Wireless Spectrum Auctions

FCC continues to receive feedback on Nextel White Paper that would realign frequencies at 700, 800 and 900 MHz and 2.1 GHz to help alleviate interference concerns of public safety users. Writing for clients that use 800 MHz for “commercial and private internal uses,” Washington attorneys John Prendergast and Richard Rubino told FCC in ex parte filing that Nextel’s proposed treatment of industrial/business users at 800 MHz must change. Nextel proposed to offer $500 million to help public safety licenses with costs such as retuning, they said, but didn’t offer private wireless users similar assistance. Attorneys recommended “Commission require that any incumbent licensee who relocates to other spectrum or is ultimately required to relocate to other spectrum at some future time have its relocation expenses reimbursed.” Nextel’s proposed offer of $500 million to help public safety users move is likely to be relatively small part of relocation cost, filing said, and it should bear “primary responsibility” for relocation costs in that band. Attorneys also balked at Nextel proposal that it receive 10 MHz in reserve portion of mobile satellite service band at 2.1 GHz as part of reconfiguration, saying that essentially would give Nextel “free” 3rd generation wireless license. Last month, Pegasus also raised concerns in letter to FCC Chmn. Powell about how 700 MHz guard band spectrum would be handled under Nextel proposal. Noting that Notice of Proposed Rulemaking on potential solutions to interference at 800 MHz is expected shortly, Pegasus said NPRM must weigh impact on guard band spectrum. “Nextel’s proposal has the ability to substantially alter the development of the guard bands in a way never contemplated by the Commission when it allocated the 700 MHz spectrum, promulgated the rules governing the guard bands and auctioned the guard band licenses to the highest bidder,” Pegasus said. It was among auction winners in FCC’s 700 MHz guard band auction. If part of guard band spectrum is reallocated to business radio and industrial/land transportation radio users, that “may fundamentally alter the demand for services from the 700 MHz guard band managers, which would of course affect the business plans of the auction winners,” Pegasus said.

Faced with falling share prices for its PCS and FON tracking stocks in recent weeks, Sprint might pursue asset sales to help near-term funding needs and clear its access to commercial paper market to borrow money, UBS Warburg said Mon. In research note to investors, analysts said company could realize nearly $2.25 billion if it divested its publishing business and holdings in EarthLink. Researchers were bullish on Sprint’s overall ability to resolve its funding issues. UBS Warburg has estimated that Sprint has funding gap of $1.67 billion -- $200 million shortfall on wireline side and $1.47 billion on PCS wireless side. PCS shortfall doesn’t include $225 million of additional payments associated with NextWave spectrum re-auction that U.S. Appeals Court, D.C., overturned last year. Sale of assets to increase Sprint’s equity position is likely to be seen as positive move by credit ratings agencies, UBS Warburg said.

Northpoint-DBS debate continued Mon. with Satellite Bcstg. & Communications Assn. (SBCA) ex parte filing at FCC again claiming terrestrial startup wasn’t entitled to free publicly owned spectrum or pioneer’s preference. Northpoint had argued in earlier filing that SBCA was hypocritical because its members obtained legislation from Congress exempting them from auction. Industry sources continued to predict final Commission decision is weeks away. “A decision isn’t imminent,” source said: “We haven’t heard anything. They seem to be plodding through a proceeding. A lot of people are still on pins and needles.”

Commerce Secy. Donald Evans said NTIA planned spectrum summit April 4-5 to address spectrum allocation and efficiency, spectrum requirements of new technologies, regulatory processes. FCC Chmn. Powell is to take part in meeting along with Deputy Asst. Secy. of State David Gross. First day of summit will focus on industry and govt. spectrum users, economists, analysts, technologists. Second day will include working sessions on commercial, international and federal govt. perspectives. “We must continue to create the right environment for growth in private-sector technologies that use spectrum, while balancing delicate national security and public safety needs,” Evans said: “This summit is a major step forward in our far-reaching effort to deal with the complex issues inherent in spectrum management policy. We owe it to the American people to get the most out of this national resource.” NTIA Dir. Nancy Victory said forum would look for ideas on spectrum policy involving auction process, how to expand secondary markets for spectrum, how to encourage innovation in new wireless technology, how to define spectrum rights without limiting technology use.

To again delay scheduled June 19 auction of Chs. 60-69 would “frustrate over 2 years” of voluntary attempts to clear that band of analog stations, “seriously jeopardizing the long-recognized public interest in introducing critically public service and new wireless services,” Paxson Communications said in comments Wed. at FCC Wireless Bureau. Saying auction already had been postponed 5 times, Paxson said if there were any further delay, voluntary efforts of broadcasters’ Spectrum Clearing Alliance would “go for naught.” Alliance (composed of 80 groups owning 144 TV stations in affected band) “has reached the critical mass necessary to conduct substantial band clearing” voluntarily, Paxson said, and FCC must not combine planned auction for Ch. 52-59 with Ch. 60-69 auction -- option proposed by Commission -- because Paxson was “extremely concerned” coupling them would lead to further delay. Paxson owns 19 TV stations in Ch. 60-69.

House Commerce Committee Chmn. Tauzin (R-La.) told investment community Wed. that he was enthusiastic about ultra-wideband (UWB) wireless technology and hoped FCC would look at it carefully. Proposal to permit UWB products to operate as unlicensed Part 15 devices is expected to be on FCC agenda at Feb. 14 meeting, he said in speech at Precursor Group conference in Washington. Tauzin said he visited UWB company Time Domain and was impressed by its founder Larry Fullerton, “an interesting guy who has been called the new Marconi.” Tauzin told investors UWB was trend to watch, explaining how technology goes through walls, could result in high-tech home security systems, communications devices for military, disaster recovery aids. “My hope, my prayer, to the Commission is to give it a good look,” he said. Tauzin said that taking up “twin issues” of privacy and security were among his Committee’s most important tasks this year. “The first battle line” is copyright, he said, “how to provide a digital product without losing value… coupled with security needs.” He said other “things to watch” were: (1) Efforts to develop privacy policy that would “enhance private efforts to self-regulate. (2) Broadband deployment. (3) Digital TV transition. (4) “Increasing capacity of wireless communications.” He also made pitch for Tauzin- Dingell bill, saying it was “not about pleasing the Bells” but rather was designed to “complete the Telecom Act.” Act didn’t contemplate growth in data communications and Internet, he said. As it is now, Act stymies development of high-speed data transmission because of restrictions on Bells, he said. Act’s mistake was to put FCC in charge of deciding when Bells could provide interLATA communication, which is required to offer broadband effectively, Tauzin said. Decision was left to “these bureaucrats whose raison d'etre is to regulate,” he said. “We left it to them to eliminate regulations, what were we doing? The FCC has become an agent for the past.” He said he thought Tauzin- Dingell would pass House and “then we will go and deal with Mr. Hollings [Sen. Hollings (D-S.C.) and chmn. of Senate Commerce Committee]), who has a different view.” Talking with reporters later, Tauzin said if Committee’s meetings with industry leaders on DTV transition didn’t result in agreement soon (CD Nov 30 p6), legislation to resolve issue probably would be introduced in April-May time frame. He said there had been progress in last 2 meetings and another was planned later this month. Meanwhile, spokesman for House Commerce Committee said it appeared House leadership would schedule vote on Tauzin-Dingell on either Feb. 27 or 28, slightly sooner than March projection given when bill was pulled from floor in Dec.

In move seen as freeing up advanced wireless spectrum, CTIA Pres. Tom Wheeler Tues. touted Bush Administration budget proposal that would create trust fund to reimburse federal agencies that have to relocate from bands auctioned to commercial users. Budget blueprint released Mon. said Administration planned to propose legislation to streamline current process for reimbursing govt. agencies that were relocated from spectrum auctioned to commercial users. Proposal would create relocation trust fund from receipts of spectrum auction that would directly reimburse agencies for relocation costs. Wheeler said that would cover 1710-1755 MHz already reallocated to nongovt. from govt. users. Wheeler said trust fund also could cover relocation expenses linked to 1755-1770 MHz now occupied by DoD and under consideration for advanced wireless services. Budget said proposed policy change also would affect reimbursement procedures for 1710-1755 MHz, for which White House has proposed moving auction deadline to 2004 from 2002. “This is something that we have been championing for some time,” Wheeler said at Tues. media lunch. Absence of trust fund of that nature has been “stumbling block” in spectrum policy on how necessary relocations would be compensated, Wheeler said. “It’s the first time that an Administration has stood up and said ‘here’s how we do this,'” he said. Balanced Budget Act of 1997 had stipulated 1710-1755 MHz should be reallocated from govt. to nongovt. users. CTIA officials said Tues. that 1755-1770 MHz now occupied by military also could be covered by trust fund under language in budget. That 15 MHz of spectrum is under study at DoD for possible options for military users relocating for commercial wireless operations and Pentagon recommendation is expected to be sent to NTIA shortly. Administration took off table last fall most of 1755-1850 MHz band occupied by DoD that had been under consideration for 3G and other advanced wireless operations. Govt. revised assessment of 3G to focus on potential use of 1710-1770 MHz and 2110-2170 MHz. Wheeler outlined ways in which commercial wireless operators could operate at 1755- 1770 MHz without disrupting military capabilities. DoD uses 1761 to 1842 MHz for satellite systems that provide uplinks for tracking, telemetry and control. Wheeler said from 1761- 1770 MHz, commercial operators could redesign wireless networks to share spectrum in plan that would prohibit base stations and allow only low-power handsets that operate at power levels too low to cause interference. Fixed microwave systems also operate in band that CTIA said are similar to commercial point-to-point systems that commercial wireless industry successfully relocated for PCS. Solutions for these operations include frequency sharing and coordination that would be paid for by Administration’s spectrum relocation fund. For tactical radio relay systems that operate in 1755- 1770 MHz, these systems operate in pieces throughout 1710- 1850 MHz and are tunable, CTIA said. Solutions here could reflect those that military uses in international deployments, including geographical separation in remote areas, tuning to above 1770 MHz if needed and relocation and upgrade that trust fund also could pay for. CTIA Senior Vp- Govt. Relations Steve Berry said reimbursement is structured to be broad enough to include upgraded equipment and other costs such as retraining because DoD can identify all costs connected to moving out of spectrum. Current reimbursement process is very strict and doesn’t allow for enhancement of capabilities, he said.

In new effort to get FCC to return billions in NextWave re-auction deposits, Verizon Wireless asked U.S. Appeals Court, D.C., Tues. to “compel full compliance” with ruling that overturned FCC decision to cancel NextWave’s licenses. “Because the cancellation of NextWave’s licenses was unlawful, the re-auction itself was without lawful basis,” Verizon said in petition. “For the same reason, any continuing obligations on the part of the NextWave re-auction winners were also necessarily extinguished by this court’s ruling.” In Jan., re-auction winners petitioned FCC to refund $3.1 billion in down payments they said agency had been holding without interest since Feb. 2001. Verizon Wireless and 12 other carriers said that because settlement agreement on NextWave’s licenses expired Dec. 31 without Congress’s approval of settlement, agency should return money. Verizon’s latest request to D.C. Circuit came in wake of carriers’ expectations that Commission wasn’t planning to return deposits until after Supreme Court decided whether it would hear oral argument in NextWave case (CD Jan 30 p1). Verizon Wireless told court FCC’s refusal so far to “implement this court’s mandate” and return deposits meant carrier had lost more than $80 million in unpaid interest on its $1.7 billion down payment.

Homeland security was dominant theme in President Bush’s FY 2003 budget proposal released Mon., with new money for securing telecom facilities among leading priorities. Some $3.5 billion would be allocated to assist first responders to emergencies in wake of Sept. 11, including support for landline and wireless telecom networks, twelvefold increase over FY 2002. Administration also outlined proposals for auctioning broadcast spectrum for 3G wireless and again proposed fines for broadcasters continuing to use analog spectrum after 2006.

Verizon Wireless is withdrawing petition to U.S. Supreme Court seeking review of U.S. Appeals Court, D.C., ruling that overturned FCC decision to cancel NextWave’s PCS licenses. Opposition briefs were due Fri. on FCC petition for high court review in NextWave case. While main petition for certiorari was from FCC, Verizon Wireless and other carriers had filed in support of Commission as intervenors. NextWave filed brief Fri. arguing Supreme Court shouldn’t agree to hear oral argument. Verizon Wireless had won largest block of licenses in Jan. 2001 re-auction of what at time had been PCS spectrum of NextWave. Verizon said it still disagreed with D.C. Circuit ruling that overturned FCC decision to cancel NextWave licenses. But Verizon told court it was withdrawing petition for review: “The public interest in putting the spectrum to use, rather than letting it lie fallow, is better served by quickly obtaining certainty in ownership of the NextWave licenses than by this court’s making the correct decision on the legal question presented.” Uncertainty over existing litigation has led to “a stalemate over the use of the spectrum that harms the public interest,” Verizon said. “The spectrum is totally unavailable to petitioner and the other Auction No. 35 bidders.” Re-auction winners, NextWave and govt. had reached settlement agreement last fall over NextWave’s licenses, but agreement expired when Congress failed to pass implementing legislation by Dec. 31. Verizon argued in Fri. filing that “NextWave itself cannot reasonably make the substantial investments needed to develop fully the spectrum without the certainty of title that would be provided by an end to this litigation.” Verizon also said that in congressional testimony last fall, FCC had testified that its main concern was immediate deployment of spectrum that had been tied up in 5 years of litigation. “The market could make faster and more reasonable adjustments if the case were ended now than if this court were to grant certiorari, hear oral argument in the autumn of 2002 and decide the case in petitioner’s favor in the spring of 2003,” Verizon said. “Even such a victory would not end this lawsuit: the case would be remanded to the D.C. Circuit for consideration of issues left open in its decision and then presumably remanded to the Commission.”