Wireless Spectrum Auctions

FCC plans to delay decision, due next month, on which spectrum bands should be allocated for 3-G use, FCC Chmn. Powell said in letter sent late Tues. to Commerce Secy. Donald Evans. FCC is working on spectrum allocation effort in coordination with Commerce’s NTIA. Under Executive Order issued last year by President Bill Clinton, FCC was scheduled to identify spectrum by July and auction licenses by Sept. 30, 2002. Powell told Evans that “as July draws near… it is apparent that additional time is necessary to allow the Commission and the Executive Branch to complete a careful and complete evaluation of the various possible options for making additional spectrum available for advanced wireless services.” Powell also made pitch for delaying auction as well, saying “relief from this deadline would allow all of the governmental entities responsible for U.S. spectrum management to have adequate time to develop a plan to make spectrum available for advanced wireless services in the future.” He told Evans that “the Administration’s support for flexibility on the auction dates would be appreciated.” CTIA Pres. Thomas Wheeler said Powell “made the right decision in delaying the allocation of spectrum in the 1710-1755 and 2110-2150 bands.” He said Powell’s “bold leadership will benefit U.S. consumers, the wireless industry and the U.S. economy by allowing those bands to be incorporated into a larger, long-term spectrum management policy.”

BOSTON -- Equipment vendors and fixed wireless operators in closing session of Wireless Communications Assn. (WCA) show here Wed. stressed need for speed amid warnings that swift action was needed before DSL and cable modems cemented their hold on market. Uncertainty over how equipment costs would be driven down and need for standards must be resolved to reach “critical mass” of customers, several speakers said. “I am still not certain how quickly we are going to make broadband to residents happen,” Vyyo CEO John O'Connell said. But slowing of financial markets that has affected rollout of DSL and cable also gives fixed wireless industry lead time to capture broadband market share, Nucentrix Chmn. Carroll McHenry said. “We still have a substantial window of opportunity,” he said, especially in small and medium markets where DSL deployment and cable overbuild efforts aren’t moving as quickly as in top markets.

BOSTON -- Implications of sagging financial markets raised at Wireless Communications Assn. convention here this week ranged from difficulty in renewing ITFS leasing agreements to FCC delay in setting auction date for 24 GHz market. Winstar Chmn.-CEO William Rouhana, in first comments before industry group since company’s Chapter 11 filing in April, assailed “schizophrenia” that has beset telecom sector, pitting perception of “overvalued” assets of broadband providers against growing consumer demand for services. “There is this incredible schizophrenia that has taken hold,” he said Tues.

U.S. Appeals Court, D.C., decision overturning FCC’s $17 billion PCS auction bolsters position of critics of $1.3 trillion tax cut that excessive tax relief can “throw government into chaos” if “larger-than-expected” federal budget adjustments eventually are required, Senate Budget Committee majority staffer said. Court ruled late last week (CD June 25 p1) that FCC erred in cancelling NextWave’s 90 PCS licenses for missed payment, raising doubt as to when -- or whether -- govt. could factor projected outlays from re-auctioned spectrum into federal surplus. Democratic aide acknowledged that “it’s a little early to tell what the fiscal impact will be” on federal budget estimates, but aide and other sources said lawmakers now would have to decide where to cut funding of govt. agencies or programs.

BOSTON -- FCC Comr. Abernathy sent strong signal to Wireless Communications Assn. (WCA) Mon. that she was reluctant to have MMDS and Instructional TV Fixed Service licensees tapped for 3rd generation wireless. “I am unwilling to jeopardize the rollout of wireless broadband services you are offering to consumers,” she told annual conference in her first speech before an industry convention as commissioner. “There are other options.” While Abernathy didn’t elaborate on other spectrum alternatives, she stressed importance of FCC’s moving quickly on 3G. “We owe you a prompt decision to eliminate the cloud that hangs over your particular spectrum,” she said.

BOSTON -- Despite overall economic downturn in telecom sector, international cross-section of fixed wireless industry at preliminary session of Wireless Communications Assn. (WCA) conference here said networks in Latin America and Europe were moving forward, with some changes. Regulators in some cases aren’t immediately seizing licenses if terms aren’t met and govts. are turning more frequently to so-called beauty contests rather than auctions, participants said Sun. Biggest change may be that both regulators and financial backers are expecting realistic business plans with controlled buildout, they said. Among challenges in Europe are that unbundled local loop regulations in some cases can make it easier for competitors to lease network elements from incumbents for DSL, making wireless network buildout less compelling, said Arturas Medeisis, radiocommunications expert with European Radiocommunications Office. “So far, we haven’t seen true success stories yet,” he said of Western European markets.

In ruling that overturns $17 billion PCS auction results, U.S. Appeals Court, D.C., handed resounding victory Fri. to NextWave in its nearly 3-year battle to retain licenses for which it had bid $4.7 billion. Unanimous ruling by 3-judge panel reversed 1998 FCC decision that cancelled NextWave licenses for missed payment, meaning C-block licenses on which largest U.S. carrier Verizon Wireless bid nearly $9 billion would revert to NextWave. Several industry observers pointed out shortfall that decision, if not challenged by FCC or sustained on appeal, would mean to govt. coffers. NextWave bid $4.7 billion for 90 PCS licenses in 1996, but bidders such as AT&T Wireless, Cingular and Verizon in reauction agreed to pay nearly $15.4 billion. Unclear as of Fri. was what action FCC would take next, with request for en banc hearing before D.C. Circuit or for airing before U.S. Supreme Court among potential options. Verizon Wireless CEO Denny Strigl urged FCC and NextWave to “settle this dispute in a way that permits the FCC’s auction results to stand.” While NextWave immediately outlined plans to begin buildout of licenses, speculation turned Fri. to settlement possibilities, with ex-FCC Chmn. William Kennard seeing potential “tragedy” if carrier received “billions” to walk away from licenses.

CTIA Senior Vp. Govt. Affairs Steve Berry told reporters after Congressional Internet Caucus lunch Tues. that wireless industry wasn’t interested in altering “integrity” of 1999 Defense Authorization Act as part of proposed 3rd-generation wireless solutions. That authorization act had guaranteed that Defense Dept. spectrum couldn’t be taken away without military users’ being compensated for moving and given comparable spectrum. Industry isn’t interested in “repealing or significantly changing” 1999 act, possibility that Defense Dept. has raised in recent weeks as being problem if that’s part of 3G wireless legislation (CD June 6 p1). Instead, industry, which has been discussing 3G draft legislation on Capitol Hill, is working to meet DoD concerns that it be given more stringent safeguards that military users will be paid to move and that any potential transition out of existing spectrum would occur in phased-out manner that would protect operations, Berry said, in response to questions. “We're having really good discussions with DoD,” he said. He characterized as positive recent reports in defense trade press that U.S. Air Force had put price tag of nearly $3 billion on potentially moving some of its systems. Berry said he didn’t think it was likely that 3G bill would drop in Congress before July 4 recess. Extra time is positive because it means DOD “can get comfortable” with concepts in draft legislation, he said. Interest of industry is in bill’s moving forward on timeline that allows workable solution to be reached, Berry said. “Right now we want to keep our options open,” he said, reiterating that CTIA would like to see Administration push back July target for FCC to make spectrum allocation decision. That change can be made without budget scoring impact because delay in allocation decision wouldn’t have immediate impact on end date for auction, he said.

Dept. of Defense (DoD) is developing draft legislation that would provide funding for upgrading military communications equipment, thus allowing it to vacate some spectrum for commercial 3G applications, House Minority Leader Gephardt (D-Mo.) said Mon. Addressing Computer & Communications Industry Assn. (CCIA) 2001 Washington Caucus, Gephardt said language soon would be shopped around Hill to both authorizers and appropriators, adding: “I don’t know how successful that will be in working its way through the House and Senate.” Gephardt outlined DoD’s plans after his formal speech, but in that speech he did make passing reference to 3G spectrum: “A lot of people recently have told me we need to move the Defense Department [from some potential 3G spectrum]. That’s probably a wise thing to do.”

AT&T Wireless, Cingular Wireless, Sprint PCS and Verizon Wireless urged FCC last week to defer grant of 2 GHz mobile satellite service (MSS) applications until after it seeks comments on March 8 New ICO filing. New ICO CEO Craig McCaw had sought FCC approval of plan that would allow him to develop terrestrial spectrum using radio spectrum allocated to MSS operators such as New ICO (CD April 4 p1). New ICO’s March filing raised concerns that “the MSS services as applied for may not be viable,” carriers told FCC Chmn. Powell in June 13 letter, citing commercial wireless industry’s keen interest in such spectrum for 3G. Wireless carriers want FCC to defer acting not just on New ICO’s request, but on all pending 2 GHz MSS applications. Carriers said New ICO had reached collaboration agreements with 2 other MSS applicants and that there was “uncertainty” in business plans of other applicants. If Commission decided MSS spectrum was suitable for terrestrial services, it must be auctioned, carriers said. “Action on these applications should be -- and must be -- deferred until the broad spectrum policy and license processing issues raised by New ICO’s fillings are addressed,” they said. Arguments raised in letter expand on those made by CTIA last month in petition for rulemaking that asked Commission to reallocate “underutilized” MSS spectrum for other uses, including 3G. Four wireless carriers disagreed with New ICO contentions that latter was asking for modification of its original license applications. FCC should respond to CTIA petition before it grants any 2 GHz MSS authorizations, they said. They argued that because New ICO’s request would be “fundamental” change in original application, FCC must seek comment on modifications. “By submitting proposed modifications to its system architecture as an ex parte filing in a rulemaking proceeding, New ICO has essentially disregarded the Commission’s application processing requirements,” wireless carriers wrote. Carriers also contended New ICO’s request would: (1) Undermine FCC’s policies on satellite construction and build- out. “In essence, New ICO now has told the Commission that it will not meet the milestones for construction of the MSS system for which it applied.” (2) Contravene existing allocation for MSS, which doesn’t allow domestic terrestrial use. (3) Go against “long-held practices and policies for satellite services.”