Pai Will Propose Late 2020 C-Band Auction, No FCC Vote This Year

FCC Chairman Ajit Pai will circulate an order seeking approval of a public auction of 280 MHz of C-band spectrum in 2020, for a vote early in the new year, FCC officials said Monday. The order won't be on the agenda for the Dec. 12 commissioners’ meeting. The decision is considered a huge loss for the C-Band Alliance, which pressed for a private auction (see 1911150046). President Donald Trump called Pai Oct. 30 to find out more about the C band but didn’t express a view the FCC should hold a public auction, FCC officials said. Pai unveiled the decision in a letter Monday to leaders in Congress.

FCC officials said on a call with reporters they expect an auction to start before the end of 2020, for spectrum at 3.7-3.98 GHz, with a 20 MHz guard band. The upper 200 MHz would be preserved for the video and radio programming currently being distributed in the band.

The FCC decided a public auction's necessary because CBA was unable to demonstrate to the agency's and industry's satisfaction that a private auction would offer adequate price discovery and be fair to all potential bidders, officials said. They declined to provide more information on the likely rules for the auction and how satellite operators will be reimbursed. Under the rules of the call, comments had to be paraphrased and attributed to a senior official.

The Pai proposal is a "significant departure from the CBA’s market-based proposal,” CBA said in a statement: “The announcement does not address the critical involvement of the incumbent satellite operators in executing the complex task of reconfiguring and transitioning their networks. Nor does the announcement address the fundamental modification of the rights afforded by the existing FCC licenses held by the CBA members which would be required under a public auction approach.” CBA pledged to work with the FCC.

T-Mobile reported on meetings with staff to all the commissioners, except Pai, raising concerns about the implications for the citizens broadband radio service auction, to start in June. “The Commission has spent nearly 10 years working with NTIA on the use of and developing rules governing the 3.5 GHz band,” T-Mobile said in docket 18-122, posted Monday. “It should not threaten the future use of the band by requiring providers to focus on two mid-band auctions at the same time.” Holding an auction “after the 3.5 GHz band auction is complete will permit 3.5 GHz band auction participants to re-engage with capital markets to secure funding for a second auction.”

The FCC recognizes there are historic concerns about holding auctions too close together, but that's outweighed by the need for mid-band spectrum for 5G, a senior FCC official said.

Hill Reacts

Senate Appropriations Financial Services Subcommittee Chairman John Kennedy, R-La., hailed Pai's C-band decision but vowed during a Monday conference call with reporters that he still intends to hold a Thursday hearing with FCC Office of Engineering and Technology Chief Julius Knapp and Office of Economics and Analytics acting Chief Giulia McHenry. Pai's “putting both the American taxpayer and our 5G efforts first,” Kennedy told reporters. “Swamp creatures” in the federal government “were trying to help some of their telecom buddies put all four feet and their snout into the trough,” but it didn't work.

Kennedy said he still wants to hear from the two FCC officials and believes the public should also “hear what they say.” The hearing begins at 11 a.m. in 138 Dirksen. He also intends to continue working to retain Senate Appropriations Committee-backed pro-public auction language (see 1909190079) in the chamber's version of the FY 2020 FCC-FTC budget bill (S-2524) despite opposition from Senate Commerce GOP leaders. “Some people are going to be very surprised by how much support I have” for keeping the language, he said. Kennedy said last week he's also filing a Senate version of the Clearing Broad Airwaves for New Deployment (C-Band) Act. HR-4855 would require a public FCC auction of 200-300 MHz of “contiguous” spectrum on the frequency by Sept. 30, 2022 (see 1910240046).

Senate Commerce Chairman Roger Wicker, R-Miss., and Communications Subcommittee Chairman John Thune, R-S.D., filed their 5G Spectrum Act after Pai's announcement. The bill would require the FCC to hold a public auction of at least 280 MHz of C-band spectrum, and require the sale to start by Dec. 31, 2020. The measure would also require the FCC to return at least 50 percent of the auction proceeds to the U.S. Treasury. Thune called it a “win-win for taxpayers,” and Wicker said it's “the best way to expand access to 5G, especially in rural areas, and secure value for all Americans.”

Kennedy said he's “putting a hold” on the Wicker-Thune bill because he doesn't agree with the C-band auction proceeds language. “Why does [Wicker] want to give 45 percent” of the auction proceeds back “to foreign corporations who don't own the spectrum,” Kennedy asked.

Carriers Pleased

“Thank you @FCC and @AjitPaiFCC for seeing the need for more spectrum and the benefit of a public and transparent C-band auction,” tweeted T-Mobile Chief Technology Officer Neville Ray.

“China and other countries have already provided huge blocks of mid-band spectrum to carriers for 5G, and there is a risk that those countries will become the hub of 5G innovation and investment if the US fails to act promptly to do the same,” said Craig Silliman, Verizon chief administrative, legal and public policy officer: “We strongly encourage the FCC to move with urgency so that our nation does not fall behind.”

AT&T supports the approach outlined by Pai, said Joan Marsh, executive vice president-regulatory and state external affairs. “Any path forward must chart a course toward a fair, open and transparent auction; compensation to C-Band licensees for relinquishing rights and relocating services; proceeds for the U.S. Treasury; and a clear and reasonable transition plan that ensures broadcasters, programmers and earth station operators that their services will not be interrupted and that their relocation costs will be reimbursed,” Marsh said in a statement.

The announcement's a “modest negative” for Verizon, which “seemed to be supportive of the CBA plan, and given its lower levered balance sheet, was arguably in the best opportunity to secure much of this spectrum,” Wells Fargo’s Jennifer Fritzsche told investors. For T-Mobile, Charter and others a “delay may be a positive,” she said.

"Mid-band spectrum is critically important for maintaining U.S. leadership in 5G, so we’re pleased to see the FCC set a clear direction for the C-band and urge the FCC to move swiftly to make this valuable spectrum available for innovative 5G services,” emailed CTIA Senior Vice President-Regulatory Affairs Scott Bergmann.

Pai's change of direction was likely driven by political pressure but also came because CBA's plan stood on "extremely shaky legal ground," said Michael Calabrese, director of the Wireless Future Program at New America. New America is part of the Broadband Access Coalition proposing a rival plan for sharing the band.

The FCC has the authority to simply modify the satellite operators' licenses and take back 300 MHz of spectrum under Section 316 of the Communications Act, emailed Public Knowledge Senior Vice President Harold Feld. Typically, in such situations the FCC provides compensation for migration, with it coming from the winning bidders and the agency setting guidelines for how to compute costs and acting as arbiter in the case of holdouts. He said it may try an incentive auction, "but that is not guaranteed to yield a specific amount of spectrum."

Calabrese said he expected the agency to schedule a traditional auction that would put the cost of transitioning incumbent services on the winning bidders, with the incumbents having to relocate by a certain time. He said the FCC might do the work in two stages, with stage one modifying licenses to set a deadline for clearing the bottom 200 MHz -- that being the amount of spectrum the CBA had indicated it could clear without affecting services or revenues. The next 100 MHz "presents a more difficult issue" and that second stage might require some negotiated agreement with satellite operators that includes "hefty incentive payments" by the winning bidders, he said.

Farrar said if the 5G Spectrum Act, which would require an auction that includes some proceeds going to satellite operators, doesn't pass, the FCC's Plan B is likely an overlay auction, with satellite operators negotiating with wireless operators on clearance and getting paid to expedite it. The 5G Spectrum Act would mean less of a payday than satellite operators had hoped, he said.

Pai's announcement got bipartisan eighth-floor kudos. "A public auction is the best and fastest way to make the C-Band available and ensure that all Americans benefit,” Democratic Commissioner Geoffrey Starks tweeted. “Moving forward quickly with a transparent process that frees up ~300 MHz of spectrum while returning money to the Treasury will help extend America’s 5G leadership,” tweeted Republican Brendan Carr.

America's Communications Association and Charter Communications, which with Competitive Carriers Association had pushed an auction with proceeds dedicated to a fiber network, also cheered (see here and here). ACA said it plans to work with the FCC on auction details and a transition plan that "gives cable earth station operators, including in rural America, the flexibility to transition to fiber-based solutions.” The Wireless ISP welcomed the proposal.

"This is a win for taxpayers and consumers," freeing up spectrum for 5G "without the prospect for delays and legal disputes," said Taxpayers Protection Alliance, which also had fought the CBA plan (see 1910170038).

“It’s time for this controversy to be over, and to move on to the public auction,” said Institute for Policy Innovation President Tom Giovanetti.