Significant upfront payments made by cable companies and DBS operators in the advanced wireless services (AWS) auction that starts Wed. is likely good news for the FCC, which wants to see a strong auction, for competition in general, and for equipment suppliers who would get a new set of customers. But the potential bids by the deep-pocketed contenders means T-Mobile, which needs spectrum to stay competitive, must dig deeper into its coffers, sources agreed.
Wireless Spectrum Auctions
The FCC manages and licenses the electromagnetic spectrum used by wireless, broadcast, satellite and other telecommunications services for government and commercial users. This activity includes organizing specific telecommunications modes to only use specific frequencies and maintaining the licensing systems for each frequency such that communications services and devices using different bands receive as little interference as possible.
What are spectrum auctions?
The FCC will periodically hold auctions of unused or newly available spectrum frequencies, in which potential licensees can bid to acquire the rights to use a specific frequency for a specific purpose. As an example, over the last few years the U.S. government has conducted periodic auctions of different GHz bands to support the growth of 5G services.
The FCC sought industry advice on the need to revise rules for the 700 MHz auction, scheduled to begin by early 2008, offering 90 MHz of highly coveted spectrum. The NPRM doesn’t ask about a proposal by Nextel founder Morgan O'Brien, chmn. of Cyren Call, to dedicate 30 MHz of the spectrum (CD June 28 p3) to a nationwide wireless network for public safety rather than sell it at auction, sources said.
SAN FRANCISCO -- NARUC’s Telecom Committee adopted a wireless preemption resolution strongly opposing a pending federal bill that would preempt state regulation of wireless terms and conditions, after amending it to clarify the states’ position. But the panel tabled a related resolution to adopt a NARUC task force’s white paper on wireless service.
Speakers at an intercarrier compensation reform panel at NARUC were sharply split on whether the Missoula Plan to unify intercarrier rates for similar carriers would fix the compensation system’s problems. Joel Lubin, AT&T regulatory & policy vp, said the plan, backed by AT&T and more than 350 other large and small carriers across the industry, “is a workable means for managing the transition from the narrowband world to the new world that’s dependent on broadband.” He said consumers and the American economy will be the ultimate winners, calling the proposal significant because a group of diverse carriers once “at each other’s throats” came together on terms. The Missoula Plan would move over 4 years from today’s tangle of compensation rates to a unified intercarrier compensation rate for all types of traffic. There would be different rates for large, medium and small carriers. Revenue losses would be balanced by SLC increases, a new restructuring subsidy method and, as a last resort, local rate increases. Lubin said the plan would cut regulatory costs, end most interconnection disputes and advance universal service, and do so “by a rational, logical transition that will put technology in consumers’ hands in a meaningful and efficient way.” Prior intercarrier compensation reforms produced substantial consumer benefits and this one will, too, he said. But the Missoula Plan won’t hit FCC Chmn. Kevin Martin’s goal of intercarrier compensation solutions not raising local rates or hiking universal service costs, said Billy Jack Gregg, W.Va. PSC dir. of consumer advocacy: “This plan does both. It raises local rates through huge SLC increases and requires a 32% increase in a universal service fund that’s already bloated and unsustainable.” The roughly $6 billion in net revenue losses from unifying rates would be made up by SLC raises and universal service subsidy hikes totaling nearly $7 billion, Gregg said. “For consumers, this means only pain, pain, pain,” he said, urging NARUC to oppose the plan. Nan Thompson, a former Alaska regulator now with competitive carrier GCI, said the plan’s subsidy approach would “permanently entrench” incumbents and keep competitors from fielding new technologies that don’t require subsidies. The plan would eliminate many opportunities for regulatory arbitrage but also create new arbitrage opportunities, said John Sumpter of PacWest Telecom: “If this plan’s goal is to eliminate arbitrage, it fails.” Speaking in support of the plan, Bill Hahn of Level 3 Communications said it will end residential rate subsidies that discourage competition, and encourage competition for transit traffic. Consumers won’t face big SLC increases “because the competitive marketplace won’t tolerate them,” he said: “Competition will keep prices reasonable.” Doug Garret, Cox dir. of western regulatory affairs, said the plan might impair competitive carriers’ ability to geographically deaverage rates and offer deals to selected customer classes, while creating new opportunities for regulatory gamesmanship: “AT&T presents this as a choice between higher access charges or higher SLCs. But maybe there’s a 3rd choice, and that is that companies who can spend billions of dollars on a broadband infrastructure to sell video service in competition with cable companies don’t need billions of dollars in ratepayer subsidies.”
Legislation aimed at managing spectrum auction revenue shows some policymakers want to do more than reduce the federal budget deficit, according to a new Congressional Research Service (CRS) report. New bills called for using spectrum revenue for public safety communications and to help small businesses, the report said. Although only a few measures made it past preliminary stages, the legislative activity reflects a growing desire among some policymakers for a national spectrum policy, it said. But it’s “an exercise in reconciling divergent interests,” the CRS report said. There’s strong pressure to use the money for the budget, which is the long-standing policy. For some, it is a “desirable policy choice,” the report said. The Deficit Reduction Act, which became law in Feb., sets about $1 billion from auction proceeds for a public safety fund to help with the transition from analog to digital broadcasting. Other pending legislation includes a bill (HR-1323) offered by Rep. Stupak (D-Mich.) that would set aside auction proceeds for grants to improve interoperability in public safety communications. Rep. Rush (D-Ill.) is backing HR-1661 that would create a new category of loan in to help companies bid in spectrum auctions, the CRS report said. Sen. Snowe (R-Me.) introduced S-1767, which would license spectrum for small geographic areas tailored to give regional and smaller wireless carriers a chance for the business. Similar provisions are in the Senate telecom bill (HR-5252), the CRS report said. Sens. Allen (R-Va.) and Stevens (R-Alaska) have introduced separate bills S-2327 and S-2332, respectively, that would allocate new frequencies for unlicenced use such as wireless broadband.
DBS and cable came in with the largest upfront payments for the advanced wireless (AWS) services auction, which starts Aug. 9, based on documents released Fri. by the FCC, potentially setting them up to be dominant players in the biggest spectrum auction in years. T-Mobile, which needs spectrum to remain competitive, was top among wireless carriers. In a surprise to some, the auction will be open with bidder identities revealed after each round, after the FCC determined that auction passed its competitiveness test.
Council Tree, Bethel Native Corporation (BNC) and the Minority Media and Telecommunications Council told the FCC they wanted to withdraw a petition for expedited reconsideration of the designated rules for the upcoming advanced wireless services auction, because action on their complaint has shifted to the 3rd U.S. Appeals Court, Philadelphia (CD June 30 p1). The AWS auction is to begin Aug. 9. Neither Council Tree nor BNC filed applications to bid in the auction.
The Wireless Communications Assn. and other groups want technical changes in an FCC broadband radio service (BRS) and educational broadband service (EBS) order, they said in filings to the FCC. The Commission approved the order to promote wireless broadband in spectrum once reserved for educational broadcast. The WCA filing was unsurprising, since the group has said since the order was released that changes are needed (CD May 1 p 3).
Rumors and reports suggesting DirecTV and EchoStar could be a willing buyer and seller, respectively, in a potential merger have DBS stocks on the uptick and analysts dusting off 2001 Hughes-EchoStar calculations. Merger talk took off this week after a Mon. L.A. Times story said executives from both DBS firms were discussing the merits of a merger at a conference in Ida. The article reported EchoStar CEO Charles Ergen as saying the combination could mean $3 billion in savings for EchoStar, suggesting for the first time there could be a willing buyer and a willing seller in the DBS world.
SAN JOSE -- Commercial prospects for fixed WiMAX are limited, and even those of the more promising mobile WiMAX are hemmed in by advancing 3G cellular technologies, industry consultants said. Mobile WiMAX will have a role, mainly in converging wireless and wireline communications, said Pres. Monica Paolini of Senza Fili Consulting late Tues. at a Wireless Communications Alliance meeting here. The technology will promote competition by allowing cellular carriers like Sprint Nextel to offer landline service, and new entrants and wireline carriers to get into wireless, she said.