TR Daily FCC Adopts 2.5 GHz Band EBS Order Over Dems’ Partial Dissents
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Wednesday, July 10, 2019

FCC Adopts 2.5 GHz Band EBS Order Over Dems’ Partial Dissents

Over the partial dissents of Democratic Commissioners Jessica Rosenworcel and Geoffrey Starks, the FCC today adopted a report and order updating its rules for 2.5 gigahertz band educational broadband service (EBS) spectrum to remove the educational use requirement, which will clear the way for the transfer of licenses from educational to commercial entities, and to hold an overlay auction of unused frequencies.

The order in WT docket 18-120 declines to adopt proposals to establish filing windows for existing EBS licensees to expand their service areas to county boundaries and for educational entities that don’t currently hold EBS licenses to acquire them. But the order establishes a filing window to allow tribes in rural areas to get access to spectrum before an auction is held. The order also sets build-out obligations.

While supporters of the item said it could provide mid-band spectrum for 5G services, there are questions about how interested parties will be in the auction.

“The demand for mid-band spectrum for wireless broadband services, especially 5G, has increased in recent years. The Report and Order approved today gives incumbent entities more flexibility in how they use this spectrum and provides opportunities for other entities, including Tribal Nations, to access unused spectrum in this band,” the FCC said in a news release.

“The Order eliminates restrictions on the types of entities that can hold licenses as well as educational use requirements, while preserving incumbent licensees’ private contractual arrangements and provisions in existing leases. Further, the Order removes limitations on leases entered into on a going-forward basis under the Commission’s secondary markets rules, which will create incentives to build out in rural areas,” the news release added.

“Additionally, the Order establishes a priority filing window for rural Tribal Nations to provide them with an opportunity to obtain unassigned 2.5 GHz spectrum to address the communications needs of their communities. The remaining unassigned spectrum will be available for commercial use via competitive bidding following the completion of the Tribal priority filing window. To maximize participation by small wireless service providers, the Order adopts county-sized overlay licenses, a three-part band plan (2 roughly 50 megahertz blocks and a 16.5 megahertz block), and adopts small business, rural service provider, and Tribal lands bidding credits. The Order also adopts robust buildout requirements to ensure that the spectrum is used to provide service,” the news release said.

FCC staff told reporters during a news conference after the meeting that one difference between the draft order and the item adopted today are the addition of bidding credits.

In addition, the band plan was changed from the draft order, which had proposed two license sizes – a 100 MHz block and a 16.5 MHz spectrum block. The band plan as adopted includes a 50.5 MHz block, a 49.5 MHz block, and a 16.5 MHz block, according to agency staff.

The FCC last year adopted an NPRM in its EBS proceeding to consider steps to free up unused EBS spectrum for commercial services (TR Daily, May 10, 2018).

FCC Chairman Ajit Pai, who said that a 2.5 GHz band auction will be held next year, said that “the Commission majority takes a major step toward freeing up critical mid-band spectrum for 5G. At long last, we remove the burdensome restrictions on this band, allowing incumbents greater flexibility in their use of the spectrum and introduce a spectrum auction that will ensure that this public resource is finally devoted to its highest-valued use. These groundbreaking reforms will result in more efficient and effective use of these airwaves and represent the latest step in advancing U.S. leadership in 5G.”

Mr. Pai added that he wants “to make sure that those committed to connecting Tribal members in rural areas are given a strong opportunity to succeed. A Tribal priority filing window will help the most marginalized communities in the country gain access to services using this transformative spectrum band.”

Mr. Pai noted that the FCC today declined “to adopt priority windows for non-incumbent educational institutions or incumbent licensees. Here’s why. Experience suggests that the past is highly likely to be prologue. And today, an overwhelming number of today’s EBS licensees lease an overwhelming amount of EBS spectrum out to wireless companies. They don’t use it for educational purposes. Indeed, over 95% of current license-holders for our 2,193 EBS licenses today lease much of this spectrum to non-educators. The FCC abiding this longstanding arbitrage has been unhelpful to consumers for many years. Given today’s imperative of 5G leadership and consumer demand for advanced wireless services, the FCC extending this middleman model even further would be nonsensical. And as Commissioner Carr’s recent inquiries have suggested, the FCC would be foolish, if not derelict in its duty, to allow entities to monetize this spectrum nationwide for purposes that have little to nothing to do with educating children. That would exacerbate rather than close the homework gap.”

The Chairman rejected Ms. Rosenworcel’s suggestion that the Commission hold an incentive auction of EBS spectrum.

“One of my colleagues suggested — yesterday — that we hold an incentive auction in this band with no details offered whatsoever on how to do so. Of the many problems with that suggestion, one stands out: It would delay an auction of this key mid-band spectrum by several years, according to our career staff, thus substantially slowing down progress on 5G,” he said. “I believe that we need to make it a priority to auction mid-band airwaves right now — not in several years’ time — and accordingly, I am not willing to support such a delay.”

“The Order frees the spectrum from the misguided choices of FCCs past. It makes the licenses flexible-use, which technology and the market show us will power 5G. It modernizes the licenses’ shapes by auctioning the white spaces and encouraging geographic consolidation. And it relies on market forces — rather than a protracted or reticulated FCC process — to quickly and fully rationalize the spectrum for 5G. This means mid-band for 5G today,” said Commissioner Brendan Carr.

“Now, some will tell you that we shouldn’t take these steps to free up mid-band spectrum. They say this spectrum is for kids and schools. They pit winning the race to 5G against education, creating the illusion of a binary choice. But when you scratch the surface of their claim and see what’s underneath it, I can tell you it’s not the kids,” Mr. Carr added. “The original 2.5 GHz licenses were given only to accredited educational institutions and government entities engaged in the formal education of enrolled students. The FCC later opened a small window of license eligibility but only for nonprofits and only if their purposes were educational and they produced instructional video content. The idea was that valuable spectrum should be given away only to entities that need it to educate kids.

“In the course of examining the 2.5 GHz licenses at issue in this order, I discovered that many of these national organizations are using this valuable public spectrum that they got for free for activities far removed from kids and schools,” Mr. Carr said. “They are not laser-focused on closing any homework gap. They are not devoting all of their energy to kids still stuck on the wrong side of the digital divide. It turns out, they’re liquidating the spectrum and spending cash on pet projects. Political campaigns. Buying a non-GMO farm. Even pocketing millions of this tax-free money for themselves. These practices may not only violate FCC rules, but, in some cases, federal tax law as well. So last week, I started an inquiry by sending letters to some of these national organizations. We need to get to the bottom of their shady practices. And we need to hold them accountable for any wrongdoing.”

Mr. Carr said that he is “glad my colleagues agreed to include language in today’s decision that directs the Enforcement Bureau and the Wireless Telecommunications Bureau to review these existing license holders for compliance with our rules and other applicable laws. Strong enforcement is especially important now because this Order allows national nonprofits and all other 2.5 GHz holders to sell their licenses, potentially at great profit. Those resources should go to kids and schools, not shady middlemen, not rent-seekers, and not scam artists.

“I also think the FCC should demand much more from these and other EBS license holders than we’ve been getting,” Mr. Carr added. “The current 30 percent buildout obligation is out of step with the performance requirements we impose on other wireless licensees. I proposed that we increase buildout on existing EBS licensees to 80 percent, and although we do not take that step in this Order, the Order now creates the procedural path to accomplishing that in a pending rulemaking.”

Mr. Carr told reporters after today’s meeting that he plans to send more letters to national non-profit organizations and said the Enforcement Bureau should assess if any groups have failed to maintain their status as “qualified nonprofits.”

“In many areas of the U.S., the Educational Broadband Service (EBS) band never lived up to expectation,” said Commissioner Mike O’Rielly. “After a protracted history of wishful thinking that included educational broadcasting and then broadband opportunities for schools and non-profit institutions, we are mostly left with an inefficient system of commercial broadband leases, continuous licensing freezes, and underutilized spectrum. I recognize that certain educational institutions took advantage of their licenses and constructed networks, but they are few and far between. This situation warrants a new approach, one that moves the pendulum towards the Commission’s well-established flexible use policies.

“Today’s item takes such a step by removing the educational restrictions on these licenses, fostering a more vibrant secondary market, and dusting off the bandwidth sitting in the FCC inventory by ordering an overlay auction where there is currently unlicensed spectrum,” Mr. O’Rielly added. “As such, the item generally moves in the right direction, and I applaud the Chairman for his leadership, even if I may have opted for tribal bidding credits rather than a tribal priority window. However, I certainly appreciate that the Chairman added stringent buildout requirements for licenses obtained in this set-aside. Every tribal EBS licensee should be on notice: if you don’t build, the license will be cancelled.”

The Commissioner added that “it is fair to say no one can truly predict who will be interested in participating in this auction, and there is unlikely to be a mad rush for these licenses. While a winning bidder would obtain an overlay license, the only guarantee is the right and obligation to serve 80 percent of the white space population, not a larger area such as the unserved portion of a market. This may ultimately discourage some of our largest providers from participating in the auction. Moreover, this proceeding is fundamentally about making slivers of spectrum available in those areas where it is not licensed. While additional spectrum opportunities in rural – or non-urban – markets are important, the lack of available spectrum in the largest markets makes it hard to characterize this as a true mid-band play for 5G or next-generation services.”

Commissioner Rosenworcel cited examples where entities have used the 2.5 GHz band for educational purposes and complained that the order adopted today “turns its back on the schools and educational institutions that have made the 2.5 GHz band their home since 1962. Today the FCC takes the innovative effort to infuse this band with learning opportunities — an initiative that dates back to the Kennedy Administration — and reverts to uninspired and stale commercial spectrum policy. This is a shame. Instead of using these airwaves in creative ways, we take the 2.5 GHz band, cut education from its mission and collapse this spectrum into an overlay auction system that structurally advantages a single nationwide carrier.”

Instead, she said, the FCC should auction EBS spectrum in an incentive auction and use the proceeds to close the “homework gap.”

“In short, we could honor what President Kennedy and his allies tried to do decades ago when they sought to spark educational use in the 2.5 GHz band. We have an opportunity now to nod to his history but do it in a way that is thoroughly modern and helps make sure every student has the connectivity they need for schoolwork. I regret that we do not do it here. So I dissent,” Ms. Rosenworcel said.

But she added that “there is one thing I think today’s order gets right and that’s the decision to preserve a filing window for Tribal entities seeking spectrum licenses. For too long those in these communities have lacked meaningful access to modern communications. Native Americans should not be the last Americans with access to broadband. Addressing this problem will take more than what we do here, but it’s an initiative that I support and the lone aspect of today’s decision that I approve.”

Ms. Rosenworcel noted to reporters that her advocacy of holding an incentive auction is not new, saying she has been pushing the idea “for more than a year.”

“I don’t think it was any secret that this was my preferred outcome – that is an incentive auction instead of an overlay auction, and, in fact, we actually started engaging with the Chairman’s office in the middle of last week on this very issue,” she said.

Commissioner Starks complained that the EBS order “is a missed opportunity. There’s no question that the EBS program has its flaws and that it doesn’t look quite the way it was envisioned all those years ago. But rather than embracing the positive aspects of the program and improving upon it, we instead set up a regulatory framework that may lead to its ultimate demise. This is a regrettable outcome, and one that could have been avoided.”

He added that “[l]ike television in the 1960s, the internet today has the potential to teach more things to more people than ever before. Similarly, the EBS program has grown from a program for closed-circuit educational television to a nationwide broadband program for schools and other educational institutions. EBS licensees use 2.5 GHz spectrum to teach online classes and provide hotspots to students. They’re using it to keep students connected while they’re in the hospital or when extreme weather events keep them from attending class. They’re using it to build out their own networks, such as Northern Michigan University’s WiMAX network, which provides broadband access to rural students in the Upper Peninsula. It’s not what we imagined in 1963, but only because before the internet these kinds of programs couldn’t be imagined.

“Critics of the EBS program suggest that the educational institution licensees should receive little sympathy for today’s decision,” Mr. Starks added. “These critics point out that, despite several innovative programs, EBS spectrum remains unused in large parts of the country and is usually leased by licensees to commercial entities. But while these facts are indisputable, they don’t tell the whole story. What they fail to account for is the Commission’s role in the lack of EBS licenses in much of the country. As the item grudgingly acknowledges, the Commission suspended the processing of applications for new EBS licenses in 1993.”

“EBS critics also make a great deal of the fact that most EBS licensees lease their spectrum. But those critics fail to acknowledge that it was the Reagan-era FCC that encouraged licensees to lease their spectrum,” Mr. Starks said.

“The Report and Order justifies its brute force approach as necessary to establishing American leadership in 5G and providing service to underserved areas. But this item falls far short of these lofty goals,” Commissioner Starks also maintained. “The order appears likely to result in a windfall of spectrum for current lessors, including Sprint, which already controls much of the 2.5 GHz spectrum. First, while the item has been revised, the spectrum blocks continue to be sized in a manner that will make it difficult for parties – like educational institutions – to compete at auction. Moreover, even among such parties, current lessors have a huge advantage because of their superior knowledge of the existing leases, which could significantly affect the valuation of any new overlay licenses. Given the advantage held by current lessors with existing substantial spectrum resources in the 2.5 GHz band, I have doubts that these companies will use any new spectrum for services they weren’t already planning to offer, particularly in rural areas.”

Mr. Starks also complained that “the item dismisses the EBS community’s concerns about the impact of removing the educational use requirement and allowing non-educational entities to obtain them. The item says that the licensees will retain their licenses and can always reject any unreasonable offers from would-be lessees. But the item ignores the asymmetrical bargaining power of the parties here. For example, as the Commission acknowledged in its 1983 order, educational institutions have limited resources and technological budgets are often the first to be cut. Suggesting that a local school district and a multi-billion-dollar corporation have equal bargaining power, particularly if existing leases restrict a school district’s alternatives through first right of refusal clauses, is simply not credible.”

“Instead of sunsetting the EBS program, the Commission could have improved it, as the President’s Department of Education recently urged,” Mr. Starks said. He said the FCC could have (1) “attached conditions to new licensees for the provision of uncapped low-cost service to educational institutions or students;” (2) “created a Priority Filing Window for educational institutions in rural areas to obtain new licenses where competing applications are unlikely;” or (3) “broken the spectrum blocks into small enough segments that smaller carriers or educational institutions could have had a shot at getting some of this spectrum.”

Mr. Starks also said he supports the tribal priority filing window.

Educational and public interest entities criticized today’s FCC action, while several industry entities praised it.

“The FCC's decision to shut schools out of future EBS band is illogical, harmful and may be illegal as well,” said John Windhausen Jr., executive director of the Schools, Health & Libraries Broadband (SHLB) Coalition. “Today's decision to commercialize EBS makes it clear that the FCC does not fully understand the evidence submitted in the docket. The FCC claims that the EBS spectrum is widely underutilized today, and that most licenses are leased to the commercial providers, so why would the FCC award even more licenses to these same companies? The FCC majority has fallen for the ‘ear candy’ promises of the large commercial carriers that the spectrum will be used to promote 5G, even though these same commercial carriers already have over 600 MHz of spectrum that they are not using. The SHLB Coalition's recent study found that commercial entities who win the licenses by auction would only deploy service in 24 of 78 unserved counties across the country. On the other hand, schools – in partnership with the private sector – would be far more likely to deploy wireless broadband service because they care about their communities and because the equipment is readily available. The build-out requirements the Order establishes for carriers are virtually meaningless, as companies are given eight years to deploy service. In eight years, it will be too late for today's students. We hope that Congress and the courts will heed the advice of the U.S. Department of Education” and “education organizations and overturn this ill-advised decision.”

“The North American Catholic Educational Programming Foundation, Inc. (NACEPF) and Mobile Beacon are gravely concerned about the long-term consequences of the Federal Communications Commission (FCC)’s decision today to dismantle the last 50+ years of public policy that designated a modest portion of licensed spectrum to educational entities to serve their communities. This Order not only abandons that policy but also ignores the record. 95% of all individuals and organizations that submitted comments in this proceeding supported keeping EBS educational and provided abundant examples of ways existing EBS programs are closing the digital divide throughout the U.S. today,” said Katherine Messier, executive director of Mobile Beacon and director-development for the NACEPF.

“The consequences of this vote are too serious to get lost in the 5G hype,” Ms. Messier added. “In the last decade, every time the FCC has granted an EBS waiver to an educational institution or tribal entity, those entities built networks that provide more affordable internet access to more rural Americans than anything available directly from the commercial sector. This is a stunning success record. Educational institutions and tribes have produced better results in less time, with less spectrum, and with less financial resources than the very providers that already hold 625 MHz of spectrum below 3 GHz, which is not being deployed in these same rural areas. While we’re pleased the FCC moved forward with a priority window for tribes, this Order unreasonably ‘declined’ to give new, rural educational institutions the opportunity to replicate these successes in the future.”

Ms. Messier added that the order adopted today “also threatens the long-term sustainability of existing EBS programs. 830 schools, 1,019 public libraries, and 4,880 nonprofits currently use our broadband service across the country to benefit students of all ages and abilities. Hundreds of these organizations submitted comments in this proceeding stating that if our service were not available, they would have no alternative means for broadband access or they would be forced to curtail existing programs due to higher commercial rates. With today’s vote, the FCC has jeopardized these programs by eliminating any incentive for commercial entities to continue their partnerships with EBS licensees in the future. To be clear, this proceeding was never about pitting educational needs against winning the race to 5G. The Commission did not face a ‘binary choice’ at the outset of this proceeding, but it created one with the drafting of this Order. Instead of developing policy to maximize both educational and commercial benefits by modernizing this band, this FCC has chosen to support only commercial interests.”

Voqal and Mobile Citizen complained that the order adopted today “will choke off the educational benefits offered by this unique spectrum band. Perhaps the worst part of today’s decision is to auction off vacant EBS spectrum that the FCC has allowed to languish unassigned for decades. As was noted by dozens of commenters and confirmed in a robust economic study, rural educators and smaller wireless broadband providers lose the most under the new scheme. The likelihood they can gain access to spectrum in an auction is practically zero. The lone bright spot of today’s decision is to allow rural Tribal Nations an opportunity to apply for EBS licenses over their territories. This model has led to broadband delivery in one of the hardest places to reach in the country, and rural tribes deserve an opportunity to gain access to EBS spectrum for their own broadband projects. But rural schools – specifically those in the counties where broadband availability remains stubbornly low – deserve the same opportunity to partner or self-build using EBS spectrum.”

“Today’s vote doubles down on the same auction-driven spectrum policies that have left rural America unserved and low-income students forced to do their homework on Wi-Fi in McDonald’s parking lots,” said John Schwartz, Voqal’s president and founder. “Instead of updating EBS and expanding on the strong track record of licensees such as Voqal – which is proud of our record of serving schools and low-income communities – the Commission has voted to commercialize a vital public asset.”

Keith Krueger, chief executive officer of the Consortium for School Networking, said, “We are deeply disappointed by the FCC’s decision today. After failing for 20 years to help school districts acquire new educational broadband service licenses, the FCC’s vote is a loss for teachers and students. This is especially true for learners in rural communities who are consistently passed over in favor of purely commercial interests. Today’s action continues that unfortunate trend. Given the strong support for maintaining the band’s educational focus – from the Department of Education to Members of Congress – this outcome is unproductive and inconsistent with the public’s interest.”

“Once again, the Ajit Pai FCC takes spectrum out of the hands of rural communities to satisfy the demands of big wireless carriers that have no interest in serving rural America,” said Public Knowledge Senior Vice President Harold Feld. “Once again, this FCC’s disdain for would-be providers unable to pay hundreds of millions of dollars for wireless licenses widens the digital divide. Once again, Commissioners grandstanding for the press on the ‘race for 5G’ means leaving tens of millions of rural Americans further behind. While Public Knowledge applauds the FCC for opening an application window for Tribal nations, the FCC should have extended a similar opportunity to other unserved and underserved communities.”

But Claude Aiken, president and CEO of the Wireless Internet Service Providers Association, said that “WISPA is excited that the FCC has taken steps to unleash the value of 2.5 GHz spectrum. In addition to eliminating antiquated educational use and other restrictions for existing licensees, WISPA applauds the FCC for making a significant amount of spectrum in rural areas available for small providers via ‘right-sized’ licenses, ‘right-sized’ spectrum blocks and bidding credits. We appreciate Chairman Pai’s public recognition of the benefits the auction rules will create for small providers, and we look forward to working with FCC staff to help implement the auction of 2.5 GHz spectrum as soon as possible so hundreds of small providers can make good on this tremendous new resource for their businesses and broadband-hungry customers.”

NTCA CEO Shirley Bloomfield said that her group “represents small hometown operators that have demonstrated time and again their interest in obtaining more spectrum to deliver quality communications services throughout rural communities and surrounding areas. We are grateful to the FCC for continuing generally to consider ways of making more spectrum available, and for continuing as well to take steps to promote use of spectrum by small businesses and in rural markets specifically. NTCA expects that its members will once again demonstrate their interest in and commitment to serving rural areas through robust participation in any auctions that follow.”

Mary O’Connor, counsel to the Wireless Communications Association International, said that “WCA is pleased the Commission has recognized that the existing regulations regarding the EBS spectrum needed to be modernized to allow more widespread use of the spectrum. We look forward to the implementation of the new rules and the auction of the available white space in 2020.”

Sprint Corp., the major lessee of EBS spectrum, said it “is pleased with today’s FCC decision to modernize its 2.5 GHz EBS rules and rapidly make additional spectrum available in areas that have been precluded from being licensed for many years. Sprint relies heavily on the 2.5 GHz band for its 4G and 5G deployments and we look forward to continuing our mutually beneficial partnerships with the EBS community.” —Paul Kirby, [email protected]

MainStory: FCC FederalNews SpectrumAllocation WirelessDeployment

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