FCC Approves Commercial Airline Broadband Rules

The ATG order appeared to be a partial win for Verizon Airfone, the lone ATG incumbent, and a loss for competitors AirCell and Boeing. Sources said after the meeting Wed. that Verizon may have a significant advantage in outbidding the others to continue its commercial air monopoly.

The Wireless Bureau initially recommended a single 4- MHz license, citing interference concerns, but it eventually agreed based on evidence presented by AirCell, Boeing and others that multiple licenses are possible. The order specifically allows overlapping 3-MHz licenses, a single 3-MHz license and a single one-MHz license, or a single one-MHz license and exclusive 3-MHz license at the opposite ends of the band. The concept is similar to the auction plan recommended by Space Data. FCC sources said the Space Data filing proved influential.

But Verizon was disappointed with the part of the order that prevents it from using the spectrum for terrestrial purposes as well. The ancillary service argument loomed large on the 8th floor in the closing days of the debate, with AirCell lobbying hard for the prohibition (CD Dec 8 p2).

Comr. Copps issued a partial dissent, as did Comr. Adelstein. “The order creates an auction where one company can lock up the only license that can support a true broadband air-to-ground service,” Copps said. “That means that if a company bids enough, it can exclude all other competitors, leaving airlines with only one possible supplier and passengers with no choice. Experience shows that if a company has the chance to buy a monopoly license, it will pay a premium for it.”

But Chmn. Powell denied that the order in effect establishes a monopoly in ATG: “There are options within the bandplan and the auctions for different scenarios to play out. To assume that it’s a foregone conclusion that the only result that’s going to follow is one carrier is successively going to outbid everyone and get everything is prejudging what the auction is meant to determine.”

Powell questioned the level of potential competition in ATG. “It’s important to recognize that an airplane is a pretty confined little market,” he added. “One of the things we had observed in the voice services… is it was a tough market. It’s a tough service to try to provide. Even when companies had exclusive models they failed. We were just not willing to sort of be sure that we knew the business model and the vision to impose.” Powell noted that FCC responded to AirCell-Boeing concerns by cutting off the one option that would guarantee exclusivity.

Wireless Bureau Chief John Muleta said the order was in keeping with FCC’s procompetition approach to spectrum licensing. “We're going to allow people with different business models to have an opportunity to play in this band… A monopolist with a bad business plan technically goes out of existence.”

Muleta said the order provides opportunities for competitors. “The history of wireless has always been about the smart guys using a little bit of spectrum to provide an interesting, valuable service that people will buy,” he said. “One MHz might do that trick. Three might do it. Overlapping 3 might. We just can’t tell you what it is.”

Muleta said the bureau preferred to allow licensees as much freedom as possible in using the spectrum, by opening the rules to allow for ancillary service. “We as a general matter would like to provide licenses with flexibility… because it makes sense,” he said. “The Commission has decided this is not the place to do this but that’s a choice that the Commission makes.” Muleta also observed that more spectrum may become available for ATG service.

AirCell expressed disappointment the FCC hadn’t endorsed multiple licenses. “Combinatorial bidding, while creative, is a new approach at the FCC and AirCell remains concerned that the process, as it plays out, may not yield the desired effect of providing competition in broadband services to airline passengers,” AirCell said.

CTIA Pres. Steve Largent said the FCC made the right decision in rejecting arguments that the ATG winner should be allowed to offer ancillary service. “There was simply too much uncertainty regarding the air-to-ground spectrum and interference to allow a terrestrial component in the 800 MHz band at this time,” Largent said. “There is an obligation to provide for interference-free homeland security communications, which could have been negatively impacted by a new terrestrial offering. Today the Commission acted in the best interest of public safety and consumers.”

Attorney Laura Phillips said the decision won’t make either side happy. “We're still not clear at the end of the day how this market is going to develop,” she said. “There was so much force to bring this to a conclusion. It finally comes up and you're still left guessing… The parties that have spent an awful lot of time putting their best arguments before the Commission are going to come away thinking the glass is half empty.”

Meanwhile, the FCC agreed 5-0 to explore lifting its ban on cellphone use on commercial flights. The Federal Aviation Administration also has a ban, which it’s studying. Muleta said that because the FAA is examining fundamental safety issues, its investigation will likely conclude after the FCC’s wraps up the rulemaking. “Specifically, the Commission proposed to permit the airborne operation of ‘off the shelf’ wireless handsets and other devices so long as the device operates at its lowest power setting under control of a ‘pico cell’ located on the aircraft, and the operation does not allow unwanted radio frequency emissions to interfere with terrestrial cellular systems,” the FCC said. The Commission asked for public comment on whether the proposal should apply only to devices operating in 800 MHz cellular spectrum, or whether devices operating on other spectrum bands, such as the PCS band or Advanced Wireless Services bands, should be included.

Adelstein said the ban may no longer make sense and the FCC can’t order the public to be polite. “Good cell- phone etiquette is essential,” he said: “Should you not be able to communicate because it might annoy a person next to you?”