Wireless Spectrum Auctions

The new advanced wireless services (AWS) spectrum band plan expected to be adopted by the FCC at its agenda meeting Fri. will benefit rural carriers because “the FCC appears on track to offer smaller, more affordable licenses throughout the country,” Medley Global Advisors said in a research note. The structure of the licenses will also benefit T-Mobile, which “needs to boost its network coverage, particularly in urban areas,” it said. The FCC is leaning toward a plan proposed by T-Mobile and Rural Telecom Group (RTG) that would create 6 licenses, some covering small geographic areas, allowing carriers to acquire “building blocks” of spectrum to fill in gaps, the report said: “The FCC was sold on T-Mobile’s plan in part because it held the promise of strengthening the position of the 4th-place national carrier while giving rural carriers the flexibility to pick up smaller slices of local spectrum.” Medley expects the AWS auction to be highly competitive, especially in urban markets. In most cases, it said, “at least 2 bidders will be competing for licenses in the multi-round auction that may last several weeks.” The AWS auction is estimated to generate about $15 billion, but Medley said “if Congress succeeds in putting a realistic digital TV transition plan in place before the AWS auction begins, it would dramatically boost the amount of spectrum coming to market. That extra supply has the potential to depress prices in the upcoming AWS auction.” Medley, however, put the chance that Congress will complete the DTV transition plan before next June -- the earliest date to begin the AWS auction -- below 50%.

Demand is certainly high for 24 MHz of mobile satellite service (MSS) spectrum at 2 GHz, at least based on filings at the FCC in its proceeding (IB 05-221). Despite the fact that the MSS spectrum is available because 3 MSS firms gave up their licenses rather than launch service, at least a dozen major firms filed comments in the proceeding -- all indicating that the spectrum should be made available to them.

The FCC should ensure BRS channel 1 and 2 licensees move from the 2150-2162 MHz band to their replacement spectrum before advanced wireless service (AWS) spectrum is deployed in the 2110-2155 MHz band, the Wireless Communications Assn. (WCA) told FCC officials. It said upstream data operations on BRS channels 1 and 2 can’t co- exist with downstream AWS operations under the AWS spectral mask (43+10 log(P)). “In the case of BRS/AWS the zones of interference to BRS could be quite large in markets where, as is usually the case, upstream BRS operations are part of a system that utilizes a single ’supercell’ [a receive antenna system mounted higher in the air than those used in more cellularized systems] that has an extensive coverage area,” the group said. WCA also stressed that BRS channels 1 and 2, often used together, must be moved together to “avoid undue disruption of existing BRS operations and to eliminate the possibility of adjacent interference between BRS channel 2 and AWS were only BRS channel 1 moved.” WCA also urged the FCC to make it “absolutely clear” AWS auction winners bear responsibility for BRS relocation costs, including “any expenditures necessary to clear the 2496-2500 MHz band of incumbent users with whom BRS channel 1 and 2 licensees cannot co-exist.” Such incumbents include grandfathered co-channel broadcast auxiliary service (BAS) licensees. Those relocation costs should be shared with Globalstar whose deployment of an ancillary terrestrial component would benefit from clearance of BAS, the group said. While calling Commission rules and procedures for point- to-point microwave services “a useful starting point,” WCA said they “must be modified to accommodate the unique circumstances associated with relocating BRS.” It said the fact that BRS is a point-to-multipoint, mass-market, consumer-based service “implicates additional cost factors that do not exist in the point-to-point model.” Moreover, it said, unlike previously relocated point-to-point services, BRS spectrum often is leased to non-licensee spectrum operators: “Accordingly, the legitimate interests of BRS spectrum lessees must be accounted for and addressed in any relocation paradigm for BRS channels 1 and 2.” WCA also said the spectrum at 2496-2502 MHz/2618-2624 MHz designated for BRS relocation won’t be available in some BRS channel 1 or 2 licensees’ markets that haven’t been transitioned to the new 2.5 GHz bandplan. It reiterated that “once a market has been transitioned, the responsible AWS licensees should be required to reimburse the ‘proponent’ for the pro rata share of the proponent’s transition costs” related to making the 2496-2502 MHz/2618-2624 MHz bands available for BRS channels 1 and 2. The Commission should let AWS and relocated BRS licensees negotiate alternative interim arrangements pending transition of the channels to the new 2.5 GHz band plan, the group said. WCA urged the FCC to issue its BRS relocation rules “as soon as possible” to end regulatory uncertainty that chills investment, delays deployment of new BRS services and keeps potential AWS auction bidders from factoring BRS relocation costs into valuations of spectrum they are bidding on.

TMI/TerreStar and ICO again asked the FCC to redistribute abandoned 2 GHz spectrum between them, citing rural broadband access and public safety needs in comments filed Mon. With the additional spectrum, the companies said, they could offer broadband and basic telephone services to all areas of the country, no matter how remote, furthering the federal govt.’s goal of universal broadband access by 2007. TMI/TerreStar said, if granted the extra spectrum, they could compete more effectively with other satellite service providers, the Broadband Radio Service and the nationwide cellular/SMR/PCS providers. Further, they said, they could provide emergency responders and homeland security end-users “seamless communications using the same low-cost, broadband-capable devices in any emergency anywhere in the country.” Citing 9/11 and the Asian tsunami, ICO said: “Time and again, MSS has proven to be the only effective means of communications at times and in locations where terrestrial wireline and wireless systems have failed.” But without the spectrum, both MSS operators said, their service offerings could be constrained. On the financial end, TMI/TerreStar asked for a prompt redistribution to foster investment in the new MSS services. Both noted they have less spectrum than other MSS licensees, like Globalstar, MSV and Inmarsat. But MSS competitor Inmarsat again lobbied the Commission to license at least 3 MSS providers in the band. Inmarsat said, with entry into the 2 GHz band, it “stands ready to deploy an expansion MSS system that will provide much-needed broadband service to all of the U.S. by the end of the decade.” Replying to wireless bids for the spectrum, TMI/TerreStar said there is “a wealth of evidence” that terrestrial wireless has ample spectrum to meet its needs for the foreseeable future. Intel urged the FCC to allocate all 24 MHz of the returned 2 GHz spectrum for “flexible, fixed and mobile terrestrial use.” It estimated an auction of the 24 MHz of spectrum for terrestrial services would bring bids of over $9 billion: “This high valuation reflects the exploding consumer demand for terrestrial wireless services, and contrasts sharply with the MSS industry’s struggle for financial viability.” Intel also urged allocating all 24 MHz, not 13 MHz, of the returned spectrum for terrestrial use, saying that would provide “substantial cost savings” and “greater benefits” for wireless carriers. Intel also said maintaining only 2 MSS licensees in the 2 GHz band would suffice to keep them from gaining market power in provision of mobile voice service or broadband wireless services because of strong competition from MSS licensees in other bands and from terrestrial wireless and wireline carriers, it said. Separately, the CTIA said both wireless and satellite commenters “overwhelmingly rejected” the FCC’s proposal to give the abandoned spectrum to ICO and TMI. Neither TMI or ICO has shown a need for additional spectrum, “let alone for their planned satellite service offerings,” the group said. Pointing to the “significant interest in the 2 GHz spectrum at issue” from various segments of the communications industry, including CMRS and SDARS, the CTIA urged the FCC to “evaluate the best use of all the surrendered spectrum -- all 24 MHz -- in a single rulemaking proceeding… Where additional spectrum is to be used for terrestrial mobile service, the Commission should not classify it as auction-exempt satellite spectrum but should reallocate it and auction it for the benefit of the public.” Cingular echoed the CTIA comments, saying TMI and ICO are “years away from commencing operations and therefore have no immediate spectrum needs.” -AK, SP

At least some FCC commissioners’ offices are leaning toward creating smaller advanced wireless service (AWS) block sizes in light of proposals from the Rural Telecom Group (RTG)/T-Mobile and MetroPCS, industry sources said. “At least 2 of the Commissioners’ offices have expressed support for making available spectrum according to smaller licencing areas to provide service to rural communities on an expedited basis,” an industry source said. An FCC order revising an Oct. 2003 AWS band plan for 90 MHz of 3G spectrum, expected to come to a vote at the next FCC meeting, is being reviewed by commissioners but isn’t final, we're told.

MetroPCS defended its recently submitted band plan for 90 MHz of 3G spectrum set for auction next year, saying it would “improve upon the Commission adopted plan and other proposed plans.” The FCC is expected at its Aug. 4 meeting to revise a Oct. 2003 advanced wireless services (AWS) spectrum band plan “in light of the recent proposals” (CD July 19 p3). On the table are: (1) A T- Mobile/Rural Telecom Group plan proposing to break the 30 MHz E Block at 1740-1755/2140-2155 MHz into 3 parts to create a 5th AWS license block, leaving the A, B and C Blocks unchanged. (2) A Verizon Wireless plan, which, unlike T-Mobile/RTG’s, would place the blocks in a different order and put 10 MHz more spectrum in REAG licenses. (3) A MetroPCS plan proposing to break the AWS band into 7, mostly 10 MHz, blocks. MetroPCS said its plan is best because: (1) “A greater variety of geographic areas and more 10 MHz channel blocks will accommodate diverse business plans and services.” (2) “More [smaller] spectrum blocks will be offered in the auction,” letting applicants “build their spectrum holdings based on their needs not upon a government- ordained market structure.” (3) “MEAs are a unique feature” of the MetroPCS plan, because “MEAs are large enough to allow for a whole metropolitan area and surrounding area to be served, but not so large as to include multiple metropolitan areas.” (4) The plan facilitates “efficient aggregation of spectrum and territory in the auction process.” (5) It encourages “the gradual move away from MSA/RSA-based allocation plans which divide the country up into too many small areas (734 in the U.S.), many of which go unassigned.” MetroPCS voiced concern about the AWS band plans from T-Mobile/RTG and Verizon Wireless, saying they are “much too heavily weighted toward” large 30 MHz or 20 MHz channel blocks and large geographic areas, which “limit opportunities for incumbents and new entrants.” It said it doesn’t view “partitioning and disaggregation” as an effective licensing mechanism: “It is easier to aggregate spectrum and market areas in the auction than to disaggregate or partition, particularly in light of the anti-collusion rule.” Providing “numerous licensing alternatives” for applicants would better serve public interest, it said. Meanwhile, Verizon Wireless said it agrees with recent CTIA criticisms of Council Tree’s proposed constraints on designated entities’ affiliation with large wireless carriers. “Some of the changes requested by Council Tree have not been raised in this proceeding before and appear to require a further rulemaking proceeding,” it told the Commission.

While his conservative leanings have center stage, U.S. Supreme Court nominee John Roberts is better known among Washington communications attorneys for his telecom and media issues work as a judge on the U.S. Appeals Court, D.C., and a Hogan & Hartson attorney representing Fox in a successful challenge to FCC media ownership rules. Attorneys termed Roberts well-liked by people on both sides of the political spectrum, although communications issues don’t lend themselves to political divisions.

Auction 60 of lower 700 MHz spectrum, which starts today (Wed.), hasn’t drawn significant telecom industry interest. The 5 licenses offered, which went unsold in earlier 700 MHz auctions, cover smallish CMA areas in Puerto Rico. The lower 700 MHz spectrum, still encumbered by broadcasters, will have to be cleared through the DTV transition. But companies led by Aloha Partners, which has paid some $100 million for 700 MHz licenses, believe they can use it for robust wireless data networks. An industry source called the licenses on sale the “dregs from auction 49m” which elicited scant interest during that sale and which the FCC is trying to sell again. Aloha and 4 other carriers have qualified to bid.

Sen. Sununu (R-N.H.), at last week’s Senate Commerce Committee hearing on the DTV transition (CD July 13 p1), was among members urging industries to avoid using “the specter of consumer confusion” on a hard analog cutoff to push political and commercial agendas.

The Aug. 4 FCC meeting agenda includes a reconsideration order revising an Oct. 2003 advanced wireless services (AWS) spectrum band plan, according to an agency source. The order, originally set for the July meeting (CD June 20 p1), was held off by the Chmn. Martin’s office due mainly to complications from designated entity (DE) issues raised by Council Tree Communications in late filings, several sources said.