Wireless Spectrum Auctions

Auctioning spectrum licenses of limited duration and flexible use is the most rational approach to spectrum governance, according to Princeton U. Prof. William Baumol, whose study was debated by economists at an AEI- Brookings Joint Center event in Washington Tues. Baumol said the govt. should give spectrum holders flexibility to rent or sell unused frequencies to other entities. He said although the FCC had embraced auctioning licenses and other decentralized market mechanisms, administrative restrictions still covered much of the spectrum. Baumol also said spectrum licenses should be “limited in duration for a clearly specified period” of 10-15 years, and renewable only through an “unbiased” auction.

SES Americom and Crown Castle Mobile Media will deliver live TV to mobile handheld devices, officials from both companies said at the NAB conference in Las Vegas. Crown Castle said it has leased Ku-band capacity aboard SES’s AMC 9 satellite to reach satellite receivers across its planned DVB-H (digital video broadcast -- handheld) network. A Crown Castle spokeswoman said the company has begun testing the DVB-H network in 3 Pittsburgh markets. The collaboration is a first for SES’s satellite-based mobile platforms, which distribute data, TV and Internet to oil rigs, freight trucks, commercial jetliners and households -- but not to cell phones. An SES spokeswoman said the SES satellite backbone will distribute the TV signals to Crown Castle’s terrestrial infrastructure via Ku-band spectrum. Once received by Crown Castle’s wireless network, the signals will be transmitted over the 1670 MHz wireless frequency, a Crown Castle spokesman said. The spokesman said Crown Castle acquired a nationwide license for the spectrum, which wasn’t in commercial use, in a 2003 FCC auction. Mobile handsets that are capable of receiving the TV signals are in development by Nokia and others. Nokia officials said they anticipate DVB-H trials in 2005, with wide scale marketing during 2006.

Sprint and Nextel defended their proposed merger before the FCC, dismissing opponents’ arguments (CD April 1 p2). They said critics provided “no facts or arguments” to counter the conclusion that the combined company would deliver many public benefits without harming competition. Sprint and Nextel said most objections weren’t germane to FCC review of the merger; if they deserve consideration, it’s in other rulemakings, they said, noting that some parties tried to use the merger to win reconsideration of the FCC’s recent 800 MHz order. Others, they said, asked the agency to issue a “policy statement” on roaming, though the FCC is already conducting a rulemaking on future roaming regulation. “These and similar claims are plainly outside the scope of the Commission’s review of this transaction and should be rejected,” Sprint and Nextel said. The companies pooh-poohed comments on Sprint Nextel’s prospective 2.5 GHz spectrum holdings. “Since only one of the merging companies has a presence in 409 out of the 493 BTAs in the U.S., the merger has no effect on BRS spectrum ownership in those areas,” they said. Even in 84 basic trading areas where Sprint and Nextel have a presence today, the companies said the combination of their 2.5 GHz spectrum wouldn’t harm competition or the public interest, since: (1) “2.5 GHz spectrum is neither a separate product market nor a unique input.” Because it is impossible to predict which types of service will succeed commercially in that band, “it would be premature and contrary to precedent for the Commission to undertake an antitrust analysis of these services.” (2) “There is plenty of spectrum -- both assigned to licensees and available to be assigned in the future through auctions -- with which to provide both the existing and the new services that may compete with the services Sprint and Nextel plan to offer using the 2.5 GHz band.” The companies argued the combination of their BRS assets would promote the development and availability of new broadband services in competition against other wireless carriers. They urged the FCC to give the merger expedited approval.

Nextel opposed a request for a 30-day extension of an April 18 comment deadline in an FCC proceeding proposing to lift curbs on use of 900 MHz “white spaces” and to auction that spectrum. The request was filed last week by the United Telecom Council, the National Assn. of Mfrs. and MRFAC, the Assn. of American Railroads, the American Petroleum Institute, the National Rural Electric Co-op Assn. and the Enterprise Wireless Alliance (CD April 7 p7). Nextel said Tues. that a longer comment period would cause delays that could affect “the successful and timely implementation of the Commission’s 800 MHz band reconfiguration plan.” The plan adopted in the 800 MHz order provides for Nextel to retune its 800 MHz facilities twice as part of clearing incumbent licensees from channels 1-120 in the 800 MHz band and retuning NPSPAC licensees to those channels. It said lifting restrictions on use of 900 MHz white space and auctioning that spectrum would give Nextel a chance to acquire “much-needed” access to more 900 MHz spectrum. “Time is of the essence,” Nextel said, noting that initial retunings under the 800 MHz band reconfiguration plan commence June 27. “The Commission should move expeditiously to afford Nextel the opportunity to obtain this spectrum in a timely manner by adopting the proposed rule changes and scheduling a 900 MHz white space auction as soon as possible,” Nextel said. It said it was willing to discuss with the associations the issues raised by the rulemaking and would cooperate in filing joint proposals with the FCC if “mutually agreeable positions on any of these issues” were reached.

T-Mobile slammed the joint H block proposal Verizon Wireless, Sprint and Nextel (VSN proposal) submitted to the FCC in Feb. (CD Feb 14 p7), saying the proposal was “not technology neutral” and shouldn’t be adopted.

Ericsson said it backed a joint proposal by T-Mobile and the Rural Telecom Group (RTG) to revise the plan for advanced wireless services (AWS) in the 1710-1755 and 2110-2155 MHz bands (CD March 15 p8). The proposal recommended the FCC divide the 30 MHz E-block licenses into 3 parts, incorporating those parts in a modified AWS band plan. “The proposed plan will enable carriers serving rural and undeserved areas to access smaller, more affordable spectrum blocks that may be more appropriate for their needs,” Ericsson said: “At the same time, carriers desiring larger blocks may still aggregate smaller spectrum blocks and licenses through auctions or the secondary market to suit their business plans.” Ericsson in past recommended that the FCC adopt 3 licenses of 2x15 MHz. But the firm said this week that “market conditions have changed significantly” since it made that recommendation. “Industry consolidations have increased the largest wireless carriers’ spectrum holdings considerably and the market may continue to move in this direction,” Ericsson said: “At the same time, other national, regional and rural carriers need access to spectrum on a smaller scale to augment their existing voice and data services and deploy innovative product offerings.” Ericsson said the FCC must respond to such market development by adopting smaller spectrum block sizes licensees can adjust based on existing spectrum holdings to fit individual business plans.

The FCC opened access to new spectrum for wireless broadband in the 3650-3700 MHz band. The Commission said it had adopted a “hybrid” approach based on both its licensed and unlicenced regulatory models, providing for nationwide, nonexclusive licensing of terrestrial operations in the band using technologies employing content-based protocols. “I am delighted that we are today opening this 50 MHz of spectrum for the provision of wireless broadband for consumers, especially in rural areas,” FCC Chmn. Powell said Thurs.: “This spectrum has been unutilized for far too long.” He said the Commission’s “flexible” technical rules turned the band into “a potential home for new innovative technologies, such as WiMAX.”

Wireless technology will play an increasingly important role in homeland security, FCC and industry officials agreed at a panel discussion during the CTIA show in New Orleans late Tues. But they said hurdles stood in the way of resolving many spectrum and other problems.

Legg Mason predicted carriers will face a period when they will demand more spectrum, leading to active auctions and markets. “We continue to believe that after a period of relative calm that followed the European/U.S. auction frenzy, carriers are getting ready to obtain more spectrum in order to satisfy what they project to be growing demand for data services, speed, mobility, and improved service quality,” the firm said in a report. “There continues to be what we regard as a happy coincidence between (1) remaining industry uncertainty over how great and how rapid the demand for wireless broadband services will be and (2) the fact that the govt. is making spectrum available to industry on a rolling basis, with spectrum coming online in waves rather than all in one batch.” Legg Mason didn’t predict what prices carriers will pay but observed that big city spectrum is bringing in far higher payments than in smaller areas. In recent transactions, operators paid an average of $1.81 MHz/POP for spectrum in the top 10 markets, compared to 94 cents per MHz/POP in the next 46 largest markets.

Govt. needs to gradually auction off spectrum on a “reasonable schedule” if it wants to get maximum value for the “taxpayer-owned asset,” said Capitol Solutions CEO David Taylor in a technology forum Fri. by Citizens Against Govt. Waste Another panelist discussed the regulatory environment and future of VoIP.