FCC Officials Concerned on Timing, Effectiveness of Proposed AWS-3 Rules

In an unprecedented move, the U.S. Commerce Department weighed in Wednesday to condemn the free broadband proposal. The administration of President George W. Bush believes AWS-3 spectrum should be auctioned without price or product mandates, said Commerce Secretary Carlos Gutierrez in a letter to FCC commissioners released at our deadline. “The draft AWS-3 order would constrain a provider’s use of this spectrum, favoring a particular business model and potentially precluding the spectrum from allocation to the most valuable use,” he said. The mandated free service “would likely lead to congested and inefficiently used broadband,” inconsistent with Bush administration views “that spectrum should be allocated by markets rather than governments,” Gutierrez said. A government-mandated free network is “not the most effective or efficient way to assist underserved areas,” he said.

Even before the financial meltdown hit hard, there were questions about the economic viability of an AWS-3 auction, an FCC official said. Some are hesitant about making rules that a brand new FCC would be tasked with implementing, the official said. And some believe the FCC should keep its focus on the DTV transition, the official said.

Timing shouldn’t be an issue, said FCC spokesman Rob Kenny. “The AWS-3 proposal was shared with the other commissioners some time ago and they've been aware of this concept since Chairman Martin first proposed it back in May,” he said. “The proposed orders would adopt rules that set the framework for this initiative to move forward. Thereafter, as with any proceeding of this nature, the auction rules would then have to be adopted. Given this process, the earliest that an auction could be scheduled is six to nine months from the time the auction rules are adopted.” Adopting rules now won’t distract from the switch to digital, he said. The FCC “recognize[s] that the DTV transition is a top priority and continue[s] to push forward to make sure we are doing all we can to ensure a smooth transition.”

Timing aside, some at the FCC fear that the free Internet plan may not effectively spur rural broadband, said two FCC officials. An enforcement provision in the plan would require the AWS-3 winner to give back all unused such spectrum if the carrier failed to meet interim build-out requirements. However, because the rule permits a carrier to keep already built-out spectrum, some at the FCC fear that the AWS-3 winner will be encouraged to build in major markets only, returning spectrum in less profitable rural areas, the officials said. FCC spokesman Kenny didn’t comment.

Meanwhile Wednesday, a broad industry coalition disputed the free broadband plan’s ability to improve low-income broadband access, in a letter to commissioners. The coalition included the CTIA, Independent Telephone & Telecommunications Alliance, Rural Cellular Association and Organization for the Promotion and Advancement of Telecommunications Companies. Under the AWS-3 plan, low- income consumers would have to fight “with middle- and upper- income Americans for access to the limited ‘free’ and inferior service proposed by M2Z Networks,” they said. Including broadband in universal service Lifeline and Link Up programs “would better ensure that [low-income] users receive access to the same quality and high-speed broadband services enjoyed by other Americans,” the letter said. The USF program would also provide the benefit of giving equipment discounts to low-income consumers, the coalition said.