Wireless Spectrum Auctions

The “vast majority” of the spectrum tied up in litigation since NextWave went bankrupt in 1998, could be “immediately” made available for other uses, the FCC said late Tues. It said the govt. had reached an agreement to that effect with NextWave on the company’s broadband PCS licenses, which have been in dispute since 1996. The deal is subject to approval of the U.S. Bankruptcy Court, Manhattan.

FCC Office of Engineering & Technology (OET) Chief Edmond Thomas told a New America Foundation (NAF) conference Fri. that OET was working on a proposal that may win support among broadcasters reluctant to see unused TV spectrum given up for unlicensed use. Thomas disclosed few details, saying the proposal hasn’t been vetted by broadcasters but would be soon. Thomas said he expected a proposal on possible unlicensed use of “white spaces” in TV broadcast spectrum in the next few months and an order by year-end.

Nextel, in an FCC filing last week, raised “significant issues and concerns regarding the potential assignment to Nextel of replacement spectrum in the 2.1 GHz band.” The FCC has been nearing completion on an item for resolving public safety interference at 800 MHz. A staff item forwarded to the 8th floor would have Nextel pay the costs of relocating incumbents at 800 MHz and then pay the difference between that and spectrum it would receive at 1.9 GHz. In a “consensus plan” backed by Nextel and numerous public safety groups, a spectrum swap would entail Nextel giving up spectrum in some bands in return for spectrum it would receive elsewhere, including 10 MHz at 1.9 GHz. Verizon Wireless, which has been arguing the FCC should auction off spectrum at 1.9 GHz that’s part of an interference solution for 800 MHz, told the FCC earlier this month it would place an opening bid of $5 billion if the agency were to hold a 1.9 GHz auction for PCS spectrum. In a research note last week, UBS said Nextel could pay $2-$3 billion as part of any plan ultimately adopted by the Commission. The consensus plan would have Nextel pay $850 million for retuning public safety and private wireless incumbents at 800 MHz. “We don’t believe ‘cash is king’ in this situation,” UBS said. “Despite Verizon Wireless’s announced intention to bid at least $5 billion for the 1.9 GHz spectrum that is part of the consensus plan, should it be put up for auction, we believe that Nextel will prevail in obtaining the 1.9 GHz spectrum as part of the proposed spectrum swap.” As other analysts have noted, UBS said it expected Nextel would have to pay more than $850 million. “Given the sell off in Nextel’s stock price over the past 2 months, we believe this extra outlay (of potentially about $1-$2 per share above what was originally expected) had already been more than reflected in Nextel’s trading value,” it said: “The downside from announcement on this issue is limited.”

Consumers Union (CU) and Consumer Federation of America (CFA) urged the FCC Thurs. to view with skepticism a pledge that Verizon Wireless made last week to bid $5 billion if the Commission were to auction PCS spectrum at 1.9 GHz (CD April 9 p1). Verizon Wireless and other wireless carriers have been calling on the FCC to hold an auction for the 10 MHz at 1.9 GHz if it’s part of an 800 MHz rebanding plan. The FCC has been considering a proposal for mitigating public safety interference at 800 MHz. An original staff proposal sent to the 8th floor would reband 800 MHz and give 1.9 GHz to Nextel for a price. Under that original staff proposal, Nextel would have to pay the cost of rebanding incumbents at 800 MHz and then the difference between that and the value assigned to the 1.9 GHz spectrum. “This so-called bid does nothing to advance the cause of eliminating public safety radio interference, and appears to be yet another anti-competitive tactic aimed at delaying a vote on this urgent matter,” CU and CFA said. “Regardless of motive, the Verizon ‘bid’ should be considered non-qualifying because it would unduly concentrate the wireless market horizontally and would represent a significantly increased threat to consumers’ hopes that wireless competes against landline telephone monopolies.” The groups argued that the opening bid promised by Verizon Wireless would lead to “less aggressive” competition between wireless and wireline companies and would be inconsistent with the Communications Act. “Any dominant wireless company’s bid for spectrum should be subjected to the same scrutiny that would be applied for a review of a merger in the wireless market,” CU and CFA said in a letter to Powell. The groups said that because Verizon Wireless has a national market share of nearly 25%, virtually any merger between it and another provider would violate merger guidelines. “Unfortunately, this letter seems to be filed in a proceeding taking place on another planet,” a Verizon Wireless spokesman said: “To paraphrase my mother, if you can’t say something relevant, don’t say anything at all. This is a laundry list of opinions that have nothing to do with the matter at hand, which is to legally and quickly provide public safety with the tools that they need.”

Public broadcasters are unlikely to get very far with their early hand-over of analog spectrum proposal if they aren’t able to rope in their commercial counterparts, wireless industry and public safety, officials told us. The Assn. of Public TV Stations is pushing a proposal for public TV stations to embrace a hard date for analog switch-off in return for the creation of a trust fund for public broadcasters from a portion of the proceeds of the spectrum auction. Although wireless industry and public safety officials saw the public TV offer as a “step in the right direction,” some wireless officials consider the trust fund concept too “self-serving.” One industry source said wireless operators would rather see auction proceeds used for things directly related to the spectrum, such as a relocation fund.

Verizon Wireless told the FCC late Thurs. it would open bidding at $5 billion if the agency auctioned nationwide PCS spectrum at 1.9 GHz. The pledge by the largest U.S. wireless carrier upped the ante in the battle over 800 MHz rebanding. It came as the FCC neared a vote on a proposal to fix public safety interference, which wasn’t widely expected to entail an auction. Several sources cautioned Thurs. some plan details were still under deliberation, although a majority appears to have coalesced around key elements of a rebanding plan backed by Nextel and others.

Critics of a “consensus plan” for addressing public safety interference at 800 MHz said at a briefing Wed. they were concerned about a “spectrum giveaway” to Nextel. At a breakfast sponsored by the New America Foundation (NAF), NAF Vp Michael Calabrese said an ideal solution would be for public safety relocation costs to be folded into a spectrum relocation fund now pending on Capitol Hill. The FCC is considering a staff proposal that would entail Nextel paying for incumbent relocation at 800 MHz and receiving spectrum at 1.9 GHz for a price. Some wireless carriers have urged that Nextel not receive 1.9 GHz outright but that this spectrum be part of an auction. The Spectrum Enhancement Act would earmark proceeds from an auction of advanced wireless services -- or 3G spectrum -- to be used for relocating govt. users from 1710-1755 MHz, Calabrese said. Under an auction scenario for 1.9 GHz, “in the name of homeland security, Congress can earmark the roughly $5 billion in revenue from an immediate auction of spectrum at 1.9 [GHz] into an account to pay the cost” of moving public safety users at 800 MHz and upgrading their equipment, Calabrese said. The spectrum relocation trust fund bill has passed the House but hasn’t cleared the Senate, he noted. “It’s still pending up there,” he said. “If the FCC simply admitted its lack of lawful authority and asked Congress in the name of homeland security to add state and local governments to the federal legislation they have, I believe that Congress would very likely agree.” A “second best” option would be for Nextel to receive some version of a bidding credit for an auction connected to the 1.9 GHz spectrum, he said. The value of the voucher could reflect the cost of the 2.5 MHz Nextel may give up at 800 MHz as part of public safety relocation and the cost of retuning incumbents, he said. “That still presents a problem of valuation” for the spectrum, he said. “But at least the margin of error is far lower.” Cingular Wireless Vp- Governmental Affairs Brian Fontes warned that the impact of a plan in which Nextel pays for relocation of incumbents at 800 MHz could be onerous in terms of litigation risks. Fontes said states such as S.C. have argued they haven’t had interference at 800 MHz and shouldn’t face rebanding. The item is likely to appear on the sunshine notice outlining the FCC’s planned agenda for the April 15 open meeting, he said. “But it may not be on the [final] agenda -- there’s still a lot of questions to be answered,” he said. The NAF briefing didn’t include representation from Nextel or public safety groups. NAF said Nextel and the Assn. of Public Safety Communications Officials declined an invitation to participate.

Senate Appropriations Committee Chmn. Stevens (R-Alaska) said any 800 MHz rebanding plan that involves relocating incumbents must be “self-financing.” In a letter to FCC Chmn. Powell made public Tues., Stevens said he wasn’t weighing in on either side the complex proceeding about mitigating public safety interference at 800 MHz. But he said that if Nextel must give up spectrum at 700 and 800 MHz to eliminate public safety interference, it must get replacement bands elsewhere. He said an auction wouldn’t be needed to do this.

The FCC Wireless Bureau plans to auction 20 automated maritime telecom system (AMTS) licenses Sept. 15. The AMTS service is a specialized system of coast stations that offer integrated marine voice and data communications, similar to cellular service, for tugs, barges and other vessels. The FCC public notice said service to units on land is allowed, “so long as marine-originating communications receive priority.” The FCC plans to auction two 500 kHz blocks of paired spectrum at 217/219 MHz in each of 10 AMTS areas. The FCC sought comment on reserve prices or minimum opening bids and other auction procedures by April 23, with replies due April 30.

One of several possibilities under consideration as the FCC mulls ways to mitigate public safety interference at 800 MHz is a bid credit for Nextel for spectrum at 1.9 GHz, sources said. Some in the wireless industry who have opposed the “consensus plan” for fixing interference at 800 MHz have been interested in a bid credit for Nextel instead of that operator receiving spectrum at 1.9 GHz for a price, sources said. But sources following the proceeding said the details of a final proposal for FCC action were fluid.