Wireless Spectrum Auctions

The Joe Biden administration could be poised to take an action the Donald Trump White House tried but wasn’t able to complete and release a national spectrum strategy, industry officials familiar with the administration’s work on the issue told us. That follows what could be key meeting in May at the Aspen Institute. FCC Chairwoman Jessica Rosenworcel and NTIA Administrator Alan Davidson participated in the two-day session, which focused specifically on a national strategy.

Senate Commerce Committee Chair Maria Cantwell, D-Wash., and other panel leaders are hopeful they can use the August recess to negotiate a deal on a spectrum legislative package before Congress returns after Labor Day, or at least decide whether to seek a stopgap FCC spectrum auction authority renewal in hopes of reaching a consensus later. Panel Democrats and Republicans divided along party lines (see 2208020076) during a Communications Subcommittee hearing last week on whether they back the 18-month authority extension included in the House-passed Spectrum Innovation Act (HR-7624).

T-Mobile plans to buy 600 MHz licenses it has been leasing from Columbia Capital for $3.5 billion, the carrier said in an SEC filing. The deal requires approvals from regulators, including the FCC, but is expected to get them easily, especially since T-Mobile is already using the spectrum covered by the leases. The first stage of T-Mobile’s 5G build used its 600 MHz spectrum. T-Mobile Chief Financial Officer Peter Osvaldik said at a financial conference Tuesday the company doesn’t expect the deal to close for at least a year.

Major U.S. tower companies, buoyed by the ongoing 5G buildout, had positive Q2s, in contrast with major wireless carriers, with AT&T and Verizon both navigating rough waters during the quarter (see 2207270054). SBA Communications, the last of the big three tower companies to report, released results Monday.

Senate Commerce Committee Democratic and Republican leaders divided along party lines during a Tuesday Communications Subcommittee hearing on their preferences for extending the FCC’s spectrum auction authority, the dominant focus during the panel, as expected (see 2208010030). Communications Chairman Ben Ray Lujan, D-N.M., strongly backed a longer-term renewal than the House proposes in its Spectrum Innovation Act (HR-7624). Commerce ranking member Roger Wicker, R-Miss., and Communications ranking member John Thune, R-S.D., back HR-7624’s proposed 18-month renewal.

The FCC’s 2.5 GHz auction started slower than other recent 5G auctions and had little upward movement Monday, after three rounds. The auction hit $115.3 million Monday, after opening Friday at $103.5 million (see 2207290045). “Demand at the start of this auction is very tepid, with excess demand as a percentage of aggregate demand starting at roughly 37%, which puts this auction at the low end of prior auction starts,” blogged Sasha Javid, BitPath chief operating officer, about the start of the auction. “Perhaps this slow start is not surprising,” he said. “This 2.5 GHz auction is far from a typical spectrum auction.” The FCC is selling overlay licenses, which means many winners will have to negotiate with educational broadband service incumbents “if they want to use their entire license,” Javid said: “By my estimate over 80% of the MHz-POPs in these overlay licenses are encumbered (including both incumbents and all pending tribal licenses). This could explain why both Los Angeles and Cook County (Chicago), the two most populated counties in the country have demand below supply at the county level.” Another factor, some 27.5% of the U.S. doesn’t have any licenses available for sale, he said. “This is because the FCC decided against selling overlay licenses in any county where every category of license was fully-encumbered when measured by area,” he said. T-Mobile holds long-term leases with most incumbents EBS licensees and “has an information asymmetry advantage over other auction participants. … Because these leases are confidential, other bidders will not know how long they may be precluded from accessing or re-leasing parts of their licenses currently encumbered by these T-Mobile leases.” New Street’s Jonathan Chaplin predicted in a weekend note to investors the auction will likely hit $3.4 billion, less if Congresses approves a 15% book alternative minimum tax on spectrum licenses (see 2204050083). He predicted the auction will likely end in September. “We have a long way to go,” Chaplin said: “The spectrum is useless to Verizon, AT&T and Dish [Network]; their only interest in the auction is pushing up the cost for T-Mobile. Smaller carriers and [wireless ISPs] may actually have a use for some of the licenses, but these companies won’t have the resources to outbid T-Mobile for any licenses that T-Mobile views as important." But Digital Progress Institute President Joel Thayer noted widespread interest in bidding. “It's a credit to the FCC's ability in shepherding this proceeding along and I'm glad to see that we are going to unleash 2.5 GHz,” Thayer emailed: “This auction is particularly going to be helpful for T-Mobile to be an even stronger alternative to the ‘big two,’ which is great for consumers.” Thayer sees Verizon and AT&T as potentially more interested in 12 GHz, a band being looked at for 5G. Two more rounds are on tap Tuesday.

The FCC’s final scheduled 5G auction, of 2.5 GHz spectrum, opened Friday at $103.5 million after one round of bidding. Two more rounds are scheduled for Monday. Industry analysts tell us T-Mobile looks likely to dominate, filling in gaps in its 2.5 GHz holdings, with some smaller carriers likely to jump in if they see the opportunity for a bargain. Verizon, AT&T and Dish Network qualified to bid but appear unlikely to make much of a play, analysts said. T-Mobile already has 159 MHz of 2.5 GHz spectrum nationwide.

The House passed the Spectrum Innovation Act (HR-7624) and three other telecom and tech bills Wednesday night, drawing praise from lawmakers and some stakeholders. The chamber voted 336-90 for an en bloc package that included HR-7624 and two of the other bills, the Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies Act (HR-4551) and Safe Connections Act (HR-7132). Lawmakers voted 416-12 for the Advancing Telehealth Beyond COVID–19 Act (HR-4040). HR-7132 and HR-7624 "provide our nation’s mobile networks with the spectrum resources necessary to provide next-generation wireless technologies, promote wireless innovation, fund important public safety priorities like Next Generation 9-1-1, and ensure that phone contracts cannot be used to perpetuate abuse when survivors and abusers share a phone contract," said House Commerce Committee Chairman Frank Pallone, D-N.J., and Communications Subcommittee Chairman Mike Doyle, D-Pa. "The bipartisan bills passed today will enhance spectrum management, strengthen public safety communications tools" and "secure our networks from countries like China," said House Commerce ranking member Cathy McMorris Rodgers, R-Wash., and Communications ranking member Bob Latta, R-Ohio. Matt Mandel, Wireless Infrastructure Association senior vice president-government and public affairs, praised lawmakers for "prioritizing America’s leadership in wireless network innovation by voting to make more spectrum available for commercial and shared use" via HR-7624. The measure would renew the FCC's auction authority through March 31, 2024, and authorize sales of 3.1-3.45 GHz spectrum licenses. "Making additional Federal spectrum resources available for commercial use will provide significant benefits for the industry, the economy, and most importantly, consumers," said Competitive Carriers Association President Steve Berry: HR-7132 "will help survivors of domestic violence remain connected."

House Communications Subcommittee Chairman Mike Doyle, D-Pa., and other House Commerce Committee members urged the chamber Tuesday to pass the Spectrum Innovation Act legislative package (HR-7624) by a lopsided bipartisan margin ahead of floor votes as soon as that evening on several telecom and tech measures. The House planned floor votes on HR-7624 and two other telecom and tech bills on the docket: the Reporting Attacks from Nations Selected for Oversight and Monitoring Web Attacks and Ransomware from Enemies Act (HR-4551) and Safe Connections Act (HR-7132). The chamber was also expected to consider the Institute for Telecommunication Sciences Codification Act (HR-4990). The Rules Committee, meanwhile, began considering Tuesday afternoon a set of proposed amendments to the Advancing Telehealth Beyond COVID-19 Act (HR-4040) amid Republicans’ concerns that the measure didn’t first get House Commerce clearance.

Eighteen wireless carriers and stakeholders are urging Congress to fully fund the Secure and Trusted Communications Networks Reimbursement Program amid ongoing concerns about the FCC’s final estimate that lawmakers will need to appropriate an additional $3.08 billion to pay the costs of replacing the unsecure equipment (see 2207150067). Industry experts told us the outlook on whether Congress will act on the Spectrum Innovation Act (HR-7624) or other proposals to provide additional funding is unclear, but the risk for industry and negative implications for closing the digital divide are real.