FCC Seeks to Maximize AWS-3 Auction Revenue With Smaller License Blocks

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By Bryce Baschuk  

March 31 --The Federal Communications Commission amended its rules to encourage a competitive bidding process and maximize revenue from the agency's highly anticipated spectrum auction of 65 megahertz of spectrum from the AWS-3 band.

The agency adopted new allocation, licensing, service, and technical rules to auction the 1695-1710 MHz, 1755-1780 MHz and 2155-2180 MHz bands during its March 31 open meeting (GN Docket No. 13-185). The amended rules are aimed at increasing competition in the wireless space and increasing the revenue from the auction of AWS-3 spectrum which is considered valuable due to its ability to penetrate buildings and other structures.

FCC Chairman Tom Wheeler commended the wireless bureau, Congress, the White House and other federal agencies who helped free up the “Gold Coast spectrum” for auction. “The hard work is not yet over. Details have to be worked out about protection zones and coordination that will affect our ability to hold the auction in the designated time,” he said. Wheeler said he is confident the commission “will reach those resolutions and we will put it out in a public notice.”

Fall 2014 Auction

The Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-96) requires the FCC to auction and license spectrum in the AWS-3 band by February 2015. Commission officials said they expect to hold the auction sometime this fall.

The FCC's ability to maximize proceeds from the AWS-3 auction will affect how the agency formulates rules for next year's broadcast spectrum incentive auction of the 600 MHz band. Revenue generated from the auction will fund the $7 billion development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt. Last month the commission auctioned 10 MHz of H Block spectrum for $1.56 billion.

Smaller License Sizes

The new auction rules will offer one 10 MHz x 10 MHz paired spectrum block sold as economic area licenses, one 5 MHz x 5 MHz paired block sold as cellular market area licenses and two 5 MHz x 5 MHz paired blocks sold as economic area licenses in the 1755-1780 MHz and 2155-2180 MHz bands. The order also offers one 5 MHz unpaired block and one 10 MHz unpaired block to be sold as economic area licenses in the 1695-1710 MHz band. Cellular Market Area (CMA) licenses are generally smaller than Economic Area (EA) licenses.

The rulemaking is seen as a partial victory for smaller carriers who have urged the commission to license available AWS-3 spectrum using as many 5 MHz x 5 MHz licenses as possible, according to recent filings.

Steven Berry, president of the Competitive Carriers Association, commended the FCC's compromised band plan but said it did not go far enough, according to a news release. “The FCC's decision today to license only one paired 5 x 5 MHz block in smaller cellular market areas is certainly disappointing for most competitive carriers. The use of the larger economic areas will likely curtail participation among smaller carriers, who have neither the resources nor the scale to bid on license areas of that size and could ultimately reduce revenue from the auction,” he said.

Joan Marsh, the vice president of federal regulatory affairs at AT&T Inc., said she was disappointed that the FCC's auction rules may have left money on the table, according to a blog post. “The AWS-1 auction results demonstrated clearly that both auction demand and auction revenue flows first and most freely to larger blocks with larger license sizes. For this reason, we supported the band plan as originally proposed by FCC staff.”

The nation's two wireless carriers, AT&T and Verizon Communications Inc., had previously said 5 MHz x 5 MHz blocks and the use of CMAs would complicate the coordination process between commercial AWS-3 licensees and federal users on the band.

'Not an Easy Task.'

FCC Commissioner Mignon Clyburn said she would have preferred a different band plan but said the compromise is important to ensure more federal spectrum is brought to auction.

“After carefully considering all of the arguments on the band plan I was more persuaded by the view that smaller block sizes and areas could enhance competition,” she said.

Rep. Doris Matsui (D-Calif.) said she was pleased the FCC put forth a band plan that “will encourage a competitive bidding process while maximizing revenue.”

“It was not an easy task, but I am pleased that a compromise was crafted to attempt to accomplish both goals,” she said in a news release.

Interoperability Requirements

The commission adopted interoperability requirements between the AWS-1 and AWS-3 band and language that encouraged industry to pursue a voluntary interoperability solution with the AWS-4 band.

FCC Commissioner Michael O'Rielly said he opposed the commission's “stealth regulation” language aimed at extending interoperability to the AWS-4 band. “Without adopting rules, the commission here is telling industry that, absent technical impediments, we expect them to implement interoperability,” O'Rielly said. “If they do not, or 'if the commission determines that progress on interoperability has stalled in the standards process,' the commission may regulate.”

Dish Network Corp. previously said its interest in bidding for spectrum in the AWS-3 auction “would be greatly enhanced” if the FCC ensures interoperability between the AWS-3 and AWS-4 bands, according to FCC filings. Dish noted that its spectrum holdings in the 2180-2200 MHz band are the foundation of its plans to launch a mobile broadband network.

Sharing Details Pending

The commission did not disclose details regarding spectrum sharing and coordination between federal and commercial users on the band but said such details will be made available prior to the auction. The success of the auction will depend on an “unprecedented level of cooperation” between corporate and federal users, an FCC official said at the meeting.

Last year the Defense Department agreed to relocate many of its key operations away from the 1755-1780 MHz band in a move that allows the FCC to pair it with 2155-2180 MHz band. In return Defense has sought access to commercial spectrum in locations like military training ranges in otherwise unpopulated areas.

The Commerce Department's National Telecommunications and Information Administration had urged the FCC to defer action on any new regulations regarding bi-directional sharing until requirements for a more flexible approach are developed, according to recent filings. “Limiting access to only low population areas at this time through specific rules to accommodate new types of tactical and training operations may not be necessary if compatibility issues can be worked out with wireless carriers,” NTIA's filing said.

“Although more work remains to be done to maximize commercial access to this band and make available information about the band to potential bidders, the AWS-3 report and order is an important step toward bringing this spectrum to market,” said CTIA-The Wireless Association's Vice President of Regulatory Affairs Scott Bergmann in a news release.

Spectrum Aggregation Limits

O'Rielly said he was dismayed that the order did not address questions about whether spectrum screens or spectrum aggregation limits should be set. “I will strongly oppose arbitrary spectrum caps or any spectrum screen that is not directly related to addressing undue power in a particular market,” he said.

Berry echoed O'Rielly's criticism and said he was “disappointed the FCC didn't take the chance to address aggregation limits today. Outside of this proceeding the FCC should promptly conclude its review of its mobile spectrum holdings rules to reform the spectrum screen and prevent excessive concentration of spectrum holdings,” he said.

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com

For the FCC's release, visit http://www.fcc.gov/document/fcc-sets-stage-auction-65-mhz-spectrum-mobile-broadband.

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