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FCC lays out 600 MHz auction rules, unleashes AWS-3

The Federal Communications Commission today laid out several decisions set to impact the upcoming 600 MHz spectrum incentive auction and how the government agency views participation in that event. Those entities lobbying their case over the past several months in front of the FCC can at least claim some level of victory from the notice of proposed rulemaking offered up by the FCC.
The NPRM included both details on how television broadcasters will participate in the proceedings (reverse auction) as well as how the FCC plans to then turn that still unknown amount of spectrum over to wireless operators (forward auction) to further feed their networks.
Those forward-auction details announced today include the FCC parsing out spectrum licenses in 5×5 megahertz chunks (10 megahertz total per license) covering partial economic are license sizes. Larger operators had wanted licenses sizes to include at least some 10×10 megahertz options, which were touted as being most beneficial to current LTE deployment plans.
The PEA-sized licenses will provide for the country to be divided up into 428 markets in which licenses will be available. Larger carriers had initially lobbied for larger license chunks of either regional economic areas (12 markets) or economic areas (176 markets), while smaller operators had petitioned for cellular market areas (734 markets). The FCC noted that “PEAs permit entry by providers
that contemplate offering wireless broadband service on a localized basis, yet may be easily aggregated
by carriers that plan to provide service on a larger geographic scale.”
Looking to avoid interoperability and band plan issues that shrouded the deployment of 700 MHz spectrum licenses, the FCC also noted that there would be interoperability between all spectrum licenses in the 600 MHz band.
The FCC also placed limits on certain potential spectrum license participants, noting that no more than 30 megahertz of spectrum will be set aside in all markets in a reserved manner for those participants holding less than one-third of spectrum in those markets below the 1 GHz level. That rule is most pointedly targeted at the likes of Verizon Wireless and AT&T Mobility, both of which control a lion’s share of the nation’ sub-1 GHz spectrum, and follows guidelines proposed by T-Mobile US last year as part of its “dynamic market rules” filing.
The FCC hinted last month that it would move to place some limits on bidding eligibility in order to promote competition by distributing the availability of low-band spectrum.
“This disparity makes it difficult for rural consumers to have access to the competition and choice that would be available if more wireless competitors also had access to low-band spectrum,” FCC Chairman Tom Wheeler said in a blog post. “It also creates challenges for consumers in urban environments who sometimes have difficulty using their mobile phones at home or in their offices.”
The FCC’s decision to limit bidding did not sit well with the Republican members of the FCC, with Commissioner Michael O’Rielly and Commissioner Ajit Pai both laying out scathing dissenting arguments that bidding limits would suppress overall auction revenues, and put the FCC in the position of trying to correct free-market conditions and cover up previous business decisions made by some companies.
Democrats on the commission also did not seem overly happy with the decision, noting that should the auction include at least 70 megahertz of total spectrum, an amount seen by many as a likely amount, 40 megahertz would be un-encumbered by limits. That would seem to allow Verizon Wireless and AT&T to both pick up 20 megahertz of spectrum each, which is the amount both had indicated would need to be the minimum amount necessary to take advantage of LTE technology, without having to bid against each other.
Leading up to the rulemaking, AT&T had hinted that if it found bidding limits to aggressive it could sit out the 600 MHz auction process, thus potentially preventing the FCC from reaching financial goals. However, the carrier came out today in favor of the proposed rulemaking, noting that it would indeed participate and that it would look to acquire between 20 megahertz and 40 megahertz of spectrum from the proceedings.
As for build out requirements, the FCC said licensees would need to cover 40% of a license’s potential customer base within six years of receiving the license and 75% coverage by the end of 12-year initial license term. However, getting hands on those new licenses could take several years as the FCC ruled that broadcasters turning in their spectrum would have up to 39 months after the auction is complete to vacate those bands.
The necessary guard bands placed between some licenses is also set to be turned over to unlicensed use. That spectrum could total up to 28 megahertz, depending on how much spectrum is returned by broadcasters.
Bidding credits for auction participants will follow the model used in the 600 MHz auction, with a 15% credit for small businesses, which are those with annual gross revenues of less than $40 million for the proceeding three years), and 25% for “very small business,” or those with less than $15 million in annual gross revenues.
Wheeler has gone to great lengths in convincing broadcasters to participate in the reverse-auction proceedings, noting at a recent speech that the opportunity was a once-in-a-lifetime chance to garner financial compensation for under-utilized airwaves.
“Seldom have I seen such a risk-free opportunity as that represented to broadcasters by the incentive auction, including the opportunity to continue their existing business on shared spectrum and take home a check for the spectrum they vacate,” Wheeler said in March at an event at the Brookings Institute in Washington, D.C.
AWS-3 free-for-all
In making its 600 MHz spectrum auction rules, the FCC also noted that there would not be any limitations on bidding eligibility for the upcoming AWS-3 auction, which is scheduled for later this year. There is currently 65 megahertz of spectrum set to be auctioned off for commercial services in those proceedings, which have garnered interest from most commercial operators.
T-Mobile US noted in its dynamic market rules argument that it would be possible that the government’s need to fund the $7 billion set aside for the FirstNet nationwide public safety network could be met with proceeds from the recently completed H-Block auction ($1.5 billion) and strong participation in the AWS-3 auction.
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