel also said she hopes the FCC will take action soon on a follow-up order to the June 2012 derecho wind storm, which led to connection problems at 77 public safety answering points (PSAPs), with 17 in three states losing all connectivity. Rosenworcel, who has visited numerous PSAPs as a commissioner, described a visit to one in Fairfax County, Va. “The director described how during the middle of the storm the entire room went silent and he said he knew instantly there was something wrong,” she said. An FCC staff report “found that backup generators failed to work, leading to system failures,” she said. “They also found that monitors failed to work because of power problems. And they also found carriers did not notify 911 centers as swiftly or as regularly as they should have.” The FCC released an NPRM in March (CD March 21 p4). “I really hope that we can bring that to conclusion with an order soon because I think there’s some commonsense things we can do to prevent this from happening again,” she said. “This is an opportunity to put better practices in place to prevent this from happening again.”

Rosenworcel said she’s very optimistic that FirstNet will be built in a timely manner and the moves the FirstNet board has taken so far are on target. FirstNet Chairman Sam Ginn and General Manager Bill D'Agostino are respected by industry, she said. “We now have a $194 million budget for the next year and they're planning some new hires,” she said. “On top of that they've already put out 30 different grants for state and local planning and they've already made arrangements in California and New Mexico to use the 700 MHz spectrum for some of the recipients of Recovery Act money for public safety. I think we're making a lot of progress and there’s more to come.”