TR Daily Kennedy Grills Pai Again on Accelerated C-Band Relocation Payments
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Tuesday, June 16, 2020

Kennedy Grills Pai Again on Accelerated C-Band Relocation Payments

Sen. John Kennedy (R., La.), chairman of the Senate Appropriations Committee’s financial services and general government subcommittee, grilled FCC Chairman Ajit Pai again today over the FCC’s decision to approve up to $9.7 billion in accelerated relocation payments to satellite operators to clear the C-band early so 300 megahertz can be repurposed for 5G terrestrial services.

Mr. Pai also faced a range of questions on other topics, including broadband mapping, contraband cellphones in correctional facilities, the E-rate program, and funding for a rip-and-replace equipment program.

This morning’s hearing offered a replay of sorts of a hearing that Sen. Kennedy’s subcommittee held in March, shortly after the Commission approved its C-band order (TR Daily, Feb. 28), which authorized the clearing of 300 MHz of C-band spectrum, 280 MHz of which will be auctioned for terrestrial services at a sale to begin on Dec. 8 (TR Daily, March 10).

However, Mr. Kennedy said today he concurs with the FCC’s decision to approve reimbursements for actual clearing costs that the agency estimates at between $3.3 billion and $5.2 billion, which the senator earlier opposed, while renewing his criticism of the Commission for requiring auction bidders to pay satellite operators up to $9.7 billion in accelerated relocation payments to clear the spectrum earlier than they otherwise would have been required – two to four years early.

Sen. Kennedy said the funding approved by the FCC for actual relocation expenses “seems fair to me,” but he said the $9.7 billion was a waste of taxpayers’ money. While the funding would actually come from auction bidders, the lawmakers and others have argued that it would have the effect of depressing bidding in the sale.

“These companies were willing to give up something they didn’t own in exchange for billions of dollars. I guess I shouldn’t blame them … . I blame us for not negotiating a better deal,” the senator complained.

He repeatedly asked Mr. Pai why the FCC approved the accelerated funding.

Mr. Pai said that it gives companies “a much stronger incentive to move quicker than they otherwise would.” He also said at the hearing that the payments “dramatically reduced the litigation risk from those companies.”

But Mr. Kennedy said, “You have the statutory authority, which Congress has given you, to tell them to move now.”

He also complained that Intelsat S.A. has filed for Chapter 11 bankruptcy protection since the order was adopted (TR Daily, May 14). “They say they’re going to use that to leverage you for more money,” he said. It’s unclear what he meant, as Intelsat has said it plans to continue operating and has agreed to the accelerated timeline like all five operators eligible for the additional funding.

Mr. Kennedy also asked the Chairman whether, as a condition for getting the accelerated relocation payments, the satellite operators have agreed not to sue the Commission.

Mr. Pai replied that those companies did not waive their right to sue the Commission, but he said “they have forfeited it by agreeing to the [accelerated] election.”

“This makes no sense to me, Mr. Chairman,” Mr. Kennedy said. “I want to get your general counsel in here and your lawyers in here. I never heard of giving somebody $10 billion to keep them from suing without them waiving their claims and causes of action.”

Mr. Pai noted that small satellite operators (SSOs) have sued the FCC over the C-band order, but he said their case is “substantially weak.” He did not mention that SES Americom, Inc., also filed suit.

SES said it filed a petition for review as “a strictly precautionary measure” (TR Daily, May 26).

“While SES is firmly supportive of accelerated clearing per the FCC Order, the company opposes the potential sunsetting of its 300 MHz C-band rights by December 2025 in the unlikely event that accelerated clearing does not proceed as outlined in the Order,” the company said. It added that its appeal is meant to “preserve its rights should the accelerated clearing option no longer be available.”

Mr. Kennedy also asked Mr. Pai if the FCC requires the operators to buy satellites manufactured in the U.S. Mr. Pai said his agency has no authority to impose such a mandate, but he noted announcements about such actions.

Yesterday, Intelsat announced agreements with Maxar Technologies, Inc., to build four satellites and Northrop Grumman Corp. to build two satellites. It said it “is currently in negotiations with manufacturers for a seventh satellite required to support its C-band transition.”

SES announced today that it has selected Northrop Grumman and the Boeing Co. to manufacture four new satellites for its accelerated C-band clearing plan.

Mr. Kennedy also said he wants at a follow-up hearing to question any FCC staffers that met last November with Intelsat Chief Executive Officer Stephen Spengler about whether the FCC would approve a private auction of the spectrum, as satellite companies had supported. Nicholas Degani, Mr. Pai’s senior counsel, met with Mr. Spengler. The day after the meeting, $246 million in company stock was sold by two major investors, the senator said. He brought the topic up at the March hearing as well.

Mr. Pai also said he would support using auction proceeds for broadband deployment, although he noted that under the law, the Commission has to deposit such funds into the U.S. Treasury.

In his opening statement and during questioning from subcommittee members, Mr. Pai noted that the FCC has estimated that up to $2 billion would be needed to fund the Secure and Trusted Communications Networks Act, rip-and-replace equipment legislation. “As our staff work through the data that’s been collected, we want to work with you to appropriate the money needed so that we can move forward quickly to implement this program and protect our nation’s networks from national security threats,” he said.

Mr. Pai also noted that the agency needs $65 million to implement the Broadband DATA Act for the first year, including by investing in necessary IT upgrades. “Otherwise, this well-intentioned law will end up significantly delaying rather than expediting the production of better broadband maps,” he said.

Mr. Pai also said that “given that this hearing is about oversight of our auctions program, I should note that there is one auction currently mandated by federal law that we are not looking forward to holding. Specifically, the Spectrum Act mandates that we auction off parts of the T-band—spectrum from 470-512 MHz, which is currently used by public safety entities in several states. Our highly skilled economists believe this auction will raise less revenue than the amount needed to clear incumbents from the spectrum. But because of the statutory mandate, our staff has nonetheless had to divert resources to preparing for an auction process to commence in February. Bipartisan legislation in Congress would repeal this mandate and address related concerns like 911 fee diversion, and I hope this legislation passes as soon as possible.”

Although today’s hearing supposedly was called to discuss the FCC’s fiscal year 2021 spectrum auctions program, but other subcommittee members generally focused on issues other than spectrum matters.

Sen. Jerry Moran (R., Kan.) said he will push for the resources the Commission says it needs to begin implementation of the Broadband DATA Act, but he said he wants a commitment “that we are going to move to a different set of data to make decisions on broadband deployment.”

Mr. Pai said he agrees that more granular and accurate information is needed.

Mr. Pai also told Sen. Moran that the Commission would work with Congress on funding to broadband carriers that have taken Mr. Pai’s Keep Americans Connected Pledge.

Sen. James Lankford (R., Okla.) asked Mr. Pai whether carriers that submitted inaccurate mapping data would be punished. Mr. Pai said there would be “consequences,” but he did not elaborate.

As he did at the March hearing, Sen. Lankford raised the issue of contraband cellphones in correctional institutions – particularly the use of managed-access equipment to address the problem.

Mr. Pai said that such equipment “could provide a solution consistent with current law,” but he suggested that the wireless industry has not been very interested in deploying it.

“They have not been as forward-leaning on some of the technological solutions as they could be,” Mr. Pai told Sen. Kennedy, who had follow-up questions on the topic. “I’m very frustrated with where we are here. … If the carriers don’t take action, then I expect we would move forward with a notice of proposed rulemaking.”

Mr. Kennedy said he wants to ask carriers about the issue at a hearing.

Sen. Chris Van Hollen (D., Md.) said he was “discouraged” that the FCC has not interpreted its authority to provide funding for “Internet services for students at home” during the COVID-19 pandemic. “Right now, I believe you’re not using your authority fully for this purpose,” he said.

The FCC should allow E-rate funds to be spent on hot spots and computers for students at home, Sen. Van Hollen said. He said lawmakers are hoping to direct additional funding to the E-rate program in the next pandemic stimulus bill.

Mr. Pai said the FCC can’t waive a statute, saying that section 254 says E-rate funds must go to service to classrooms. But he noted that the FCC has proposed a learning initiative that wouldn’t be subject to that restriction.

Meanwhile, Senate Commerce, Science, and Transportation Committee Chairman Roger Wicker (R., Miss.) and Sen. John Thune (R., S.D.), chairman of the communications, technology, innovation, and the Internet subcommittee, wrote Mr. Pai yesterday to “encourage the FCC to move swiftly to clear C-Band spectrum to meet its planned auction timeline in December.” —Paul Kirby, [email protected]

MainStory: Congress FCC FederalNews SpectrumAllocation WirelessDeployment Satellites UniversalServiceLifeline PublicSafety BroadbandDeployment Cybersecurity Covid19

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