Rural Carriers to FCC: Sell Some 700 MHz Spectrum in Small Licenses

Rural carriers long have coveted the 700 MHz spectrum for its propagation characteristics, which allow maximum coverage in remote areas with relatively few towers. Under federal law the FCC has to sell the spectrum before Jan. 28, 2008. In the AWS auction, the FCC offered licenses in three sizes: CMAs, larger economic areas (EAs) and regional economic areas covering 1/6 of the continental U.S.

The FCC hasn’t signaled whether it will allow for CMA- sized licenses, David Nace, who represents the Rural Cellular Assn. (RCA), said Mon. “It’s very difficult to know where they're headed,” he said: “We can expect the large companies and their associations to try to preserve the status quo, which certainly favors the large companies.”

Kenneth Johnson, attorney for the Rural Telecom Group, said he'd be surprised if the FCC didn’t offer some of the spectrum - most likely 12 MHz of the 60 MHz to be sold via CMA licenses. Regardless, he said, small carriers will face tough competition from major carriers likely to try to aggregate small licenses. “The spectrum, unlike the last time [in the AWS auction], is going to go for more money,” he said: “It will be hard for the small, rural guys to get spectrum this time around. The companies who got it last time are in a good position.”

“The 700 MHz spectrum is particularly well-suited for rural applications,” NTCA said in comments to the Commission. “Its propagation characteristics enable providers to cover vast distances with minimal tower construction,” NTCA said. But rural carriers will bid only if the spectrum is sold in CMA-sized licenses, NTCA said. The group asked the FCC to set aside some of the spectrum for sale exclusively to designated entities not affiliated with major carriers to improve the odds they will succeed in the auction.

“Small license territories are not a panacea and disparate resources dictate that larger carriers will win out against smaller when the two are competing, ceteris paribus, for the same resource at auction,” the group said: “As the price for the most desirable spectrum blocks increases, carriers that are priced out of markets look to the next tier of spectrum for acquisition.”

“The availability of 734 comparatively more affordable CMA licenses undoubtedly helped attract rural carriers and other small businesses to the AWS auction,” RCA said: “By RCA’s count, 70 of the 94 winning bidders, including 16 that are RCA members or their affiliates, were rural carriers or small businesses.” For the 700 MHZ spectrum, RCA is asking for a new build-out requirement under which counties not served by carriers that buy larger licenses would be covered by small licenses resold after 10 years. “The large carrier that holds a 700 MHz… license may not set out to serve only the many high-revenue metropolitan areas in its region,” RCA said: “But left to its own devices, the licensee will build-out its system to serve its low-cost, high-density urban areas and will never extend its services to reach its high-cost, low-density rural areas.”

TIA cautioned the FCC against dividing licenses into blocks smaller than CMAs, saying that would boost carriers’ costs. “The cost of frequency and technology coordination weighs equally on licensees on both side of a geographic border regardless of whether the licensee is a small or large service provider,” TIA said: “Further, smaller service areas would require more roaming agreements to enable the type of seamless services customers demand.”

CTIA backed offering spectrum in vari-sized geographic licenses. But at the same time, CTIA said, it’s more important to fix intercarrier compensation and USF problems as a spur to investment in the spectrum than to modify licensing and service rules. “The process for designating wireless carriers as ETCs for universal service support should be rigorous, but the existing system is often overly burdensome and biased against wireless technology,” CTIA said: “Further, intercarrier compensation rates charged by smaller ILECs in rural areas are often very high, driving up the cost of wireless service in these areas unnecessarily.”

The Consumer Federation of America, Consumers Union and Free Press collectively questioned how the FCC is devising rules for the 700 MHz auction. As in the past, the FCC is asking for comment on licensing issues, but leaving auction design and bidder eligibility issues for a future proceeding, the groups said.

“The fundamental flaw in this sequential approach is obvious,” the groups told the agency. “These issues are inextricably intertwined. Decisions made in this proceeding can be effectively nullified in the next. At the end of the day, the size of geographic licensing areas is irrelevant unless the Commission adopts appropriate performance measures in this proceeding and also, in the subsequent proceeding, prohibits the current handful of giant companies which already control enormous amounts of wireless spectrum from acquiring licenses, either directly or via investments in sham DE partnerships.”