Wireless Spectrum Auctions

The FCC Wireless Bureau announced last week the shifts in responsibilities among its staff members as part of its recent reorganization into 6 new divisions. A bureau spokeswoman said the legal advisers and deputy bureau chiefs generally had shifted the divisions they supported. The bureau chief’s office added Aaron Goldberger as a legal adviser to provide support to the Public Safety & Critical Infrastructure Div. (PSCID) and to coordinate with the FCC Office of Engineering & Technology. The bureau named Lauren Patrich as special counsel for media and outreach. It announced 2 reassignments in the chief’s office: (1) Chief Engineer Thomas Stanley will be responsible for wireless technology and engineering policy on licensing or sharing wireless services. (2) Chief Economist Walter Strack will be policy and technical adviser on economic issues concerning regulatory policy, spectrum policy and auctions. In other areas, the Bureau said: (1) Deputy Bureau Chief Catherine Seidel is supporting the bureau’s new Broadband Div. and the PSCID. (2) Deputy Bureau Chief Gerald Vaughan is supporting the Spectrum & Competition Policy Div. and the Spectrum Management Resources & Technology Div. (SMART). (3) Acting Deputy Bureau Chief Peter Tenhula provides support to the Mobility Div. and the Auctions & Spectrum Access Div. Tenhula also directs the agency’s Spectrum Policy Task Force. Margaret Wiener, chief of the bureau’s Auctions & Industry Analysis Div., becomes chief of the new Auctions & Spectrum Access Div. The new Broadband Div., which has taken on some policy areas that had been in other divisions, is headed by Joel Taubenblatt, who was deputy chief of the former Policy Div. and a legal adviser to the bureau chief. The Div.’s policy areas include Multipoint Distribution Service/ITFS, advanced wireless services, 70-80-90 GHz, Local Multipoint Distribution Service, 24 GHz and 18 GHz issues. D'wana Terry, who headed the previous iteration of the Public Safety Div., becomes chief of the new Public Safety & Critical Infrastructure Div. William Kunze is heading the Spectrum & Competition Policy Div., responsible for Spectrum Policy Task Force implementation, secondary markets. His division also will include competitive reviews of proposed transactions. Elsewhere, John Chudovan is heading the SMART Div., which covers all the bureau’s information technology, licensing support, auctions support and outreach functions.

Attention turned in recent months in the 800 MHz proceeding to the question of how to value spectrum at 1.9 GHz under a rebanding proposal by Nextel and others, FCC Wireless Bureau Chief John Muleta said after the Commission’s Thurs. agenda meeting. But he said that didn’t mean the agency had zeroed in on the “consensus plan” to mitigate interference to public safety at 800 MHz. Other FCC officials acknowledged they faced budgetary belt-tightening in 2004 and said a must-carry decision might be a way off.

Salmon PCS, which has financial backing from Cingular Wireless, outlined for the FCC last week a possible spectrum manager leasing arrangement the 2 companies were considering that would involve most of Salmon’s 45 markets. A Cingular official told us Fri. an agreement was in the exploratory stages. Talk of a deal follows the FCC’s adoption last year of rules on secondary markets for spectrum, allowing licensees to lease underused capacity (CD May 16 p1).

Rural telecom companies are uniquely positioned to provide wireless services in the vast majority of rural areas, parties said in comments filed with the FCC. They urged the Commission to adopt rules and policies that would provide opportunities for rural telephone companies and eliminate outmoded barriers to deployment of wireless broadband service. The comments came in response to a rulemaking the Commission began in Sept. (CD Sept 11 p6) asking how to promote spectrum-based services in rural areas.

The FCC is poised to take up a proposal and order at today’s (Wed.) agenda meeting on cognitive radios in a move that some developers hope ultimately will create more incentives to deploy the technology. One helpful outcome would be for the items to more clearly define what cognitive radio technology was vs. software-defined radios, said Mike Chartier, Intel Corporate Technology Group dir.-regulatory policy and regulatory chmn. of the Software Defined Radio Forum.

In continued back-and-forth at the FCC on the 800 MHz proceeding, Nextel shot back at a CTIA filing earlier this month that argued that the “consensus plan” to realign that spectrum would violate the competitive bidding provisions of Sec. 309(j) of the Communications Act. Nextel accused the plan’s opponents of unleashing a “campaign of misinformation” in the last few weeks, “audaciously twisting the application of regulation to serve their myopic interest.” In its latest filing, Nextel argued that the FCC had full legal authority to approve the consensus plan, which also was backed by some private wireless groups, PCIA and the Assn. of Public Safety Communications Officials. The plan is designed to mitigate interference to public safety operations at 800 MHz and would involve reconfiguring parts of 700, 800 and 900 MHz. CTIA’s most recent criticism had focused on the part of the plan that would give Nextel a nationwide license for 10 MHz at 1.9 GHz as part of a spectrum swap for capacity it was giving up in other bands. CTIA raised concerns about the extent to which the proposal would run counter to Sec. 309(j), which outlined the principals for the FCC’s offering spectrum at auction and would circumvent the Commission’s standard license assignment process. “CTIA applies inapposite precedent, distorts the comparative value of Nextel’s current licenses and proposed replacement spectrum and ignores the enormous societal benefits that would result from the consensus plan,” Nextel told the FCC. “The Commission should reject this last-ditch effort, and should instead move expeditiously to adopt the consensus plan in its entirety.” Nextel, a member of CTIA, told the Commission that this was not the first time the group had weighed in at the 11th hour in a spectrum proceeding to raise new arguments. Nextel cited the mobile satellite service rulemaking, in which CTIA argued late in the proceeding about potential interference to 1.9 GHz PCS operations. As for the 800 MHz proceeding, Nextel said it could implement the consensus plan and modify its licenses without triggering the competitive bidding requirements of Sec. 309(j). Nextel contended that provision applied only to the awarding of initial licenses. Instead, it said, the consensus plan would be modifying only Nextel’s already existing licenses. It said the FCC had authority to assign that spectrum to Nextel as a license modification under Sec. 316 of the Act. Nextel said important public interest provisions underlay the competitive bidding provisions of Sec. 309. “In the case of the 800 MHz proceeding, however, the compelling public interest benefits that would result from the consensus plan outweigh the public interest in spectrum auctions,” Nextel said. Nextel Vp-Govt. Affairs Lawrence Krevor said: “The consensus plan will eliminate the dangerous problem of public safety radio interference and we look forward to CTIA rallying to the cause.”

The FCC Wireless Bureau turned down a request by the United Telecom Council (UTC) and Southern Communications to postpone a 900 MHz auction set to begin Feb. 11. The Bureau’s Auctions & Spectrum Access Div. rejected a petition to delay the auction of 896-901 and 935-940 MHz licenses until after the Commission resolved issues in the 800 MHz proceeding. In that proceeding, the FCC is examining possible ways to reduce public safety interference at 800 MHz, including relocation of some public safety and private wireless incumbents. UTC and Southern Communications asked for the delay last month, arguing it would be in line with past FCC decisions. The FCC ruled Fri. that Sec. 309(j) of the Communications Act required that after auction bidding rules had been issued, the agency must provide enough time for prospective bidders to develop business plans, assess market conditions and evaluate the availability of equipment for relevant services. “We do not believe that the statutory requirement to provide prospective bidders with time to develop a business plan and evaluate the availability of equipment requires the Commission to postpone an auction until every external factor that might influence a bidder’s business plan is resolved with absolute certainty,” the FCC said. It said the public interest would be served by holding the auction as planned, in part because Sec. 309(j) directed it to consider other goals, including rapid deployment of new technologies. The Commission dismissed arguments that it would be difficult for potential bidders to develop business plans or form strategies for participating in the 900 MHz auction because of uncertainty over how the FCC would decide in the 800 MHz proceeding. A “consensus plan” before the FCC, backed by Nextel and others, would realign spectrum at 700, 800 and 900 MHz. The agency rejected assertions that the Nextel proposal would reallocate the 900 MHz band for noncommercial use. “Even were the consensus parties proposal adopted and some incumbent 800 MHz licensees relocated to the 900 MHz band, we do not believe that this possibility is sufficient reason to delay the scheduled auction,” the agency said. It also said the proposal didn’t depend on the availability of the 900 MHz specialized mobile radio licenses that were included in the Feb. auction, known as Auction No. 55. “We are not persuaded that the prospect of more intensive use of the 900 MHz band is a sound basis for postponing Auction No. 55,” it said. It also turned down suggestions that the auction be postponed because of the possibility that Nextel’s 900 MHz SMR licenses could be cancelled under applicable construction requirements. UTC and Southern Communications had argued that cancellation of Nextel’s licenses would increase the number available for auction in that band. The FCC called such reasoning “highly speculative.”

FCC Comr. Abernathy lauded the approval of regulatory best practice guidelines this week at the ITU’s Global Symposium for Regulators (GSR). The 4th annual conference, sponsored by the ITU’s Development Bureau, drew regulators from 90 of 123 ITU member countries, Abernathy told us from Geneva. “The focus of this meeting was on universal access - - how do we as regulators move forward to promoting universal access for all parts of the globe, whether urban or rural,” Abernathy said. The GSR’s universal access best practice guidelines are scheduled to be delivered to the World Summit on the Information Society (WSIS) this week in Geneva. The ITU said the best practice guidelines called for support for regulatory reform “at the highest level of government,” including treating information and communications technology as a development tool, not a revenue source. Abernathy said regulators backed best practices that included technologically neutral licenses, independent telecom regulatory bodies and clear and transparent rules. She said they marked “all the themes that the U.S. has been pushing globally.” She said the lessons of competition in the wireless arena -- including the possibilities created by unlicensed competitors and the potential for multiple competitors -- were cited by regulators as applying more broadly to universal access. “The fact that the regulators now agree to these kinds of guidelines and regulators sends a strong signal,” Abernathy said. Among the topics discussed was the extent to which unlicensed spectrum through Wi-Fi could address last-mile issues, she said. The 2-day meeting, which ended Tues. in Geneva, made clear the extent to which a wide range of countries had embraced competition and regulatory reform, with an emphasis on the need for an independent regulatory authority “so that you can’t have undue pressure exerted by an incumbent,” she said. Even 6 or 7 years ago, those themes wouldn’t have been on the table, she said. Toward the end of the conference, discussion turned to funding mechanisms for universal access, including the possibility of an auction approach in some cases, she said. The ITU said that “the regulators agreed that the lessons learned from developing countries’ initial experiences with mobile cellular services should now be applied to a broader range of ICT services to foster universal access.”

CTIA told the FCC last week that the “consensus plan” backed by Nextel and others for fixing public safety interference at 800 MHz “would significantly depart from Commission precedent and is unsupported in law or policy.” The plan backed by Nextel, the Assn. of Public Safety Communications Officials, PCIA and others would involve reconfiguring parts of the 700, 800 and 900 MHz and 1.9 GHz band, including paying public safety and private wireless incumbents up to $850 million to move. CTIA’s filing at the FCC late Thurs. focused on the part of the plan that would give Nextel “an exclusive nationwide license” for 10 MHz at 1.9 GHz as part of spectrum it would receive for giving up bands elsewhere. CTIA said that would: (1) Violate policies underlying Sec. 309(j) of the Communications Act, which outlines the principals for the FCC’s offering spectrum at auction and would “circumvent the Commission’s standard license assignment process.” (2) Not qualify under applicable law as either a channel swap or a license modification. (3) Require the FCC to either “improperly ignore” its statutory obligations or to illegally use Sec. 316 authority to “trump” its Sec. 309(j) obligations. CTIA argued that past channel swaps allowed by the Commission, including those involving FM and broadcast licenses, were different from what Nextel was proposing. In the Rainbow Broadcasting case involving a broadcast spectrum swap, CTIA said the exchange was limited to situations in which a licensee wasn’t seeking to use the process to substantially change its coverage area. It said: “In contrast to that concept, the ‘consensus plan’ proposes a nationwide assignment of 10 MHz of contiguous, comparatively clear spectrum to Nextel in exchange for relinquishment of a patchwork of frequencies that have limited utility.” Rather than making Nextel whole for spectrum it would give up elsewhere, CTIA said the swap would substantially upgrade its spectrum holdings.

Cingular told the FCC Wireless Bureau last week that the Justice Dept.’s approval of a debt compromise agreement involving NextWave licenses was important to a pending waiver request at the Commission involving unjust enrichment rules. Cingular and NextWave filed applications at the FCC in Oct. to assign licenses as part of a $1.4-billion deal in which Cingular was buying PCS spectrum from NextWave in 34 markets. The companies asked that the FCC waive parts of its unjust enrichment rules, which require that designated entities (DEs) pay penalties if selling a license to a non-DE during a restricted period to compensate for advantages such as bidding credits. The filings said DoJ had approved a term sheet allowed by the bankruptcy court under which Cingular would pay the FCC $714 million for the licenses involved. (The companies said the unpaid principal associated with the licenses in the deal was about $687 million). The companies cited unjust enrichment rules that applied to disaggregation of PCS spectrum. Cingular said the term sheet represented a “negotiated arms'-length settlement of litigation.” It said DoJ, on behalf of the FCC, had agreed to accept $714 million to satisfy all govt. claims on the designated licenses, which represent a fraction of NextWave’s spectrum holdings and still would leave it with a national footprint. In response to a Wireless Bureau request for more information, Cingular said DoJ’s approval of the debt compromise was important to the FCC’s consideration of the pending waiver request because: (1) The debt that was the focus of both the DoJ approval and the pending waiver request “results from the same source: the FCC’s auction rules.” (2) DoJ approval was predicated on the Commission’s recommendation on the debt compromise, which examined public interest factors. (3) The FCC’s recommendation that DoJ approve the debt compromise took into consideration the amount owed under the unjust enrichment rules. (4) “DoJ made an independent review of the relevant public interest factors and determined that a compromise of NextWave’s debt would serve the interests of the United States.” Cingular said the term sheet on the licenses was finalized after it and NextWave had reached agreement on the lump-sum purchase price for the spectrum package. It said the $714 million direct payment to the FCC “is more than sufficient” to pay in full the unpaid principal amount attributable to each of the designated licenses. “The total amount of unpaid principal is approximately $687.5 million, leaving approximately $26.5 million remaining from the FCC direct payment to be applied to unpaid accrued interest,” Cingular said.