FCC CLOSING IN ON POSSIBLE APRIL 15 VOTE FOR 800 MHZ PLAN

Several sources said a bid credit for Nextel was under consideration, but the idea didn’t have majority support on the 8th floor. Several sources said Comrs. Abernathy and Adelstein were interested in a bid credit, but it was part of a mix of options under consideration rather than a favored position. Discussions on final details come as the FCC kept working toward putting an 800 MHz item on the April 15 meeting agenda. Sheryl Wilkerson, FCC Chmn. Powell’s wireless adviser, told an FCBA Wireless Committee lunch Fri. the agency still planned to have the item on the April 15 agenda. Even among those interested in the possibility of a bid credit, there still appeared to be legal questions about exactly how it would work.

Abernathy said at a press breakfast last month that she had concern about a plan that would give Nextel spectrum at 1.9 GHz, along with doing an in-band realignment, to fix public safety interference at 800 MHz (CD March 19 p1). She said she would prefer a solution that didn’t include spectrum outside the 800 MHz band, but she hadn’t “foreclosed” moving outside that band, including to 1.9 GHz, if necessary. “She’s not advancing a voucher plan or a bidding credit plan as much as she’s considering that among other options,” an FCC source said. “She’s entertaining a variety of proposed approaches.” The idea of an auction voucher is among a “menu of options” that some offices have been discussing with the General Counsel’s Office, the source said.

The bid credit could be based on the sum Nextel actually spends relocating incumbents at 800 MHz, said one wireless industry source who has opposed the “consensus plan” for 800 MHz backed by Nextel, the Assn. of Public Safety Communications Officials and others. Under this scenario, the Commission would add the value of the 800 MHz spectrum that Nextel would give up in that rebanding process, the source said. “That total is then reduced by the increased value of Nextel’s spectrum position at 800 MHz,” the source said. (After the proposed rebanding, Nextel and public safety incumbents would receive contiguous spectrum blocks at different parts of 800 MHz.) The amount left over would go to Nextel in the form of a bid credit for a future auction, the source said.

“If there is a ‘private sale’ of 1.9 GHz spectrum, that will virtually guarantee one or more lawsuits,” the industry source said. “If the FCC looks at a bid credit, at least this company would consider how that was structured before determining whether to sue or not.”

An FCC staff proposal on how to fix public safety interference at 800 MHz began circulating last month on the 8th floor (CD March 11 p1). The proposal would cover 800 MHz and 1.9 GHz, but not blocks at 700 and 900 MHz that were part of the “consensus plan.” Under the draft, Nextel would pay for incumbent retuning at 800 MHz and would pay the difference between that and the value of 10 MHz at 1.9 GHz. The FCC draft item would require Nextel to pay the govt. the difference between relocation costs at 800 MHz and the valuation of 10 MHz at 1.9 GHz. The consensus plan, on the other hand, would set a capped amount of $850 million for Nextel to pay for private wireless and public safety relocation costs. It wouldn’t have the carrier pay for spectrum at 1.9 GHz because it would be part of a spectrum swap in which Nextel would receive some spectrum in return for bands it was giving up elsewhere. Wireless carriers have decried the consensus plan as giving Nextel a spectrum “windfall.” Nextel has argued that it would pay more for retuning and other costs under the plan than it would gain. Verizon Wireless told the Commission in Feb. it was willing to bid in an “immediate” auction of spectrum at 1.9 GHz (CD Feb 26 p1).

Numerous sources stressed that the FCC is still hashing out important issues on the 800 MHz proposal. In recent days, “they were still churning and trying to figure out what do,” one industry source said. Even within the wireless industry, reaction to the possibility of a bidding credit was mixed. “It depends on the magnitude,” said one industry source. “Whether it’s a voucher or a bid credit, it still distorts future auctions.” It would still have the attraction of allowing a market value to be placed on the spectrum, rather than the Commission coming up with a valuation itself, the source said. It appears to be more closely in line with the FCC’s auction obligations under Sec. 309(j) of the Communications Act, the industry source said.

One of the highest profile uses the Commission has made of an auction discount voucher involved the resolution of a legal dispute with Qualcomm involving pioneer’s preference spectrum. The FCC in 2000 granted a $125-million auction discount voucher to the company to be used in any auction within 3 years as long as it went toward CDMA development. The award of the voucher was part of a settlement of a lawsuit involving Qualcomm’s claim for pioneer’s preference in its development of CDMA technology. The FCC also explored the idea in 2002 in the context of possible incentives for mobile satellite service (MSS) operators to return their spectrum so that it could be auctioned to bidders that include MSS licensees and mobile wireless operators. Under that idea -- which the Commission ultimately didn’t pursue -- MSS licensees that returned spectrum and then competed in an auction along with other bidders could have received flexibility to provide an ancillary terrestrial component (ATC) service (CD Sept 3/2002 p1).