FCC Receives Differing Analyses on License Size

“Large service areas are efficient and directly benefit consumers,” said Charla Rath, Verizon Wireless exec. dir.- spectrum & public policy, as she submitted a study by Peter Cramton, prof. of economics at the U. of Md. But Michele Farquhar, SpectrumCo’s outside counsel, submitting a study by Coleman Bazelon of the Analysis Group, said: “The availability of smaller license sizes in an auction actually tends to increase both the efficiency and the revenues generated by that auction.” SpectrumCo is a coalition of cable and Sprint Nextel.

The FCC needs to find the “right” mix of small and large licenses, Rath wrote: “Any band plan that the FCC adopts for advanced wireless service (AWS) spectrum must include a sufficient amount of spectrum in economic area groups (EAGs) and regional EAGs.” SpectrumCo won big in last year’s AWS auction (CD Sept 19 p7). The 2006 AWS auction included a mix of smaller licenses. “The lessons of the AWS auction include the importance of including smaller licenses to provide the building blocks needed to meet the demands of a variety of bidders and to allow entities with alternative business models to compete in the auction,” Bazelon wrote.

Though many in the U.S. are calling for smaller sizes, Verizon Wireless said other countries have chosen to auction on regional and nationwide basis. “Even countries as large as Canada have chosen band plans with large regional licences,” said Rath. Bazelon countered that the U.S. has taken “a more market- orientated approach” by not trying “to pick technical standards for mobile phone operators.”

In a separate filing, Citizens Telephone, a winner of the earlier 700 MHz rural licenses, urged the FCC to adopt a band plan with a mix of license sizes. “A band plan heavily favoring large license areas will significantly limit auction participation,” said Gregory Whitaker, Citizen’s outside counsel. Adopting a plan with only one block of paired spectrum divided smaller than REAGs “will force all but a select few bidders to compete for that one license… [and] will unduly favor a few large companies, and will chill and limit” participation by smaller carriers, Whitaker said.

The size of the license and the ability of large companies to push out smaller ones (See separate report in this issue.) should lead the FCC to institute anonymous bidding in the 700 MHz auction, argued Gregory Rose of Economic Research Services: “The only way in which blocking bidding strategies can be prevented is adoption of strict anonymous bidding rules.” DBS carriers participating in the 4G Coalition have urged the FCC to allow packaged bidding, in which a bidder could win a group of licenses if it outbid those competing for the licenses, but packaged bidding would not stop blocking bidding, said Rose: “The fundamental problem is incumbents knowing whom to target, and this remains a problem for the 700 MHz” auction.

In other action, CTIA’s Christopher Guttman-McCabe spoke last week with Barry Ohlson, Comr. Adelstein’s aide for wireless, expressing the wireless trade group’s opposition to the plan submitted by Frontline to create a 10-MHz E-block, to be auctioned to one licensee to build a network to public safety’s specifications but rented to commercial carriers. The FCC doesn’t have enough time to review Frontline’s proposal, Guttman- McCabe told Ohlson, according to an ex parte filing: “The Commission is being asked in an unrealistic time frame to review and act on a plan full of legal risk, policy flaws, and business uncertainties.” Frontline’s proposal “reverts back to ‘command and control,'” said Guttman-McCabe. The conditions that Frontline proposes make “the prospect of business success a real and open question,” he said: “The proposal so devalues the spectrum that it jeopardizes auction proceeds already earmarked for worthy projects including public safety interoperability.” CTIA also opposes the Ad Hoc Public Interest Spectrum Coalition’s proposal to require open access and the ability to attach any device to the network -- a principle known as Carterfone after a long-standing FCC wireline ruling. “The government should refrain from imposing a single business plan -- novel and untested -- on the 700 MHz auction,” said CTIA’s Guttman-McCabe. Finally, barring large companies from participating in parts of the auction “is a step backwards” and “a clear attempt to favor non-incumbents in this auction,” he said.