‘Use It or Lose It’ Rules, License Sizes, Hot Topics in 700 MHz Rule Debate

Thanks to the perceived success of the AWS auction, the FCC seems likely to offer varying license sizes, industry sources said. Stricter buildout requirements are seen as far less likely. “The FCC seems open minded” on license size, a regulatory lawyer said: “There certainly was a lot of support in the comments for a balanced approach to license sizes.”

The Rural Cellular Assn. (RCA) urged strong buildout mandates -- including stipulations that a buyer demonstrate coverage of 25% of a license area by the 3rd anniversary of the license grant and 75% by the 8th anniversary. The rules should be based on geography, not population, RCA said. “The superior propagation characteristics of 700 MHz Band spectrum make it a uniquely valuable resource and a likely target for ’stockpiling or warehousing,'” the company said: “RCA urged the Commission to abandon its current toothless substantial service standard… in favor of more enforceable performance requirements for the remaining portions of the 700 MHz Band.”

The FCC should adopt a “keep what you use licensing approach” and “adopt a mechanism to ensure that an entity that truly desires to provide service in a rural area can obtain the license/right to do so from a licensee that is not providing such service,” the Rural Telecom Group (RTG) said.

Cingular Wireless said that of 34 comments filed on 700 MHz rules, only 7 asked for keep-what-you-use requirements. “Numerous commenters correctly noted that adoption of new, restrictive performance requirements for commercial 700 MHz licenses would violate Section 332 of the Communications Act which mandates that similar commercial radio services should be subject to similar regulatory treatment,” the carrier said. CTIA said the record “contains no factual basis” to impose tough buildout requirements on carriers and “revert back to command-and-control build-out requirements or ‘keep what you use’ spectrum take-backs.”

Pacts between large and regional carriers to offer service in rural America and sale of spectrum in the secondary market would work better than a buildout mandate, T-Mobile said: “A ‘keep-what-you-use’ rule, if implemented for the 700 MHz band, would deprive carriers of the business opportunities created through secondary markets transactions. ‘Keep-what-you-use’ also may cause carriers to waste valuable resources and capital to engage in uneconomic buildout.”

Another point of friction is whether the FCC should set aside spectrum for smaller license areas. Small carriers and carrier groups want the FCC to sell bite-sized chunks - the cellular market area (CMA) licenses, the smallest sold in the AWS auction. A group of small carriers, consumer groups and some state regulators endorsed what they call the “balanced consensus plan,” which provides for large and small licenses.

The FCC should sell only large economic area groupings (EAGs) and regional economic area grouping licenses (REAGs), Verizon Wireless and Cingular said. The agency has sold many small licenses, Verizon Wireless said: “In light of the myriad opportunities available to acquire spectrum to provide services in rural areas, it is completely unnecessary to further divide the 700 MHz spectrum.” DirecTV and EchoStar have been unique in urging nationwide licenses, an idea that not backed by other commenters.

RTG sees no surprise in Cingular and Verizon support for selling only large licenses, it said: “Auctioning the spectrum on such a basis substantially decreases the number of entities against which these incumbent, nationwide cellular carriers will have to compete for the spectrum. Such an approach would benefit the few large incumbents… to the detriment of new entrants and developing mobile competitors.” The 2 DBS providers said cutting power limits or dividing license blocks “would limit the robustness of wireless broadband services.”

The Commission should prevent interference to TV stations, NAB and the Assn. for Maximum Service TV said in a joint filing. Stations on channel 51 can be protected by keeping a current 6 MHz alignment, they said. Channels below 51 likewise need interference protection, the groups said: “Any entity acquiring a license to operate in channel 52 should therefore continue to be on notice of its obligation to protect Channel 51 services.”

T-Mobile wants licenses of various sizes made available, it said: “National and rural carriers alike could access additional spectrum in appropriately sized blocks to augment their existing voice and data services, and deploy innovative product offerings based on their business plans. At the same time, bidders seeking larger blocks of spectrum, either spectrally or geographically, have access to larger licenses and may easily aggregate two or more licenses in the course of the 700 MHz auction or in the secondary market.”

RTG, NTCA, OPASTCO and Blooston Rural Carriers want some spectrum set aside for sale to designated entities, they said. Don’t do that, T-Mobile said: “Set-asides interfere with the efficient working of the marketplace by preventing licenses from getting into the hands of the entities that value them the highest.” The AWS auction showed that “even without set-asides, small companies continue to have an opportunity to participate and win licenses in spectrum auctions,” CTIA said.

CTIA reminded the FCC it needs to make timely decisions. “Some commenters have seized the opportunity presented by the notice to advance far-reaching proposals that would substantially alter licensing, service and technical rules and impact deployment and services in the 700 MHz Band,” the group said: “CTIA cautions against a protracted proceeding that could affect the timing of the auction, as well as statutory deadlines.”