Wireless Spectrum Auctions

Wireless carriers urged FCC to provide relief to NextWave re-auction winners, but some differed on details, including whether withdrawing winners should be penalized. FCC last month floated alternatives for allowing NextWave re- auction winners that faced potential payment obligations of $16 billion to opt out of their bid commitments, which were entangled in pending litigation. FCC returned licenses to NextWave after U.S. Appeals Court, D.C., reversed agency’s decision to cancel licenses for nonpayment. Nextel told FCC that applicants wanting to opt out of their commitments shouldn’t be able to re-bid on them in subsequent auctions or acquire them in secondary market for limited period. Alaska Native Wireless, on other hand, argued that winners shouldn’t be penalized for withdrawals and should have at least 180 days to make decision.

CTIA Pres. Tom Wheeler suggested in letter to Senate Commerce Chmn. Hollings (D-S.C.) and Ranking Republican McCain (Ariz.) that govt. return spectrum auction fees to wireless companies. “If the Congress wants to accelerate high-speed wireless into the furthest reaches of America, it does not have to create new subsidies,” letter dated Oct. 9 said: “Simply by repatriating the tens of billions of dollars the government kept for itself instead of allowing it to be used for expanding networks and services, the government could stimulate a ‘lightning round’ of wireless expansion.” Letter focuses on Oct. 1 Senate Commerce committee hearing on broadband development (CD Oct 2 p6). Wireless industry, which letter said was most competitive sector of telecom, is being “penalized” by being “saddled with government mandates designed for monopoly carriers.” CTIA spokeswoman said “unfunded mandate” of which Wheeler wrote refers primarily to FCC requirements that wireless carriers provide number portability. Letter also said Commerce Committee shouldn’t allow use of unlicensed spectrum for services that would compete with wireless carriers that paid billions for spectrum. CTIA spokeswoman said CTIA is primarily concerned by use of Wi-Fi, wireless broadband technology that is transmitted over unlicensed spectrum. “The wireless industry has paid billions of dollars to the government to acquire spectrum to offer our innovative services,” letter said: “We were perplexed and concerned at the suggestion that additional unlicensed spectrum should be given away for free to other commercial entities so that they may offer the same or similar commercial services.” Govt. is unable to apply policies such as CALEA-like wiretap, E-911 or universal service support to users of unlicensed spectrum, letter said. Letter was also sent to: House Commerce Committee Chmn. Tauzin (R-La.) and Ranking Democrat Dingell (Mich.); FCC Chmn. Powell and Comrs. Abernathy, Copps and Martin; NTIA dir. Nancy Victory.

Bill introduced late Thurs. by House Commerce Committee leaders would establish new mechanism for reimbursing incumbent federal spectrum users for their relocation costs. House Telecom Subcommittee Chmn. Upton (R-Mich.) introduced legislation (Commercial Spectrum Enhancement Act) with Commerce Committee Chmn. Tauzin (R-La.) that would place funds from spectrum auctions into new Spectrum Relocation Fund to cover relocation costs incurred by federal entities, Commerce Committee said. Auction proceeds currently are placed in General Fund. Bill also would guarantee federal incumbents received adequate compensation for expenditures related to relocating to other spectrum bands. Auction proceeds would have to equal 110% of total estimated relocation expenses, Committee said. If agency is required to relocate its spectrum operations, it must be able to achieve comparable telecom capability in new band, Committee said. Office of Management & Budget (OMB) and Congress are assigned oversight authority to ensure that incumbents make accurate estimates of their relocation costs and timelines, CTIA said. “The road to relocating federal government incumbents to comparable spectrum is unpaved and filled with potholes,” Upton said. Bill would “pave that road,” he said, by providing for timely and privately funded relocation plan. Tauzin said: “Earlier this year, we significantly changed spectrum auction policy by eliminating artificial deadlines that dictated when auctions had to occur. Now, with this bill, we are entering the second chapter in our spectrum management efforts.” He said bill would create system that’s more efficient and less expensive. “It is a win-win for the federal government and the wireless industry,” he said. CTIA Pres. Tom Wheeler said: “This proposal delivers exactly what America’s spectrum policy needs: Certainty. It brings certainty to the wireless industry, answering critical questions: What does it cost bidders? How long will it take to access the spectrum? And, most importantly, it provides certainty to American taxpayers -- the certainty that they won’t get stuck with relocation bills.”

CTIA urged FCC Tues. to follow through on proposal that laid out options for NextWave re-auction winners to opt out of all or some of their pending license obligations. Commission in recent public notice described alternatives, with comments due Fri. In comments, CTIA reiterated dire economic straits that it said encompassed wireless sector. “By allowing Auction 35 winning bidders maximum flexibility to decide whether to request voluntary dismissal of pending applications, allowing a full refund of applicable deposits and granting a full release from contingent liabilities that encumber billions of dollars of wireless assets, the Commission can inject new liquidity into the wireless telecommunications industry that will foster capital development, job creation and better services,” CTIA said. “The NextWave licenses have been nothing but a tar baby for the FCC and the wireless industry,” CTIA Pres. Tom Wheeler said. “While the Supreme Court decides the NextWave appeal, it is essential the Commission move forward and expeditiously release the multi-billion-dollar overhang it has saddled the wireless industry with.” CTIA said NextWave re-auction winners now had contingent liability of $16 billion that would have to be paid in 10 days if FCC ultimately prevailed in litigation and could uphold re-auction results. CTIA said FCC should: (1) Let winning bidders cancel their pending auction applications in full or in part. (2) Allow any bidders that opted out of applications to be allowed to take part in future auctions for same spectrum “should the ultimate resolution of the NextWave proceedings permit such a re-auction.” Because FCC couldn’t follow through on its part of auction “contract” when it couldn’t deliver licenses because of litigation, re-auction winners shouldn’t be punished for opting out of original bids, CTIA said.

Critics of plan filed by Nextel, private wireless and public safety groups to mitigate public safety interference at 800 MHz expressed concern about coalition’s compromise rebanding proposal at FCC this week, including lack of full funding. Numerous mobile wireless, satellite, public safety and utility companies took issue with coalition’s description of rebanding blueprint as representing “consensus” proposal. City of N.Y. said plan crafted by Nextel and others outlined general framework for relocating public safety operations, but it still had concerns that funding, beyond $500 million already pledged by Nextel be identified up-front. AT&T Wireless, Boeing and Verizon Wireless were among commenters lining up against Nextel plan. Meanwhile, backers of compromise proposal told FCC they would fill in details of their funding arrangements by Oct. 23.

Itron, which supplies automatic meter reading equipment to utilities, opposed ArrayCom request to FCC to postpone auction of one 5 MHz license in 1670-1675 MHz band. Citing downturn in financial markets that has made it difficult to raise capital for auctions, ArrayCom sought 6-month delay of bidding, until April 30. FCC adopted order earlier this year implementing service rules for 27 MHz in 7 separate bands that had been reallocated to nongovt. from govt. use, including 5 MHz at 1.6 GHz. Itron has nationwide authority to operate wireless meter reading equipment in 1427-1432 MHz on secondary basis and is potential bidder in 1670 MHz auction. Itron contended ArrayCom hadn’t provided Commission with sufficient justification to postpone auction and that delay would defer rollout of new services to public in that band. Itron said that if agency concluded economic conditions supported delay, “it should consider reducing the upfront payment amount and the minimum opening bid, but it should not delay the benefits of new services to the public in order to satisfy the financial needs of one particular company.” Itron said there was no guarantee telecom financial markets would turn around in 6 months. Itron also rejected ArrayCom’s making comparison to decision to postpone bulk of 700 MHz auctions, which were to have started June 19 until Congress indefinitely delayed bidding for all but smaller licenses in lower band. Itron said: “Congress delayed the auction of the bulk of the 700 MHz spectrum not because potential bidders were facing difficulties in raising money for the auctions, but because the telecommunications policy and spectrum management principles regarding this particular portion of the spectrum were unsettled.” FCC last week revised schedule for auction, for which short-form applications had been due Sept. 25. New date for those filings is Oct. 1, with upfront payments due Oct. 15, mock auction Oct. 25, with auction beginning Oct. 30.

“Unhealthy” telecom industry is unable to gain investors’ confidence and good part of blame goes to regulators, Verizon CEO Ivan Seidenberg said Thurs. in hard- hitting speech at Progress & Freedom Foundation lunch. “You know something’s wrong” when regulatory policy continues to favor CLECs after “a large CLEC fabricates billions of dollars,” he said in apparent reference to WorldCom. “Uneconomic regulation” has turned telecommunications from “an economic engine to an economic anchor, weighing down” entire economy, he said. He said he was “somewhat encouraged” by FCC’s proposal to let wireless companies opt out of bids in re-auction for Nextwave spectrum because “removing this $16 billion overhang on the wireless industry will provide a welcome jolt of economic stimulus.” However, Seidenberg said he was “wary” of bankruptcy process’s returning failed companies to marketplace with debts forgiven. “Verizon and other established companies should not be forced to subsidize failed companies.”

Draft bill circulated by Reps. Tauzin (R-La.) and Dingell (D-Mich.) would require broadcasters to cease analog TV service and operate in digital only by Dec. 31, 2006, and do so without dual must-carry. Bill, if passed, would impose 2006 date originally intended by Congress when it mandated that broadcasters return their analog spectrum and effectively shut down analog broadcasting for good. Under current law, TV station doesn’t have to return its analog spectrum until 85% of local market can receive DTV signal, but new bill draws hard-and-fast line at Dec. 31, 2006 -- 85% or not.

FCC auction of C- and D-block licenses of lower 700 MHz spectrum ended Wed. with total net bids of $88.7 million, with Aloha Partners leading with $24.1 million. Paul Allen- backed Vulcan Spectrum was distant 2nd with $15.1 million, followed by Cavalier Group with $6.5 million. Of 125 bidders originally qualified to compete, 102 remained at end of 84 rounds, seeking 484 licenses. Auction, which started Aug. 27, had been scaled back this summer when Congress delayed June 19 start for both upper and lower 700 MHz auctions, leaving summer bidding time frame for only smaller C- and D- block licenses of lower band. Total of net bids was close to $64.5 million in upfront payments made by bidders, which were down from nearly $154 million in upfront payments before Hill pared down auction and allowed participants to opt out of bidding. Rounding out top 10 high bidders were Union Telephone Co., 4th, with $4.5 million; LIN TV $4.3 million, DataCom Wireless $3.3 million, Harbor Wireless $2.8 million, MilkyWay Broadband $2.8 million, Redwood County Telephone $1.9 million, David Gates $1.7 million. Of licenses for cellular market areas, including metropolitan statistical areas and rural markets, largest single successful bid was by Aloha for L.A. license at $5.4 million. Cavalier Group bid $4.5 million for N.Y.-Newark and Vulcan $4 million for Seattle area and $2.3 million for Portland, Ore. Among licenses divided by larger economic area groupings (EAGs), only Pacific area license was sold to Aloha for $4.7 million. Final FCC results posted Wed. said EAG licenses for 5 other parts of country didn’t have any takers.

Europe’s 3G sector needs policy support, not restrictions, to recover from current financial crisis, some Europe telecom industry representatives said at one-day workshop organized by European Commission (EC) Tues. in Brussels to examine results of study by McKinsey Consulting Group on 3G licensing regimes. “Where is the policy support for a financially strapped industry to exploit 3G technology? We don’t see this support forthcoming. Instead we see regulation of this emerging market in the making,” said European Telecom Network Operators’ Assn. (ETNO) Dir. Michael Bartholomew.