Communications Outlook 2013
In 2013, Congress, the Federal Communications Commission, and the National
Telecommunications and Information Administration of the Department of Commerce
will continue to focus on the issue of most immediate concern to the information
economy: finding additional spectrum for wireless broadband connectivity.
Following congressional action, much of the FCC's work to free up airwaves in
2013 will be focused on writing rules for the first-ever voluntary “incentive
auctions” of spectrum. The NTIA, which manages the federal government's use of
the spectrum, will continue efforts to find swaths of frequencies that could be
And, in the coming year, the FCC once again will try to carry out its agenda
under the glare of intense congressional scrutiny, as House Republicans look to
fundamentally change the way the commission conducts business as an independent
By Paul Barbagallo
The focus of the Obama administration, the Congress, and the Federal
Communications Commission in 2013 will be to free up more spectrum for faster,
more reliable, and more widespread wireless internet access across the
For much of the last four years, federal policymakers have worked
aggressively to find swaths of frequencies that could be made available to
wireless carriers to help meet the ever-increasing consumer demand for
smartphones and tablet computers, which require more radio spectrum to carry
their data transmissions--significantly more than what is needed to carry
cellular telephone calls.
That work will continue this year, starting at the FCC.
The chairman's office is crafting rules for the first-ever “incentive
auctions” of spectrum, in which the agency will try to reclaim airwaves now used
for broadcast television and auction them off to carriers led by Verizon
Wireless and AT&T Inc., with a portion of the proceeds paid to the
While the auctions are not expected until 2014, the auction rules will be
finalized in the first half of 2013.
The rulemaking is likely to be contentious, as most broadcasters want to
either retain their spectrum or maximize the opportunity to sell their spectrum
at the highest possible rate.
Democratic FCC Commissioner Jessica Rosenworcel said the key for the
commission is simplicity.
“Incentive auctions are undeniably complicated,” she told BNA. “But at every
juncture we need to take steps to simplify the process. A simpler incentive
auction system will yield more interest, more spectrum, and more clarity for all
participants in the process.”
She also said the FCC must treat broadcasters fairly.
“Balance is essential,” she said. “There are so many parts to the incentive
auction process, we must remember that they all interrelate. For instance,
choices we make regarding interference will not only impact broadcast service,
but also how much spectrum will be available for auction, and in turn how much
revenue will be raised to address the priorities Congress set out in the
Lastly, she said the agency must stay mindful of one of the goals of
incentive auctions: to support the creation of new public-safety communications
Even at this early stage in the process, agency officials anticipate a return
of between 60 and 80 megahertz from broadcasters, roughly half of the amount
contemplated when the FCC released the National Broadband Plan in 2010.
Such a result undoubtedly would be disheartening to the president and to
Democratic and Republican congressional leaders, who are counting on incentive
auctions to generate as much as $15 billion in revenue, $7 billion of which
would go toward building a new nationwide emergency communications network for
public safety officials, the last unfulfilled recommendation of the 9/11
Given these realities, Rep. Greg Walden (R-Ore.), chairman of the House
Energy and Commerce Communications and Technology Subcommittee, said he will
exercise vigorous oversight of the FCC plan for incentive auctions, particularly
how much spectrum the agency ultimately will reserve for “unlicensed” uses.
“The mission of this subcommittee is to squeeze as much as possible out of
existing spectrum…,” Walden affirmed during a forum hosted by the Villanova
School of Business in Washington on Dec. 5, 2012.
Walden's remarks, while brief, offered a preview of what is likely to be a
protracted policy battle in 2013.
The FCC is proposing to auction the spectrum given up by the broadcasters in
5-MHz blocks, with 6-MHz “guard” bands to prevent interference between mobile
broadband services and broadcast TV services, which would be made available for
unlicensed use. The agency also is considering making available an additional 30
MHz of spectrum on an unlicensed basis.
To be sure, Walden wants the FCC to auction--and license--as much spectrum to
the wireless carriers as possible. Spectrum is a scarce government resource, he
argues, and must be used wisely so as not to favor unlicensed users such as
Silicon Valley tech firms over licensed users such as wireless carriers--or vice
versa. Auctioning the spectrum also will mean a monetary return to the general
treasury, while allotting spectrum for unlicensed uses will not, he notes.
“We will … ensure FCC implementation does not pick winners and losers by
allocating large swaths of spectrum to favored constituencies for free, thus
shorting the supply of spectrum that is badly needed to meet the rising consumer
demand for mobile broadband and leave public safety hanging by depriving it of
the funding it needs to build out a public safety network,” Walden added at the
Villanova School of Business event.
According to Neil Fried, Walden's chief telecommunications counsel, the FCC
proposals could result in a $19 billion loss in auction revenues.
Appearing on a panel at the Telecommunications Policy & Regulation
Institute on Dec. 13, 2012, Fried said the FCC plan not only is “bad policy,”
but could also violate the Middle Class Tax Relief and Job Creation Act of 2012
(Pub. L. No. 112-96), the legislation that authorized the FCC to hold incentive
House Democrats have taken a decidedly different stance on the issue.
Reps. Henry Waxman (D-Calif.) and Anna Eshoo (D-Calif.), the respective
ranking members of the full House Energy and Commerce Committee and its
Communications and Technology Subcommittee, have pushed the FCC to set aside
more and more spectrum for unlicensed uses, which they see as critical to
encouraging innovation and experimentation in new mobile devices and
By far, the most popular use of unlicensed spectrum is wireless fidelity, or
Wi-Fi, with roughly 20,000 different devices now certified by the FCC for use in
the Wi-Fi band, three times the number in any other frequency band. Wireless
carriers also increasingly rely on unlicensed spectrum to offload traffic from
their data networks. AT&T Inc. alone operates nearly 30,000 Wi-Fi “hot
spots” in the United States.
“Unlicensed spectrum is a very important platform for economic growth,” Eshoo
said during a Broadband Breakfast Club event Jan. 15 in Washington.
“Just walking around downtown Palo Alto [California] and going in and out of
startup [businesses], I ask them all the same question,” Eshoo said of visits to
her congressional district. “ 'What would cause you to shut off the lights,
close the door behind you, lock it, and have to walk away?' And they all said,
'if we lose unlicensed.' ”
As support, Eshoo cited language in the Middle Class Tax Act that said that
nothing “shall be construed to prevent the commission from using relinquished or
other spectrum to implement band plans with guard bands.”
Some, including Walden, Fried, and FCC Commissioner Robert McDowell, remain
unconvinced that 6-MHz guard bands are necessary to mitigate interference, given
In an interview with BNA, McDowell pointed to language in the Middle Class
Tax Act that stipulates that “guard bands shall be no larger than is technically
reasonable to prevent harmful interference between licensed services outside the
“I think we can have both licensed and unlicensed,” said McDowell, who has
been a longtime proponent of making spectrum available for unlicensed uses,
notably in TV “white spaces.”
“But let's not have fatter guard bands just to create a lot of leftover
spectrum for the purposes of preserving it for unlicensed use,” he said.
“Exclusive-use licenses provide an incentive to use spectrum at its highest
and best use and to build out infrastructure that provides tremendous economies
of scale, which best serve consumers,” he said. “With unlicensed, there's not
that incentive. You're not going to build a powerful cell tower because you
don't have priority use of that frequency. You're a secondary user and other
licensees can bump you out.”
In addition to the 6-MHz guard bands and a potential nationwide block of 30
MHz for unlicensed use, FCC Chairman Julius Genachowski has promised a major
boost for Wi-Fi.
At the Consumer Electronics Show in Las Vegas, Jan. 7-10, the chairman
announced that the FCC will vote soon on designating 195 MHz in the 5-gigahertz
band for unlicensed uses, a move that was hailed by Eshoo and tech giants such
as Google Inc.
The policy battle is not expected to be decided by the end of 2013.
Regardless of how much spectrum the FCC reclaims from broadcasters, the
pressure will increase in 2013 on the Commerce Department National
Telecommunications and Information Administration to pry loose frequencies from
federal government agencies.
Between incentive auctions and NTIA efforts, the Obama administration is
hoping to free up roughly 500 MHz of spectrum for mobile broadband uses by
To date, the NTIA has identified 115 MHz (1695-1710 MHz and 3550-3650 MHz) of
federal spectrum for potential mobile broadband uses, in addition to 210 MHz
that could be shared between federal agencies and wireless carriers.
In March 2012, the NTIA concluded in a much-anticipated report that, while it
is possible to reclaim and re-auction 95 MHz of government-held spectrum in the
1755-1850 MHz band for commercial mobile broadband and similar applications,
some federal licensees, such as the Department of Defense, “could remain in the
Several months later, the President's Council of Advisers on Science and
Technology released a report calling for as much as 1,000 MHz of government-held
spectrum to be shared with commercial broadband networks.
Taken together, these reports have changed the narrative in Washington from a
focus on taking back spectrum from so-called inefficient users--TV broadcasters
and federal government agencies--to a focus on sharing spectrum between federal
and non-federal entities (216 TCM, 11/8/12).
“We know that the United States competitiveness and global technology
leadership depend on the availability of spectrum--the lifeblood of smartphones,
tablets, and other wireless communication devices--but we also need to protect
mission-critical capabilities,” Anna Gomez, deputy assistant secretary for
communications and information at the Commerce Department, wrote in a 2012 recap
posted to the NTIA website Dec. 27, 2012. “So NTIA is exploring innovative
approaches that would allow federal and non-federal users to share the same
swaths of spectrum.”
Though NTIA has signaled that sharing must be embraced as a new reality, the
wireless industry is expected to push in 2013 for legislation that would require
the Department of Defense and other federal agencies to move off of airwaves in
the 1755-1780 MHz spectrum band.
The prized 1755-1780 MHz band is immediately adjacent to a 25 MHz block of
spectrum already allocated for mobile broadband uses and ready for auction--what
is known as AWS-3, or Advanced Wireless Services-3. If the DOD agrees to give
up--or, at the very least, share--spectrum in the band, the FCC would “pair” the
two blocks of spectrum together for a future auction.
A working group convened by leaders on the House Energy and Commerce
Communications and Technology Subcommittee is studying the issue of federal
spectrum use, and according to one House aide, “serious discussions” about the
1755-1780 MHz band will continue in 2013.
“Things will heat up on 1755-1780 this year,” said the aide.
Whatever form legislative action takes, the DOD will remain engaged on the
issues. Last year, the Pentagon lobbied Congress successfully to remove from the
Middle Class Tax Act a provision requiring the FCC to auction the 1755-1780 MHz
band to wireless carriers within three years.
Most of the 3,300 federal assignments within the larger 1755-1850 MHz band
are licensed for point-to-point fixed microwave use by the departments of Energy
and Homeland Security, and the Federal Aviation Administration. The DOD also
makes use of the spectrum for military satellites, precision-guided munitions
training, and unmanned aerial vehicles.
“I think we're going to see bipartisan interest in both inventorying and
transferring spectrum from federal government use to private-sector use,” Bruce
Mehlman, co-chairman of the Internet Innovation Alliance, a coalition of
nonprofits and corporations, including telecom carriers and equipment makers,
Mehlman, former assistant secretary of commerce for technology policy under
George W. Bush, noted that for the last four years, Congress has placed much of
its attention on passing legislation to authorize the FCC to hold incentive
“A lot of focus is now going to turn to federal spectrum holdings that could
be repurposed,” he said.
Regulatory reform is another issue that will command the attention of the FCC
In November, 2012, AT&T filed a petition with the agency to establish
so-called test zones where regulations left over from the Ma Bell era should no
According to the company, the rules underpinning the old monopoly telephone
network must expire with an industrywide transition to internet protocol, or IP,
networks. As such, the company has asked the FCC to declare that the new IP
networks are “subject to minimal regulation only at the federal level.”
In addition to the AT&T filing, the National Telecommunications
Cooperative Association (NTCA), a group that represents rural providers, also
has filed a petition calling for a rulemaking to “examine means of promoting and
sustaining the ongoing evolution of the public switched telephone network … to
an IP-based infrastructure through targeted regulatory relief and the
establishment of tailored near-term economic incentives.”
Such incentives would include allowing phone companies to recover the costs
of carrying IP traffic on their networks and providing “sufficient and
predictable” universal service support for providing “standalone” broadband
internet access service to rural America.
Michael Romano, NTCA senior vice president of policy, said the FCC should
avoid taking a “sledgehammer” approach, which he contended that AT&T has
“To say that, once this magical 'IP' pixie dust is sprinkled, that
regulations become irrelevant is a sweeping over-generalization,” Romano told
BNA in an interview. “If the FCC finds that [regulations] are not applicable due
to IP or changes in the market, then withdraw or modify. Don't just throw the
entire thing out and hope you can recreate it later.”
To address the issues raised in the two petitions, the chairman's office
created a Technology Transitions Task Force, which will be led by FCC General
Counsel Sean Lev on an interim basis and will include Julie Knapp, chief of the
FCC Office of Engineering and Technology and Marius Schwartz, the FCC chief
economist, as members.
Zachary Katz, the FCC chairman's chief of staff, said last month at the
Telecommunications Policy & Regulation Institute that the goal of the task
force will be to “develop holistic views for the commission” rather than to
“look at things piecemeal.”
“I think you'll start to see in 2013 some tangible outputs,” Katz said.
The debate over whether rules of the copper-line era should apply to today's
fiber-optic and internet-based networks centers on the changes in an industry
whose service for decades was guaranteed by government rules, rather than driven
Currently, the FCC regulates telecommunications providers under Title II of
the act, wireless carriers under Title III, and cable operators under Title VI,
even though the distinctions between these companies have blurred as telecom
providers now offer video service, cable operators now offer voice service, and
wireless carriers offer both voice and data service. Of the three provider
“types,” the telecom providers--successors to the Bell monopoly that was broken
up by court order in the 1980s, including today's AT&T and the local-phone
units of Verizon Communications Inc.--are required under state law to offer
service to every residence. They must meet standards for providing a quick dial
tone, a sure connection, and resiliency during storms and power outages. Newer
competitors offering phone service over fiber-optic or internet connections,
including Comcast Corp., do not have to abide by the same rules.
In addition, AT&T and Verizon still must maintain their copper phone
lines, whether they upgraded to fiber optics or not, which the two companies say
skews the playing field.
As part of the AT&T filings with the FCC, the company made a point to
request a deadline by which all phone companies may “sunset” the old public
switched telephone network.
Bob Quinn, an AT&T senior vice president and the firm's chief privacy
officer, said this is “focused in large part on the realization that if you want
to move to a broadband plan, you have to allow the carriers to retire the older
Speaking during a panel discussion at the Phoenix Center's Annual U.S.
Telecoms Symposium Jan. 3, 2013, Quinn said the goal is to “get into an economic
framework where you have as much private capital as possible going into
The company will be lobbying just as assertively for deregulation.
The United States Telecom Association, an industry trade group that counts
AT&T as a member, also filed a petition to reclassify all incumbent local
exchange carriers in the country as “non-dominant,” which the group says will
put them on more equal footing with wireless and cable competitors. If the FCC
approves the petition, “dominant” carriers, including AT&T, Verizon,
CenturyLink, and Windstream would be relieved of all currently applicable
regulations for pricing and market entry and exit, as well as the obligation
imposed upon them to file tariffs.
“The question the FCC should be asking is, 'What are the legacy regulations
from the copper-wire era, which obviously presumed a monopoly power, that should
be imported into the IP world?' ” FCC Commissioner Ajit Pai, a Republican, told
BNA in an interview.
Pai said the FCC could begin by eliminating tariffs and cost-study
requirements and harmonizing regulations that apply to a broad range of
communications service providers, but noted that the obligation to provide 911
emergency calling services should be preserved.
“We need to be thinking creatively about how to establish a framework for 911
services in an all-IP world,” Pai said.
Broadly speaking, Rosenworcel sees the IP transition not just as a “set of
arcane legal issues before the agency,” but rather, the “essential
infrastructure of communications in the digital age.”
“So we need to ask how we can inspire investment in IP infrastructure,” she
said. “And we need to ask how we can ensure that consumers across the country
can access the expanding range of digital opportunities and services this
While the FCC is expected to take a serious look at these issues, no final
action is expected in 2013. The agency will accept public comment on the
petitions in January and February of 2013, and may propose rules addressing the
industry's requests by the end of the year, at the earliest.
Further complicating the agency's agenda in 2013 is the potential departure
of FCC Chairman Genachowski.
Genachowski has not announced plans to resign but, according to several
people with knowledge of his thinking, he could step down before the second
quarter of 2013, if not earlier.
If Genachowski goes, Karen Kornbluh, U.S. ambassador to the Organization for
Economic Cooperation and Development, could become the next chair, sources told
BNA. Larry Strickling, the head of the NTIA, and Blair Levin, the architect of
the Federal Communications Commission National Broadband Plan, also are being
considered for the top FCC job in President Obama's second term, sources
With or without a new chair at the helm, the biggest challenge facing the FCC
in years may come to the fore in 2013 as the U.S. Court of Appeals for the
District of Columbia Circuit considers the Verizon Communications Inc.
challenges of the agency's Open Internet order, which bars internet service
providers from slowing or blocking web traffic, a concept commonly known as net
Verizon contends the order infringes free speech and property rights and is
an overreach of FCC statutory authority.
A Verizon victory would leave FCC jurisdiction over all things broadband in
question, and could set in motion congressional action--or action by the FCC
Following such a result, public interest groups and congressional Democrats
are likely to push the FCC to use Title II of the Communications Act to
re-establish jurisdiction over broadband service. With a majority vote by the
FCC, broadband easily could be reclassified as a “telecommunications service,”
which advocates say would put broadband more squarely within FCC statutory
In 2013, the FCC will review two wireless mergers.
Japan's Softbank Corp. is seeking agency approval to buy about 70 percent of
Sprint Nextel Corp., the third-largest wireless carrier (by subscribers) in the
United States, while Deutsche Telekom AG's T-Mobile USA Inc., the fourth-largest
carrier, wants to buy control of MetroPCS Communications Inc.
Analysts have said they expect approval of the deals, since both would leave
the combined companies with fewer customers than either Verizon Wireless or
AT&T, the No. 1 and No. 2 carriers, respectively.
In the nearer term, one issue that will need to be addressed by the FCC is
Genachowski has proposed relaxing a longstanding rule that limits the ability
of companies to own both a newspaper and a television or radio station in the
same local market. The proposal, which has been challenged in court, is expected
to be the most controversial piece of the agency's quadrennial update of the
nation's media ownership rules.
One area on which the Senate Commerce Committee and the House Energy and
Commerce Committee will focus is the reauthorization of the 2010 Satellite
Television Extension and Localism Act, or STELA, which expires in 2014.
According to Senate and House aides, STELA could provide an opportunity for
Congress to update other communications laws, such as the 1992 Cable Television
Consumer Protection and Competition Act and the 1996 Telecommunications Act.
STELA, which authorizes satellite providers to retransmit broadcast TV
signals, is the only “must-pass” legislation before the committees in 2013.
Those seeking reforms already have begun to push for smaller “add-ons” to STELA
to ensure their quick passage, Senate aides told BNA.
One of the add-ons expected to be proposed is a repeal of a provision in the
Cable Act that sets forth what is known as “retransmission consent”
negotiations, the aides said.
With advertising revenues declining and the price of sports rights soaring,
TV broadcasters have been fighting distributors for higher and higher fees to
retransmit their network programming, money that is eventually passed through to
consumers in the form of higher monthly rates.
Cable operators and satellite TV providers claim the current rules favor the
broadcasters and programmers, which can simply shut off their signal when
negotiations reach an impasse.
Section 325(b)(1)(A) of the Cable Act states that a television station's
signal may not be retransmitted by a multichannel video programming distributor,
or MVPD, without the “express authority of the originating station.”
Under FCC rules implementing the 1992 Cable Act, however, a station may be
found to have violated “good faith” bargaining rules “based on the totality of
the circumstances of a particular retransmission consent negotiation.” But, in
the past 20 years, there have been only two instances in which the FCC concluded
that a company negotiated in “bad faith.”
In 2011, the FCC launched a rulemaking proceeding to explore whether the
agency should, or could, do more to prevent blackouts of television programming
when negotiations to renew retransmission consent agreements stall. The agency,
however, has yet to take any substantive action.
Genachowski and top agency officials have admitted publicly that, absent
congressional action, there is little the FCC can do under the current
“We don't see things getting any better,” Matt Polka, president and CEO of
the American Cable Association, which represents small cable operators, told BNA
in an interview. “In fact, things are getting worse.”
Polka said that rising costs of sports rights, among other factors, have been
contributing to the recent high-profile standoffs between broadcasters and
“The truth is, from a true marketplace perspective, neither the sports
leagues could demand, nor the networks could agree, to pay the rights fees that
they are paying today if they didn't know that they could turn around and
immediately send all that cost down to every consumer of cable TV service or
satellite TV service, whether they watch one inning, one quarter, or one
period,” Polka said. “If they had to sell it based on the merits of who watches
it, the leagues could never get what they're getting today, and the networks
couldn't pay it.”
League executives argue, however, that the vast majority of viewers not only
watch sports, but are willing to pay to watch their favorite team.
Despite the growing concern, most agree that Congress is not expected to pass
legislation to deal with the issue of sports rights, but rather, is more likely
to hold hearings and launch inquiries.
Along these lines, aides to Senate Commerce Committee Chairman John D.
Rockefeller IV (D-W.Va.) say the committee in 2013 will examine the rates for
cable TV service, as well as the nascent online video market, which is providing
competition to the traditional cable-channel model.
With the departure of Sen. Jim DeMint (R-S.C.), who was expected to be
ranking member of the committee, there are lingering questions about whether
another Republican will reintroduce the Next Generation Television Marketplace
Act. As Congress neared adjournment in 2011, DeMint and Rep. Steve Scalise
(R-La.) introduced companion legislation (S. 2008, H.R. 3675) to repeal many of
the provisions of the 1992 Cable Act, which itself amended the Communications
Act of 1934. Their legislation would completely eliminate rules for
retransmission consent negotiations, compulsory licensing, and channel “must
“It changes efforts,” James Assey, executive vice president of the National
Cable and Telecommunications Association, the cable industry's main trade
association in Washington, told BNA. The association supported the bill.
“DeMint was a very important member of the committee,” Assey said. “You have
lost a champion, but you also have a number of new members of the
One Senate aide told BNA that the committee will soon begin discussions about
a rewrite of the Communications Act--how, and to what extent, an overhaul might
Progress will be slow, however.
The last time Congress updated the act was in 1996, when the internet was
barely in its infancy. It took more than five years to produce that statute, the
1996 Telecommunications Act, which focused mainly on deregulating the telephone
industry and was itself the first major overhaul of telecommunications law since
the Communications Act of 1934.