Spectrum Act Could Be Template for Dividing C-Band Proceeds, O'Rielly Says

The 5G Spectrum Act, even if it doesn't become law, could benchmark how satellite communications incumbents get compensated for clearing part of the C band, FCC Commissioner Mike O'Rielly told reporters Tuesday in a wide-ranging interview. S-2881 "does have weight," especially as there seemingly has been a general shift from Capitol Hill resistance to any incentives, said. If satcom incumbents receive a percentage of the $40 billion in auction proceeds, as the legislation says (see 2001090021), debate will likely center on between 30 and 50 percent, though compensation could be a hard number for incumbents, or a combination of percentage and hard number, he said.

O’Rielly remains hopeful the FCC will also take on the 4.9 GHz band, possibly as part of a package giving public safety access to the T band in return for giving up 4.9 GHz. “That’s been the conversation that people have had” on Capitol Hill, he said.

The Spectrum Act approach for compensation is workable, the C-Band Alliance told us. In a meeting with FCC officials including Office of Economics and Analytics acting Chief Giulia McHenry and Wireless Bureau Chief Donald Stockdale, CBA CEO Bill Tolpegin and Brattle Group principal Coleman Bazelon said those acceleration fees could be proportioned based on an estimate of what accelerated clearing would be worth to winning bidders, per a docket 18-122 posting Tuesday. Bazelon said the acceleration payments would "more than double" value of auctioned C-band spectrum.

C-band clearing is among "the easiest of the harder decisions" in spectrum management, with future allocation issues to be even more contentious, O'Rielly said. He said disagreements with other federal agencies regarding spectrum -- such as with DOT over 5.9 GHz use -- reflects that increasingly contentious spectrum reality.

O'Rielly is focused less on C-band clearing incentives than on amounts of the band being freed up and on proper protections for incumbent services, "and we have mostly gotten there." Incentives to satellite operators seem reasonable to avoid protracted litigation and because satcom interests have made "compelling arguments," he said.

O’Reilly noted he previously backed reallocating the C band for 5G. “Now, everyone is talking about a C band,” he said: “You can’t go anywhere … and not talk about it.” A lot of things “need to happen in a lot of different bands,” he said. Even with the C band, the FCC needs to take on the 3.1-3.55 GHz band, he said.

“There are going to be drag-out fights from now on,” O’Rielly said. “We’ve done all the easy lifting.”

Disagreements

Asked whether Dish Network has a shot to replace Sprint as the fourth national wireless network, O’Rielly said it’s possible. “The market is a fickle thing,” he said: Dish “has the elements to be able to provide a fulsome package of services.”

Deal watchers have shifted their attention to New York, where a judge will soon rule on a state challenge (see 2001150077). “I don’t see the validity of the state’s arguments,” O’Rielly said. “I’m equally troubled by what it could mean if the states were to prevail” and the negative implications for M&A, he said.

On Ligado's requested terrestrial use of 40 MHz of satellite spectrum, O'Rielly told us the company is "due an answer." It's "been a long slog for them," he said, adding he doesn't know what the draft proposal FCC Chairman Ajit Pai has floated to other agencies says. Pai's office didn't comment. Ligado told the FCC that DOD opposition to its license modification applications contradicts past Pentagon stances (see 2001210040).

O'Rielly slammed DOD, saying it backed away from what was once more of a commitment to sharing with industry. The Pentagon wants to share commercial bands without giving up its own airwaves, he said. DOD also added to the areas to be protected from sharing in the 3.5 GHz band, he said. “They have changed their tune,” he said: “I’m worried about that and … we should be worried about that as a nation.” DOD didn’t comment.

O’Rielly defended FCC work on the 5.9 GHz band, noting the agency proposed 30 GHz of safety spectrum (see 1912120058). Providing more than 10 or 20 MHz for dedicated short-range communications makes no sense, he said. Some DSRC advocates want to preserve the whole 75 MHz band “for something in the future that has never developed … after 20-some odd years," he said. Many auto companies are migrating from DSRC to cellular broadband to everything technology, he said.

Media Modernization

O’Rielly listed media modernization, further rulemakings on ATSC 3.0, and the completion of the post-incentive auction repacking as issues the agency is likely to tackle in broadcasting in 2020. There’s an open proceeding on distributed transmission systems that broadcasters say is important to the 3.0 rollout (see 1911130064). “We’ve got a lot to do,” O’Rielly said. Though the repacking is to be complete this summer, widespread use of temporary antennas means work will remain, he said.

The commissioner “would love” for the FCC to be able to take action on media ownership matters such as the broadcast incubator program, but such action is blocked because of the 3rd U.S. Court of Appeals’ Prometheus IV ruling. He doesn’t have new information on whether the FCC would pursue certiorari for a Supreme Court appeal, and hopes the agency would “take a shot.” He repeated he would support breaking out pieces of the 2018 quadrennial review and approving them on their own. Supporters of current media ownership rules “are in favor of inertia,” he said, calling such a viewpoint “mind-boggling.” O’Rielly has “deep concerns” about DOJ’s view of broadcast competition and the lack of follow-up on that agency’s workshop on whether broadcasters compete with digital advertisers.

O’Rielly was skeptical about arguments the FCC’s relaxation of the main studio rule contributed to recent announcements of layoffs at iHeartMedia stations. Relaxing the rule was about allowing small-market stations to reduce costs without degrading service, he said. “I don’t believe in my heart of hearts it had anything to do with the main studio rule.”

Asked by us about the numerous localities challenging the agency's cable TV local franchise authority order at the 6th U.S. Circuit Court of Appeals (see 1911270010), O'Rielly said it's unsurprising: If anything, the FCC should have gone further. He hopes to see the nascent Office of Economics and Analytics do more thoughtful cost-benefit analyses of big items before commissioners and start doing such analyses for more mid-tier items.

It remains unclear how many tribal entities will bid for 2.5 GHz licenses when a window opens next month (see 2001140059), O’Rielly said. “It is not an easy business,” he said: Anyone who gets a license has to meet buildout and other obligations "or otherwise we’ll try and reclaim our licenses.”

Overbuilding

O’Rielly raised red flags about broadband overbuilding involving USF dollars.

He’s “incredibly concerned” with sending duplicate federal spending to fund competitive broadband providers in a single area, not just from FCC but from other agencies, such as the Agriculture Department. He will continue to watch any new infrastructure legislation.

Also concerning is the FCC raising minimum speeds for rural broadband programs, because he wants to make sure the entire country has access to some form of broadband first. “When we raise the speeds, the dollars go to easier builds,” such as areas closer to the suburbs, O’Rielly said. “Let’s get everyone to 25/3 before we go to the new speeds,” he said. “We have an obligation to the Americans who don’t have service today.”

O’Rielly told us he's “digesting” a proposal in a Rural Digital Opportunity Fund draft up for a vote later this month that gives preference to gigabit speed networks once a budget clearing round threshold has been met (see 2001150005). “I’d like the networks to be future-proof,” he added.

O’Rielly has no immediate plans to gather state officials and industry representatives to address USF contribution reform. He said he’s at a standoff with some state leaders, and he disagrees with their point of view (see 1910150045). He suggested the joint USF board process was “not exactly functional now. The hardening of positions is problematic.” He’d like states to come forward with different proposals.

911, FCC Process

O’Rielly plans to write a letter to state officials in West Virginia this week or next to follow up on past contact on 911 fee diversion, as expected, he told us (see 1912190077). That state didn't comment now.

Changes he was looking for “haven’t happened yet,” the regulator said, calling 911 fee diversion “an incredibly important” issue. “We’ve really shrunk the list” of states with outstanding issues, he said, including American Samoa, which didn’t file a response to O’Rielly’s initial inquiry, plus West Virginia, Nevada, New Jersey, New York and Rhode Island. “They all have different reasons” why their actions don’t comply with the statute that says the fees must go for their intended purpose, O’Rielly said.

On process changes, which the commissioner has pushed, he wants documents that are circulated for votes to be decided on more quickly. "The circulation process is broken," O'Rielly told us. "We should be able to fix that." He has "advocated that we fix the circulation process up front" and commissioners could vote sooner. "We’re taking too long on the most benign items" and that can be remedied without hurting overall agency processes, he said. FCC members "should read items and vote on them," he added: "Pretty simple."

The GOP regulator said the agency could make public more drafts, beyond the current system of releasing those that are slated to be approved at monthly commissioners' meetings. Such disclosure wouldn't apply to adjudicatory items, O'Rielly noted. The other types of documents could be kept private for a window of time and then issued, he told us.

The FCC agrees with O’Rielly that commissioners "should give prompt consideration to items placed on circulation," an agency spokesperson emailed. The commission appreciates "him doing so,” the representative added.