Day After FCC C-Band Announcement, Industry's Trying to Read Tea Leaves
It's good news that FCC Chairman Ajit Pai will seek a public auction of the C band next year, rather than endorse the C-Band Alliance plan (see 1911180065), Comcast said the day after the announcement Monday. Others said questions remain, though the FCC is likely to follow the outlines of Senate legislation introduced Monday. The Pai approach “will ensure that this valuable spectrum is put to use expeditiously for 5G in a manner consistent with the public interest, while also preserving the C-Band as a critical input for the delivery of video services,” Comcast told the FCC Tuesday, in a docket 18-122 filing.
Comcast said the FCC should choose either an incentive auction or “a more traditional auction of 280 megahertz under section 309(j)(1), following a modification of incumbent C-Band licenses to limit satellite operations to 200 megahertz.” Under either methodology, “the Commission would be taking an important step to promote 5G in a legally sound and efficient manner,” Comcast said: “At the same time, by maintaining the current satellite allocation for 200 megahertz without qualification, and by ensuring that all necessary technical, transition-related, and cost-recovery issues are addressed, the Commission would keep the country’s video distribution system on firm footing.”
New Street’s Vivek Stalam said the federal proposal likely means less money for satellite operators than the CBA plan -- 50 percent of revenue, versus 50-70 percent proposed by the alliance. “We doubt that the CBA will accept this offer given the downside risk, but now that there is a firm proposal from the regulators, we have a better idea of the spread between the regulators and the CBA and can begin trying to understand what a compromise might look like,” Stalam wrote in a research note Tuesday: “We remain Buy on Intelsat, though we expect more volatility as negotiations play out in public in the coming weeks.”
Pai and the staff will “have to work overtime to put together an item for the other Commissioners to approve,” said New Street’s Blair Levin in a separate note. Pai likely has the votes, though Commissioner Mike O’Rielly was an advocate of the CBA plan, Levin said. “Pai cannot afford to wait for Congress to legislate to meet his own deadline of an auction in 2020,” Levin added. Senate Commerce Chairman Roger Wicker, R-Miss., and Communications Subcommittee Chairman John Thune, R-S.D., “publicly endorsing Pai’s decision and providing him the details on the financial split is significant regardless of what the House and Senate do,” he said: “The order likely will be fully consistent with the draft legislation in terms of the allocation of proceeds. Pai could seek to obtain more money for the government, but we think it would be difficult, unless Thune and Wicker concur, for Pai to advocate accepting less.”
Dish Network could emerge as the winner if it takes a long time to deploy the C band, MoffettNathanson’s Craig Moffett told investors Tuesday. CBA’s “argument, that their plan was the fastest way to achieve that goal, was a reasonable one,” Moffett said: “But our central concern from the beginning was the secret that was hiding in plain view: the FSS (fixed satellite services) companies don’t actually own the spectrum they were supposedly going to sell. It always seemed inevitable, at least to us, that the battle over who would get to keep the proceeds of a sale hadn’t really been fought yet, and until it was, the whole debate had been limited to mere preliminaries.”
The problem for Dish is it faces similar ownership questions since its AWS-4 spectrum was never purchased in an auction, Moffett said: “Technically, Dish has a right of use. But the spectrum is owned by taxpayers.” Dish didn’t comment.