TR Daily CBA Sets Treasury Contribution, Eyes Open Access Network
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Friday, November 15, 2019

CBA Sets Treasury Contribution, Eyes Open Access Network

The C-Band Alliance committed in a letter to the FCC today that if satellite operators are allowed to transfer 300 megahertz of their spectrum in the 3.7 gigahertz to 4.2 GHz C-band through a private sale for terrestrial 5G services, it would pay a minimum of 30% of the net proceeds to the U.S. Treasury, with higher percentages for sale revenues that exceed $0.35 per MHz POP. However, it said that the income tax obligations incurred by CBA members as a result of the auction would count toward the payment.

The letter also cites efforts to work with Congress to see a portion of the payment to the Treasury set aside for an open access 5G network.

Specifically, in an ex parte letter submitted GN docket 18-122, CBA Chief Executive Officer Bill Tolpegin said, “If the FCC adopts the CBA proposal, the CBA commits to pay a portion of net proceeds of a CBA-led auction to the U.S. Treasury pursuant to the following progressive formula: 30% of net proceeds up to $0.35/MHz-POP, 50% of incremental net proceeds up to $0.70/MHz-POP, and 75% of incremental net proceeds thereafter.”

The commitment defines “net proceeds” as “proceeds received from the auction less the costs incurred to plan for and take all actions to implement the CBA proposal to clear 300 MHz of spectrum.” The letter adds, “This payment to the U.S. Treasury would be inclusive of all Federal income tax liabilities incurred by the CBA member companies as a direct result of the auction.”

“This CBA commitment could provide billions of dollars to the U.S. Treasury at a critical time, while still ensuring that expensive transition costs are covered and that mid-band spectrum is made available for 5G on a time frame that would realistically be years ahead of any other proposal on the record,” Mr. Tolpegin added.

He also pointed to the benefits the proposal could yield in expanding mobile broadband to suburban and rural areas.

“In order to ensure that all Americans receive the benefits of 5G, the CBA is working in good faith with various members of Congress to develop a proposal using a portion of the contribution to the U.S. Treasury to fund the deployment of an open access 5G network for rural broadband. This network would be deployed by a third party within 5 years of the spectrum being available and provide service on a nondiscriminatory, wholesale basis to over 100 million Americans,” Mr. Tolpegin explained.

There has been speculation that an auction of C-band spectrum for terrestrial 5G services could yield as much as $60 billion (TR Daily, April 17).

Recently, Eutelsat, which pulled out of the C-Band Alliance earlier this year (TR Daily, Sept. 3), suggested that up to half of the proceeds from an auction go to the U.S. Treasury. The CBA’s remaining members are Intelsat S.A., SES S.A., and Telesat.

In a research note, New Street Research LLP analysts Vivek Stalam said, “We don’t know if the regulators will accept this offer, but we think the CBA and Intelsat are in a better position now that they have made a firm one.”

The CBA commitment “would translate into a 30% government cut with a $25BN auction, and a 38% cut under our base case $50BN auction,” he added.

As for the open access network discussed in the CBA letter, Mr. Stalam said, “We are hard-pressed to think of anyone besides DISH who could conceivably build a nationwide 5G open-access network (all of the carriers will build 5G networks; none of them will be open-access).”

Regarding the timeline for FCC action on the CBA proposal, Wells Fargo Securities LLC Senior Equity Analyst Jennifer Fritzsche said, “While we do not know, we expect the carriers (likely with VZ [Verizon Communications, Inc.] leading the way) to be working with the CBA to push this plan. We agree that timing is of the essence, if the FCC is not able to settle on a plan in 1H 2020, the window likely gets closed as we get through the November 2020 Presidential election.” —Lynn Stanton, [email protected]

MainStory: FederalNews FCC SpectrumAllocation

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