NORTHPOINT AMENDMENT COULD KILL SPECTRUM TRUST FUND BILL

Senators supporting the amendment said it would let Northpoint roll out broadband and cellphone services to rural areas. Sen. Sununu (R-N.H.), who co-sponsored the amendment with Sen. Cantwell (D-Wash.), said it also would allow local- into-local TV broadcasts. Detractors said it was a spectrum give-away that ran contrary to current spectrum auction policy and would sink important trust fund legislation (HR- 1320), which already had passed the House.

McCain warned committee members that the Administration wouldn’t support the trust fund bill if the Northpoint amendment were added. “It’s in conflict with wise spectrum management,” he said. House Commerce Committee spokesman Ken Johnson said Committee Chmn. Tauzin (R-La.) wouldn’t let a bill move that included the Northpoint amendment. “Simply put, it’s a deal breaker,” Johnson said: “Unless it comes out, the spectrum bill is dead.”

Several senators complained that the provision made an exception to spectrum policy. Sen. Wyden (D-Ore.) said while he had sympathy for the goal of increased rural broadband deployment, he saw the amendment as a special exception to auction policy and couldn’t support it. “There is little doubt this is a give-away and an exception,” McCain said, citing what he called the “$70 million give-away” of DTV spectrum to broadcasters. The amendment also would put in jeopardy the rollout of 3G wireless technology. Sens. Hollings (D-S.C.) and Rockefeller (D-W. Va.) also opposed the bill.

But other senators hailed Northpoint’s technology as having vast benefits for rural areas at the price of a “narrow exception” to auction policy. Particularly vocal in support of the bill was Senate Appropriations Chmn. Stevens (R-Alaska), who said the provision would let villages in rural Alaska get wireless phone and TV service at a fraction of the cost of standard wireless infrastructure. “I've got 227 villages with no service,” Stevens said forcefully after other senators complained about special exceptions: “This gives them a chance.” Cantwell said Congress had made exceptions to spectrum policy before and the broadband benefits made it a worthwhile exception. Senate Communications Subcommittee Chmn. Burns (R-Mont.) also said he supported the measure.

The addition of the Northpoint provision, coupled with the Administration’s opposition to a spectrum relocation bill with such riders attached, created serious uncertainty for a measure that had been one of the wireless industry’s top Capitol Hill priorities this year. The measure is critical to clearing Defense Dept. incumbents from spectrum earmarked for advanced wireless services, including 3G. Last year, DoD had agreed to clear most of 1710-1755 MHz, which is part of the 90 MHz that’s being made available for advanced wireless services.

Current law requires commercial entities to reimburse federal users for the costs of relocating from reallocated spectrum. The proposed spectrum relocation trust fund was the result of negotiations between the federal govt. and industry on how that would occur to clear spectrum for an advanced wireless service auction.

The proposed relocation fund would change the existing system of direct payments from commercial carriers to federal entities that would be reimbursed for relocating. It would set up a central relocation fund financed from auction receipts that would be used to reimburse DoD incumbents that moved. The House already has passed such a bill, 408-10. NTIA has called such legislation a “critical piece” of a measure that would stimulate the rollout of 3G services.

The Administration “would strongly oppose any amendment to the bill,” Commerce Dept. Gen. Counsel Theodore Kassinger told McCain in a letter this week. “Any amendment could delay enactment of the spectrum relocation fund and jeopardize this important opportunity to expedite the opening of spectrum to new commercial uses and consumer services.” Kassinger said the Administration was pleased that the legislation “closely tracks” its spectrum relocation fund proposal. He said the bill would “streamline the process for reimbursing government users, to facilitate their relocation to comparable spectrum and to provide greater certainty to auction bidders and incumbents.”

While expressing concern about the rider, CTIA lauded the markup, saying it hoped the “core bill” would move forward quickly so DoD and other incumbents could begin to upgrade their equipment in alternate bands. “The unrelated amendment added in committee, which gives away spectrum to a commercial interest, is not consistent with the spectrum relocation legislation and it denies taxpayers revenues from the auction process,” CTIA Senior Vp-Govt. Affairs Steve Berry said. “We hope the provision is dropped as the relocation bill moves forward.”

Northpoint Exec. Vp. Toni Bush called the amendment a “victory” for the multichannel video consumer: “This provision, once enacted, will pave the way for rapid deployment of the multichannel video distribution and data service (MVDDS) throughout the entire [U.S.]. [It] levels the playing field between satellite companies and the terrestrial applicants like us.”

MDS America CEO Kirk Kirkpatrick said his company could benefit from the amendment, but a market forces decision was “better for all legitimate businesses… The motivation to build these systems, in our opinion, should be the purchase of spectral real estate which would put a time value on the investment and make [a company] want to roll out services. This amendment doesn’t prevent anyone from getting the spectrum and having their own auction.” Kirkpatrick said the amendment would only “dramatically slow down the rollout” of the systems, due to the FCC’s applicant qualifications process and any additional litigation. MDS “obviously” will litigate if a final iteration of the amendment cuts the company out, Kirkpatrick said, but he believes it’s unlikely to pass through the House.

DirecTV responded: “It’s shocking to us, as we're considering participating in the upcoming FCC auction for DBS spectrum, that Congress would even consider giving the terrestrial portion of the same spectrum away for free because one company wants a special exemption from the auction law.” Satellite Bcstg. & Communications Assn. Pres. Andrew Wright said the amendment would set a “dangerous legislative precedent,” interrupting a pending appeal and preempting the auction procedure required by law: “Passage of this amendment sends the wrong message. First, it says if you don’t like the result at the FCC, go ask Congress to change it. Second, it says if your company’s business plan cannot attract sufficient capital to participate in a statutorily-required auction, get Congress to eliminate the auction and deprive the U.S. Treasury of payment for the use of extremely valuable public assets.”