Wireless Industry Offers Views on CSEA Implementation

The CSEA was signed by President Bush as part of broader legislation (HR-5419) creating a spectrum relocation trust fund. The fund guarantees use of eligible frequency auction revenue to compensate U.S. agencies for moving off the 216-220 MHz, 1432-1435 MHz, 1710-1755 MHz and 2385-2390 MHz bands. The Act requires auctions of eligible frequencies to raise at least 110% of total estimated federal users’ relocation costs.

The industry is particularly interested in 1710-1755 MHz band, which accounts for half the spectrum the FCC plans to auction as early as June 2006 for AWS, including 3G. Given CSEA’s applicability to the 1710-1755 MHz band, the proceeding at issue will implement and modify FCC bidding rules for auction of AWS spectrum licenses.

In implementing CSEA, the FCC should “balance the need to ensure the required level of funds necessary for federal relocation with a balanced and realistic scheme that provides bidders with the most certainty,” T-Mobile said. Under CSEA, the FCC must obtain from NTIA a relocation cost estimate for any auction of prior federal spectrum and to adopt rules that ensure any auction raises 110% of that estimate in total cash proceeds. Under the statute, an auction that doesn’t raise at least 110% must be canceled. “At a time when mobile spectrum is so critically needed to enable broadband applications, the impact of voiding an auction under CSEA would be highly detrimental to the mobile marketplace,” T-Mobile said.

T-Mobile also said the FCC should: (1) Not apply license-by-license procedures in the AWS auction to assess total cash proceeds due to the constraints to achieve 110% of the relocation cost value. “Determining CSEA compliance by looking at the auction as a whole is simple to implement and understand,” T-Mobile said: “At some point during the auction, the Commission may simply announce that aggregate bids, taking into account bidding credits, have exceeded CSEA minimums.” (2) Distribute Tribal Land Bidding Credits “on a first-come, first-served basis,” because “such a plan would better gain early, and final, resolution of outstanding Tribal Land bidding credit valuations.” (3) Raise maximum withdrawal and post-auction default penalties to 20% from 3% of withdrawn bids. T-Mobile said some recently have been placing, then withdrawing bids to discourage competition: “Clearly, the current 3% penalty is insufficient as an economic deterrent against strategic bidding. Under these circumstances, it appears clear that stiffer monetary amounts should be assessed to deter strategic behavior, especially for this important auction.”

Verizon Wireless urged the FCC to: (1) “Retain flexibility to set reserve prices” either for individual licenses or for the total auction and “apportion bids among licenses in a package.” (2) “Increase the default and withdrawal penalties to discourage speculation.” (3) Incorporate the broadcast rule for payment at time of license grant into the auction payment rule.

Telephone & Data Systems (TDS) and subsidiary U.S. Cellular urged the FCC to refrain from using package bidding rules “until much more is known about the likely real-world impact on small bidders” of such practices. TDS said there is “substantial evidence” that using the FCC’s proposed package bidding system in simultaneous multiple round auctions could have “adverse consequences” for small bidders. The harm could even “deter participation of small bidders in package bidding auctions as a consequence of the (a) ’threshold’ problem, (b) more likelihood that large bidders will tie up multiple licenses in nationwide or super-regional package bids, (c) added auction complexity, in terms of both mechanisms for navigating the auction itself and strategies successful bidders will need to employ, in combination with (d) the potential financial risks imposed under the Commission’s 25% default penalty rule for package bidding,” TDS and U.S. Cellular said.