Expiration of FCC Auction Authority Could Complicate Plans for 2.5 GHz Auction
The FCC’s public notice seeking additional comment on rules for a 2.5 GHz auction, the next big 5G auction at the FCC, was seen as a positive by industry officials, but there's a wrinkle. FCC auction authority expires Sept. 30, which means the agency may have to move quickly to do an auction by that date. T-Mobile is still expected to be the biggest player, adding to its already considerable 2.5 GHz holdings.
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Industry officials said the potential need for speed could potentially weigh against use of a more traditional simultaneous multiple-round (SMR) auction format favored by T-Mobile and some smaller carriers. Wednesday’s notice seeks comment on the use of an ascending clock auction format rather than SMR or a single-round auction. The FCC imposed a tight deadline, with comments due Feb. 23 (see 2202090068). Industry lawyers said the FCC probably hasn’t given up on holding an SMR auction. The FCC didn't comment.
“A big question is whether a 2.5 GHz auction that starts in the summer could be wrapped up by Sept. 30 in case Congress does not act in time,” said a lawyer with wireless carrier clients: "Congress has never allowed the commission's auction authority to lapse and there is no indication that it would let that happen this year." Lawyers active in the proceeding said FCC Chairwoman Jessica Rosenworcel is likely working quietly with congressional leaders to get an extension of the commission’s auction authority.
“T-Mobile is the most incentivized player due to their current large 2.5 GHz holdings,” said Recon Analytics’ Roger Entner: “The FCC wants to do the auction this year and the deadline for comments indicates that.” Entner said whether the Sept. 30 deadline becomes a problem depends on how quickly the FCC moves. “A single round auction is certainly quicker than SMR as it would need only one day, whereas SMR auctions can drag on,” he said. He noted that if the auction starts too close to the deadline, a bidder could force the auction to fail “knowing that they would in all likelihood never have to pay because the FCC’s auction authority expired.”
“Congress needs to make FCC spectrum auction authority a priority, as the competitive bidding procedures lead to an efficient assignment of radio operating rights,” said Jeffrey Westling, American Action Forum technology and innovation policy director: “This has worked for decades, and I hope Congress gets it done soon.”
Westling said last week’s notice may reflect the FCC being extra careful before it approves rules. “If the commission was solely worried about issues with the auction authority, it may make more sense to just push forward on one of the original proposals in the NPRM,” he said. The request for further comment “could simply be the commission trying to find the optimal approach to auction these licenses,” he said. “Because the commission explicitly rejected the approach in the original notice, it needed to seek additional comments to satisfy [Administrative Procedure Act] requirements if it does eventually go down this route.”
Analysts expect T-Mobile to dominate a 2.5 GHz auction as it fills in coverage gaps (see 2009180029). “T-Mobile is almost surely the main player here,” MoffettNathanson’s Craig Moffett said: “It’s not just that they control the rest of the block, so their marginal cost in putting this spectrum to use would be a fraction of anyone else’s. It’s also that AT&T and Verizon’s balance sheets are badly overstretched after the C-band” and 3.45 GHz auctions.
Only Player
“Isn't T-Mo the only player?” asked Shane Tews, American Enterprise Institute visiting fellow: “Everyone else just went on a C-band spending spree.”
Former Commissioners Mignon Clyburn and Robert McDowell, who earlier urged the FCC to move on the auction (see 2112100045), applauded the notice. Both have done work for T-Mobile. “I was hoping for a 2022 start, and am happy to see the FCC moving forward with finalizing the auction procedures and paving the way for a reloading of the spectrum supply chain,” Clyburn said.
“It means the 2.5 auction could start this summer,” McDowell said: “We’ve seen a stall in replenishing the spectrum pipeline and this will help. But then, there’s nothing much behind that.”
“This is a positive proposal by the commission moving us closer to an auction of this important mid-band spectrum,” a T-Mobile spokesperson emailed in response to the notice. AT&T and Verizon didn't comment.
In a filing posted Friday in docket 20-429, a representative of the Open Technology Institute at New America said the group asked a Rosenworcel aide about the timing of an auction and whether caps on spectrum holdings in the band are “feasible.” OTI cited developments since the FCC initially sought comment on rules, including “the acquisition of nearly 90 percent of the 380 megahertz of 3 GHz spectrum auctioned last year by the three largest mobile carriers” and “the success of the 40 megahertz cap that applied to last year’s 3.45 GHz auction in expanding the number and diversity of winning bidders.” OTI noted President Joe Biden’s July executive order on competition “explicitly called on the Commission to use auctions to promote -- and not deter -- competition.”
The Wireless ISP Association urged a single-round auction, in a call with an aide to Commissioner Geoffrey Starks. “The vast majority of WISPA’s 700-plus members are very small fixed” WISPs that “lack the resources to hire auction consultants and in-house counsel,” WISPA said: “A single-round, sealed-bid auction is much easier to understand than a multiple-round auction.”