To the cheers and jeers of an industry, the Federal Communications Commission announced licensing rules for its highly anticipated AWS-3 spectrum auction that appears to cater to concerns of smaller carriers and consternation of larger operators.
In its notice of proposed rulemaking, the FCC has moved forward with plans for a total of 65 megahertz of spectrum in the 1.7/2.1 GHz band to be auctioned later this year for commercial purposes. The spectrum license will include four paired options: three 5×5 megahertz options, leaving just a single 10×10 megahertz license covering the country. While the FCC release did not specify the size of geographic size of those licenses, comments indicated that the 5×5 megahertz licenses would include two sized to economic area dimensions and one sized to commercial market area dimensions.
Smaller operators have been pushing for the FCC to carve out sufficient spectrum in smaller geographic areas in an attempt to cater to their more specific coverage needs that generally do not include major markets. The Competitive Carriers Association has said it would prefer the FCC move forward with CMA-sized licenses, which would include 734 total licenses covering the country. Larger carriers tend to prefer larger license blocks in the EA (176 total licenses) or larger blocks that they claim are easier to manage in an auction format.
News had surfaced earlier this month that FCC staffers had recommended that the commission move forward with a pair of EA-sized 10×10 megahertz licenses and only a single CMA-sized 5×5 megahertz license, which received support from AT&T, but was blasted by smaller carriers. The recently completed H-Block spectrum auction, which included 10 megahertz of spectrum in the upper 1.9 GHz band, were sliced into EA-sized chunks with Dish Network running away nearly un-contested with all the licenses.
T-Mobile US came out following the AT&T announcement in favor of smaller license slices, a tone it re-iterated at last week’s CCA event in San Antonio.
A number of speakers at last week’s CCA event noted that if the FCC were to move forward with a pair of 10×10 megahertz licenses, they would for sure have been split evenly between Verizon Wireless and AT&T, leaving the rest of the industry to fight over the single 5×5 megahertz license. At past events, smaller carriers have also argued that without CMA-sized licenses, they would not be able to participate in the auction.
CCA President and CEO Steve Berry said that while the organization was content with the amount of licenses sized in smaller 5×5 megahertz slices, he railed against there being only a single CMA license made available.
“The Wireless Bureau previously proposed to license the spectrum in only one 5×5 [megahertz] block, and we are pleased the FCC restructured the band plan to promote greater participation in the auction and ensure a device ecosystem,” said Berry in a statement. “Unfortunately, the FCC did not go far enough. The FCC’s decision today to license only one paired 5×5 [megahertz] block in smaller cellular market areas (CMAs) is certainly disappointing for most competitive carriers. The use of the larger economic areas (EAs) 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.”
AT&T was also unhappy with the rules, citing the need for large spectrum chunks in order to take greater advantage of carrier aggregation capabilities of LTE technology.
“As we previously argued, 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,” said Joan Marsh, VP of federal regulatory at AT&T in a statement. “For this reason, we supported the band plan as originally proposed by FCC staff. The dis-aggregated blocks will still draw significant interest at auction, I’m sure. Spectrum after all remains a scarce resource, and this order represents important progress in bringing this valuable spectrum to market. Any fragmentation driven by the auction design will no doubt be fixed in the secondary market – history shows us that this is inevitable (see AWS-1). But secondary market fixes means money was left on the table. And where revenue is essential to pay for relocation costs and to meet other U.S. priorities, that should matter.”
Outside of the spectrum sizes, the FCC also ordered for interoperability between the AWS-3 and AWS-1 band that is already being used by carriers to support 3G and LTE services. This move would seem an attempt by the FCC to cut off any potential band plan or interoperability challenges that marred the 700 MHz auction and subsequent roll outs.
The FCC has yet to rule on the exact date for the auction or on concerns from smaller operators regarding spectrum aggregation. Those concerns have been mostly focused on the upcoming 600 MHz incentive auction, where smaller carriers are looking to limit the participation of Verizon Wireless and AT&T, claiming they already control a vast majority of sub-1 GHz spectrum.
FCC Commissioner Michael O’Rielly touched on the spectrum aggregation concern in his statement.
“The item defers this question to the mobile spectrum holdings proceeding,” O’Rielly said. “But, as I have said before, I will strongly oppose arbitrary spectrum caps or any spectrum screen that is not directly related to addressing undue power in a particular market. We simply cannot afford the risk of using that proceeding to give favored industry players an unwarranted discount on spectrum.”
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