The Federal Communications Commission received comments from wireless operators over its tentative decision to allow large carriers to bid in the re-auction of C- and F-block personal communications services spectrum. Most large carriers, however, feel the potential rules severely limit their participation.
The FCC has preliminarily decided it is in the public interest to allow large companies to bid for this spectrum, most of which belonged to bankrupt NextWave Telecom Inc. The commission’s proposed rules would split the 30-megahertz C-block licenses into three 10-megahertz blocks and allow large companies the ability to bid on two of those blocks for the top 19 markets. Large companies would have the ability to bid on one block in markets with populations less than 2.5 million.
Large operators like Verizon Wireless, Nextel Communications Inc., VoiceStream Wireless Corp., SBC Communications Inc. and BellSouth Corp., who are looking to create ubiquitous nationwide footprints, championed an open auction for all licenses, saying bidding credits can effectively assure small business opportunities.
If any set-aside to entrepreneurs is kept, many large carriers reasoned that the 2.5-million threshold is too high.
AT&T Wireless and Verizon said if the commission reserves spectrum for small businesses, it should limit these entities to 10 megahertz in each C-block market, while opening the remaining two to all bidders, including small businesses. Only nine basic trading areas in the auction have populations of more than 2.5 million, Verizon noted.
“In effect, this proposal would exclude 20 megahertz in all but a small number of markets from being open to all interested bidders,” the company said. “The demand for spectrum to implement 3G services is not limited to nine cities. The proposal would limit Verizon Wireless’ participation in the auction for many large markets, without justification.”
Nextel went further, saying if any set-aside is required by the commission, it should be limited to a single 10 megahertz license in only those markets at or below 1 million pops. VoiceStream and SBC encouraged the commission to use a 1-million population threshold rather than the 2.5-million requirement to divide the tiers.
Companies that have obtained spectrum in the C- and F-blocks reiterated their disappointment in the FCC’s ruling. The Personal Communications Industry Association, which represents PCS players, opposed the FCC’s proposal to change eligibility requirements.
“The large carriers should bear the burden of demonstrating with detail and specify the capacity need that they claim necessitates dramatic alteration of the commission’s rules. They simply have not done so,” said Leap Wireless International Inc.
Leap noted, however, that the FCC’s proposed rules may mitigate some of the negative effects on small businesses and other designated entities. It suggested the FCC auction one 10-megahertz license and one 20-megahertz license, reasoning that with a minimum of 20 megahertz, the company could expand its offering into a data offering. Large operators should be limited to bidding on one 20-megahertz license in areas that have 5 million pops, said Leap.
“Notwithstanding the fact that there is no need for any change in the commission’s rules, TeleCorp PCS/Tritel is cognizant that compromise is the order of the day,” said TeleCorp, which plans to merge with Tritel Corp. “The most essential component in the revised rules is the reservation of at least 10 [megahertz] for entrepreneurs in all markets.”
The FCC also sought comment on what to do with the 10-megahertz F-block licenses. All large operators that commented recommended the commission open that spectrum to all bidders, while most existing DE companies want the FCC to keep it closed.
The commission is also considering upping the bidding credits for small companies and whether previous C-block winners can be grand fathered in to qualify as a DE company. Most DE carriers no longer meet the financial limits for entrepreneur status.
Large operators also took the time to reiterate their desire for the commission to lift the spectrum cap in time for the auction.
It’s unclear when the FCC will reschedule the re-auction. The auction originally was set for July 26, but this date has slipped since the comment cycle completed June 26. The FCC was scheduled to cut off all meetings with staff last week. The auctions divisions of the FCC’s Wireless Telecommunications Bureau will release a public notice announcing the new date.
The number of licenses in the re-auction is likely to increase given the FCC’s policy of canceling them after the grace period for installment payments has expired.
Since bankrupt licensees have not made installment payments while in the bankruptcy proceeding, this list could include all of the bankrupt C blockers. The FCC has told the bankruptcy courts in at least the cases of Airadigm Communications Inc. and Personal Communications Network Inc. it has canceled their licenses.
The FCC says its automatic cancellation rules do not require it to put out a public notice announcing the cancellation. It is unclear when, or if, the FCC will include these licenses in the re-auction since the agency has yet to put out a public notice saying so. Many months have gone by since the FCC canceled some licenses.
“We will be putting out an inventory close to the auction,” said an FCC official. “We’re now in the process of going through rulemaking, and we have to get the minimum opening comment rules.”
NextWave has asked the U.S. Court of Appeals for the D.C. Circuit to set an expedited briefing schedule that would allow the appeals court to rule on whether the FCC has the authority to cancel its licenses before the scheduled re-auction. If the court refuses to set such a schedule, NextWave has asked the court to stay the re-auction.
In hopes of preventing NextWave from getting a reprieve from Congress, the Cellular Telecommunications Industry Association has begun placing ads in Capitol Hill newspapers to convince lawmakers that allowing NextWave to keep its licenses would amount to a subsidy for NextWave. Additionally, the National Taxpayers Union sent a letter to Congress last month expressing the same view.
