NIA, CTN Offer Compromise on Length of EBS Leases
In a potential breakthrough, the National ITFS Assn. (NIA) and the Catholic TV Network (CTN) will offer in a filing at the FCC today (Fri.) to accept 20-year lease terms for education spectrum, in the interest of getting the FCC to vote out the stalled Education Broadband Service (EBS) item. The groups are willing to negotiate even longer lease terms, though they disagree on the details. Until this point, they have argued that lease terms should be no longer than 15 years.
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The 2 part company on one detail. NIA would accept leases as long as 25 years. CTN would accept 30-year terms, provided review after 15 years is built into the contracts.
The lease issue could be politically sensitive. Broadband operators led by the Wireless Communications Assn. typically are seeking to lease as much as 95% of the spectrum reserved for education in negotiations with lease holders. Comrs. Copps and Adelstein in particular have expressed reservations about leases they believe force educators to almost permanently take the spectrum out of educational use.
NIA attorney Todd Gray and CTN attorney Ed Lavergne told us the groups view the longer lease terms as a “significant concession” after discussions with companies interested in leasing the spectrum to offer wireless broadband. Gray said the groups have met with commissioners and staff in recent days to signal they're willing to offer a compromise.
“We believe that it’s appropriate for the Commission to move off of the 15-year limitation,” Gray said: “We have independently come to the view that in order to foster the kind of investment in the band that we are all looking for, and which will benefit all of us, that probably the number needs to be at least 20.”
“The door is always open to working something out with the operators,” Lavergne said. “CTN, NIA and WCA have been cooperating on these types of issues for many years and we still want to do that.”
Gray said NIA is willing to agree to lease terms as long as 25 years. “Our concern continues to be that asking people to sign agreements today before we know exactly what this is going to look like and what it’s going to do and what its value going to be and bind people for a generation or 2 into the future is very difficult for educators,” he said. “But we've been trying to offer up a significant potential increase in the term length… Our sense is that the Commission is willing to move the item and this is one of the things that needs to get decided.”
Lavergne said CTN would agree to 30-year leases, provided that after 15 years the FCC allows EBS spectrum holders a way to review the leases to make sure the spectrum they reserve for themselves is “being used efficiently and effectively” for educational purposes. “Nobody can predict today what the educational, technological and spectrum use requirements are going to be decades from now,” he said: “The benefit of the 15 year lease was that at least at the end of 15 years educators had an ability to sit down at the table… and make sure the spectrum is being used for its intended purposes.”
Meanwhile, Intel said in a filing this week that lease terms should be at least 30-35 years to encourage investment in the EBS spectrum. Peter Pitsch, communications policy dir., said in a filing that Intel Capital has developed a “generic business model” for offering wireless broadband in the top 50 U.S. markets using 2.5 GHz spectrum. “The business model estimates that such a business would have to incur capital costs of approximately $5 billion over its first 5 years,” the filing said: “It also concludes that it would take 9 years for the cumulative free cash flow to turn positive and the net present value of the business would still be negative at 10 years.”
Gray said educational institutions already view 25 years as an “almost conceivably long” period. “That’s consistent with what we're hearing from the commercial community generally,” he said of the Intel filing: “They want more than we're prepared to give.”