TR Daily Meeting Draft Items Reveal Sat Operators Eligible for C-Band Payments
Friday, February 7, 2020

Meeting Draft Items Reveal Sat Operators Eligible for C-Band Payments

Only five incumbent satellite operators are expected to be eligible to receive regular relocation and accelerated payments under a draft C-band report and order and proposed order of modification released today for consideration at the FCC’s Feb. 28 meeting.

The FCC released the text of the eight items it plans to consider at the meeting, along with a tentative agenda. The meeting is scheduled to start at 10:30 a.m.

The satellite operators that are expected to be eligible to receive regular and accelerated relocation payments are Eutelsat S.A., Intelsat S.A., SES S.A., Star One S.A., and Telesat Canada.

In order to qualify for relocation cost reimbursements, “an incumbent space station operator must have demonstrated, no later than February 1, 2020, that it has an existing relationship to provide service via C-band satellite transmission to one or more incumbent earth stations in the contiguous United States,” according to the draft item. “These existing relationships could include, for example, contractual obligations to provide C-band service to be received at a specific earth station location. And these existing relationships need not be direct but could include indirect relationships through content distributors or other entities, so long as the relationship requires the provision of C-band satellite services to one or more specific incumbent earth stations in the contiguous United States. Based on the record, only five incumbent space station operators have such operations: Eutelsat, Intelsat, SES, Star One, and Telesat. We do not expect any other incumbent space station operators to need to incur any relocation costs, and thus we do not expect them to be eligible for relocation payments. Nonetheless, such operators may be compensated for reasonable relocation costs should they demonstrate that those costs were truly required as a direct result of the transition of existing C-band services provided to one or more incumbent earth stations in the contiguous United States.”

The 185-page draft item in GN docket 18-122 also stressed that the FCC will not allow relocation costs that allow parties to upgrade their equipment unless that is necessary to clear the spectrum to be repurposed.

“Consistent with Commission precedent, compensable costs will include all reasonable engineering, equipment, site and FCC fees, as well as any reasonable, additional costs that the incumbent space station operators and incumbent earth station operators may incur as a result of relocation,” it said. “We recognize that incumbents may attempt to gold-plate their systems in a transition like this. Let us be clear: Incumbents will not receive more reimbursement than necessary, and we require that, to qualify for reimbursement, all relocation costs must be reasonable. This requirement should give incumbents sufficient incentive to be prudent and efficient in their expenditures. If a particular expenditure is unreasonable, the incumbent will only receive compensation for the reasonable costs that the incumbent would have occurred had it made a more prudent decision.”

“We reiterate that compensable relocation costs are only those that are reasonable and needed to transition existing operations in the contiguous United States out of the lower 300 megahertz of the C-band,” according to the item.

“Based on the current record, we believe that reasonable estimated costs will include the following ranges, subject to further reevaluation when we create and release a cost category schedule. With respect to satellite procurement and launch costs, we believe that $1.28 billion to [$]2.5 billion is a reasonable estimated range. This accounts for $160-$250 million in capital costs for each satellite, the high and low ranges provided by the C-Band Alliance and SES, respectively, and the estimated range of eight to 10 additional satellites,” the item said. “With respect to earth station costs, we find that a range of $1 billion to $2 billion is a reasonable estimate for repacking transponders, filter installing, re-pointing earth station dishes, and antenna feeding. This would account for the lower-end estimates provided by the C-Band Alliance and the upper-end estimates provided by ACA Connects. With respect to MVPD compression hardware, we find $500-$520 million to be a reasonable estimated range. This is consistent with ACA Connects’ estimate of about $10,000 per transcoder and its claim that about 20 transcoders will be needed at each of 2,600 MVPD locations. It is also consistent with the C-Band Alliance’s estimate of $500 million for compression costs. This leads to a total clearing cost estimate ranging from about $3.3 billion to $5.2 billion.”

Regarding the up to $9.7 billion in accelerated relocation payments, the item suggested “that the C-Band Alliance’s proposal seems to misunderstand the purpose of accelerated relocation payments. Incumbent space stations operators are not ‘selling’ their spectrum usage rights—instead they have the right to provide the services they currently offer going forward. Furthermore, the transition we adopt, including relocation payments, will make them whole during and after that transition. Indeed, they have no terrestrial spectrum usage rights to ‘sell.’ Instead, our responsibility is to set an accelerated relocation payment that fairly incentivizes incumbent space station operators to expedite the transition while increasing the value of the entire transition effort for the American public.”

“Given the record, we find that a $9.7 billion accelerated relocation payment is reasonable and will serve the public interest. We recognize that the Commission could find reasonable any number of calculation methods advocated in the record, and in doing so would need to rely on estimates on several variables such as potential future industry profits, spectrum valuation, the costs of transitioning, and consumer surplus,” according to the item. “Ultimately, we recognize that this determination is a line-drawing exercise, in which we must attempt to capture the value to new entrants of accelerated clearing and the amount that will effectively incentivize incumbent space station operators to complete such accelerated clearing. We find that a $9.7 billion accelerated relocation payment strikes the appropriate balance between these considerations and the amounts advocated in the record. Although some incumbent space station operators have argued for significantly more, we find $9.7 billion is a substantial margin lower than the total amount we estimate that overlay licensees themselves would be willing to spend to clear this spectrum early. This helps ensure that we do not impose an obligation on overlay licensees that we are not comfortable they would have assumed on their own, in the typical Emerging Technologies scenario in which voluntary acceleration payments would be feasible.”

Here is the breakdown of maximum accelerated payments per operator: Intelsat: $1.2 billion (Phase I), $3.7 billion (Phase II); SES: $983 million (Phase I), $3.0 billion (Phase II); Eutelsat: $115 million (Phase I), $353 million (Phase II); Telesat: $92 million (Phase I), $283 million (Phase II); and Star One: $3.4 million (Phase I), $10.3 million (Phase II).

A fact sheet noted that under the item, “[e]ligible space station operators that choose to accelerate the clearing would have to meet the following accelerated timeline: (1) clearing 100 megahertz for terrestrial operations in 46 of the nation’s top 50 Partial Economic Areas by September 30, 2021; and (2) clearing the entire 280 megahertz for terrestrial operations in the contiguous United States by September 30, 2023.” The deadline for clearing the spectrum absent the accelerated timelines would be Sept. 30, 2025.

The item also noted that “ABS, Hispamar, and Star One (collectively, the Small Satellite Operators) argue that any transition of C-band spectrum must provide compensation, including ‘premium’ payments above relocation costs, to all satellite operators that operate space stations that cover parts of the United States using C-band spectrum. According to their filings, the Small Satellite Operators have launched operational satellites that have been granted market access and are on the U.S. Permitted Space Station List. The Small Satellite Operators argue that grants of U.S. market access are ‘authorizations’ made pursuant to Part 25 of the Commission’s rules and therefore provide the same protection from interference as is granted under licenses for space stations. As a result, the Small Satellite Operators argue that they are entitled to compensation for the loss of spectrum access and corresponding future revenues that will result from a new primary allocation for terrestrial mobile services in the C-Band spectrum.”

“We find that our definition of eligible space station operators appropriately encompasses the satellite entities entitled to participate in the transition process and to receive compensation for relocation costs and potential accelerated relocation payments,” the item said. “Contrary to the Small Satellite Operators’ arguments, we find that the appropriate standard for a successful transition is whether it includes all authorized satellite operators that provide C-band services to existing U.S. customers using incumbent U.S. earth stations that will need to be transitioned to the upper portion of the band or otherwise accommodated in order to avoid harmful interference from new flexible-use operations.”

The item also said that “we find that selecting a single, independent Relocation Payment Clearinghouse to oversee the cost-related aspects of the transition in a fair, transparent manner will best serve the public interest. The Commission’s experience in overseeing other complicated, multi-stakeholder transitions of diverse incumbents demonstrates the need for an independent party to administer the cost-related aspects of the transition in a fair, transparent manner, pursuant to Commission rules and oversight, to mitigate financial disputes among stakeholders, and to collect and distribute payments in a timely manner.”

The order would permit the following entities to make up a search committee to select the clearinghouse administrator: the CBA, Eutelsat, the National Association of Broadcasters, NCTA, ACA, CTIA, and the Competitive Carriers Association.

The draft order also proposed a process to select a relocation coordinator “to coordinate the transition between satellite operators and incumbent earth stations to ensure uninterrupted service during and following the transition,” the fact sheet noted. “If eligible space station operators elect accelerated relocation so that a supermajority (80%) of accelerated payments are accepted (and thus accelerated relocation is triggered), we find it in the public interest to allow a search committee of such operators to select a Relocation Coordinator,” the draft order said.

Under the item, the lower 280 MHz of the C-band (3.7-3.98 GHz) in the contiguous United States” would be cleared, with the 20 MHz at 3.98-4 GHz serving as a guard band.

The draft item would “[r]equire incumbent fixed service licensees in the contiguous United States to relocate their point-to-point links to other bands by September 30, 2023.”

The item also stressed the FCC’s legal authority to take the actions it proposes, including through the emerging technologies framework.

A source told TR Daily yesterday that the CBA and the FCC have reached an agreement on the $9.7 billion level for accelerated relocation payments, and Commissioner Mike O’Rielly mentioned an agreement in his statement yesterday (TR Daily, Feb. 7).

“The FCC is to be congratulated on the issuance of a draft order in the complex challenge of clearing licensed C-band satellite spectrum to accelerate 5G deployment in the U.S.,” Intelsat said in a statement today. “The FCC’s continued progress on this important proceeding will ensure the United States is positioned to lead in 5G, capturing economic and national security benefits for our nation. As a majority U.S.-owned company with a majority U.S. workforce, Intelsat applauds the expediency the FCC has applied to this proceeding.”

The Commission also plans to consider at its Feb. 28 a draft public notice in AU docket 20-25 to seek comment on proposed procedures for the auction of licenses for 5G services in the 3.7-3.98 GHz band. The auction would commence on Dec. 8.

A fact sheet noted that the public notice would “[p]ropose specific upfront payment and minimum opening bid amounts for the 5,684 new flexible-use overlay licenses for spectrum in the 3.7–3.98 GHz band throughout the contiguous United States.”

It also would “[p]ropose to establish two categories of generic blocks in each PEA [partial economic area]—Category A would consist of blocks in the lower 100 megahertz (3.7–3.8 GHz), and Category BC would consist of blocks in the remaining 180 megahertz (3.8–3.98 GHz).”

The FCC also would “[p]ropose bidding procedures for the clock and assignment phases of the auction, which are largely consistent with the procedures the Commission adopted for the auction of spectrum licenses in Auctions 102 and 103. Auction 107’s clock phase would allow bidding on generic blocks in each PEA in successive clock bidding rounds. Auction 107’s assignment phase would allow bidding for frequency-specific license assignments.”

The item also would “[p]ropose bidding credit caps of $25 million for small businesses and $10 million for rural service providers, as well as a $10 million cap on the overall amount of bidding credits that a small business bidder may apply to winning licenses in smaller markets.”

Comments on the item would be due May 1 and replies May 15.

The FCC also plans to consider a notice of proposed rulemaking in ET docket 20-36 proposing to relax its TV white spaces rules to make it easier to deploy rural services in rural and undeserved areas.

A fact sheet on the item noted that it would “[p]ropose to increase the maximum permissible power for fixed white space devices operating in ‘less congested’ (e.g., rural) areas in the TV bands from 10 watts to 16 watts EIRP.” It noted that areas that are “less congested” are those “where at least half the channels in the band of operation are vacant.”

The item also would “[p]ropose to increase the maximum permissible antenna height above average terrain (HAAT) for fixed white space devices from 250 meters to 500 meters, subject to a coordination/notification procedure with TV broadcasters.” And it would “[p]ropose minimum required separation distances from protected services in the TV bands (e.g., TV stations, cable headends, translator receive sites, land mobile radio service, licensed wireless microphones) for white space devices operating with higher power and HAAT.”

The NPRM also would “[p]ropose to allow higher power mobile operations within defined ‘geo-fenced’ areas.” It said that such “geo-location capability of mobile devices combined with database access would ensure that they do not operate outside their defined geographic area.”

The Commission also would “[p]ropose rules for narrowband white space devices used in IoT applications” and solicit “comment on whether to allow white space devices to operate with higher power levels when located inside an adjacent TV channel’s service contour.”

Comments on the NPRM would be due 30 days after “Federal Register” publication and replies would be due 30 days after that.

Last year, Microsoft Corp. filed a petition for rulemaking asking the FCC to modify its TVWS rules (TR Daily, May 3, 2019).

In its petition, Microsoft asked the FCC to (1) “[p]ermit fixed WSDs [white spaces devices] in the second-adjacent channel to broadcasters in less congested areas to operate at a higher radiated power limit, consistent with the methodology used in Section 15.712(a)(2)(iv);” (2) “[p]ermit fixed WSDs to operate at greater than 40 mW on the first-adjacent channel at locations within the protected contour where the potential for harmful interference is low;” (3) “[p]ermit fixed WSDs to operate at heights above average terrain of up to 500 meters, consistent with the methodology used in Section 15.712(a)(2)(iv) and subject to a special set of coordination procedures modeled on the Commission’s Part 101 rules;” (4) “[f]oster the development of narrowband WSDs that can support IoT applications by modifying existing technical and operational rules and providing licensees the same level of protection from harmful interference as the rules for broadband WSDs;” and (5) “[p]ermit geofenced operation of fixed WSDs on mobile platforms.”

Also on the tentative agenda is a public notice in AU docket 19-244 that would establish application and bidding procedures for Auction 105, the auction of priority access licenses (PALs) for 70 MHz of spectrum in the Citizens Broadband Radio Service (CBRS) in the 3550-3650 MHz band, which is scheduled to begin June 25.

The window for filing short-form applications would open at noon ET on March 26 and all such applications would be due before 6 p.m. ET on April 9, according to the 71-page draft PALS auction PN. Upfront payments, to be made via wire transfer, would be due by 6 p.m. ET on May 21. An online bidding tutorial would be available by June 11. A mock auction would be held June 22.

The auction would “assign up to seven Priority Access Licenses (PALs) in each county-based license area, for a total of 22,631 PALs nationwide. Each PAL will consist of a 10-megahertz unpaired channel. PALs are 10-year renewable licenses,” according to a fact sheet released with the draft PN.

“Auction 105 will offer the greatest number of spectrum licenses ever made available for bidding in a single auction and is intended to further the deployment of fifth-generation (5G) wireless, the Internet of Things, and other advanced spectrum-based services for the benefit of the public,” the fact sheet said.

The draft PALs auction PN would “[a]dopt an ascending clock auction format for Auction 105, similar to that used in Auctions 102 and 103, in which bidders indicate their demands for generic license blocks in specific counties,” according to the fact sheet.

“The procedures for Auction 105 differ from the procedures in those previous auctions as follows: There is no assignment phase in Auction 105. Priority Access Licensees will be authorized to use frequencies associated with their PALs as dynamically assigned by frequency coordinators, known as Spectrum Access Systems,” the fact sheet said.

Another departure from previous procedures is that, “[i]n order to mitigate the possibility of a bidder losing bidding eligibility in certain circumstances, Auction 105 would incorporate an ‘activity upper limit’ that would allow a bidder to submit bids that exceed its current bidding eligibility. The bidding system would not, however, process activity that exceeded the bidder’s current bidding eligibility,” according to the fact sheet.

In addition, the draft PALS auction PN would “[p]ermit bidding on a county-by-county basis, but not adopt Cellular Market Area (CMA)-level bidding. Bidders in Auction 105 will be allowed to bid for no more than four generic blocks of spectrum per county.”

Finally, the draft PALS auction PN would “[a]dopt bidding credit caps of $25 million for small businesses and $10 million for rural service providers, as well as a $10 million cap on the overall amount of bidding credits that a small business bidder may apply to winning licenses in smaller markets.”

In a blog post today, Commissioner Mike O’Rielly said, “Ultimately, this auction will provide the first new, mid-band licenses for 5G (albeit with inferior power limits), and it is expected that, given the importance of mid-band’s capacity and propagation, it will provide a spectrum foothold for those deploying these next-generation networks. Yet, since this CBRS structure is the first of its kind to incorporate licensed and unlicensed-like opportunities, it is of interest to a wide variety of users.”

He added, “In the end, the final compromise offers county-sized licenses—far smaller than the Commission’s normal size—in 10 megahertz blocks that are renewable like our traditional licenses, providing all potential applicants with the confidence needed to bid, invest, and deploy networks without the fear of capital investment being stranded. Licensees need the assurance that if they build, follow the rules, and put their spectrum into use to serve the American people, then they will not be at risk of losing their licenses in the future.”

Commissioner O’Rielly continued, “For those familiar with FCC processes, most of our auction procedures will look very similar to those we have used in the past. There is no need to reject a structure that has been a smashing success. One mechanism, however, that was planned for this auction in the Comment Public Notice did not make the cut. CMA-level bidding, which was part of the Comment Public Notice, and would have facilitated an applicant’s ability to bid on licenses covering all the counties within a CMA, was opposed by a number of interested parties, and will not be implemented. It is important to note, this proposal would not in any way have changed the license size from county to CMA, provided a price break for CMA-level bidders, or changed the rules they needed to follow. Put another way, it was simply intended and designed to make the bidding process easier for those wanting coverage over a larger area. While I am not convinced by some of the arguments made against CMA-level bidding, throwing it overboard should neither alter bidding practices nor decrease the bidding pool. Thus, I asked Chairman Pai to jettison it as part of this new Public Notice.

“Going forward, we will need to revisit the package bidding issue for future, unrelated auctions. Hopefully, the artificial limitations presented by the software will no longer hamper us in this respect. Bidders should be able to select which counties they want to include in a bidding package and not be shoehorned into a package designed by the Commission based on what is easiest to program in our software. This would allow bidders to pick those licenses and areas that they prioritize, and, therefore, assuage the concerns raised by many commenters,” he added.

As for the CBRS auction, he said, “[w]hile there are still some outstanding issues that ought to be reconsidered in this band, such as ways to reduce the protection area sizes and increasing power limits, the auction is not dependent on these being resolved at this exact moment. Moreover, we may need to consider how to mitigate the potential of harmful interference occurring between future C-Band licenses and CBRS users as well. I will certainly be pushing hard to make these changes a reality as soon as possible.”

The tentative agenda also includes a public notice in AU docket 20-34 and WC dockets 19-126 and 10-90 that would propose Oct. 22 as the starting date for the reverse auction to allocate Rural Digital Opportunity Fund Phase I support, as well as seek comment on procedures for the auction, which the draft public notice proposes adopting from the Connect America Fund Phase II auction, “with certain targeted improvements,” according to a fact sheet released with the draft PN.

The draft RDOF PN would “[s]eek comment on the appropriate minimum area for bidding in the Phase I auction to balance bidders’ need for flexibility against the need for an efficient and manageable auction,” according to the fact sheet.

“We recognize that using census block groups provides greater flexibility than relatively larger geographic areas, particularly for those bidders that intend to expand existing networks or construct smaller networks. At the same time, we estimate that there could be more than double the number of census block groups that contain eligible census blocks for the Rural Digital Opportunity Fund auction as compared to the CAF Phase II auction, which may create greater complexity as bidders develop their bidding strategies and submit bids. We also note that using census tracts instead of census block groups is likely to produce a number of biddable areas very similar to Auction 903, which could promote efficient bid processing by the bidding system. We seek comment on whether we should retain census block groups or use census tracts as the minimum biddable area for Phase I of the auction,” the draft RDOF PN said.

The draft RDOF PN would also “[p]ropose pre- and post-auction application requirements for auction participants, including: [c]ollecting pre-auction ‘short-form’ application information such as applicant ownership information and other information about the applicant’s operational and financial capabilities” and “[c]ollecting post-auction ‘long-form’ application information from winning bidders to ensure they have the technical and financial ability to meet broadband deployment obligations and public interest requirements for all carriers receiving support,” the fact sheet said.

Finally, the draft RDOF PN would “[p]romote transparency and efficiency in the auction by seeking comment on procedures for bidding in the auction and assigning support to ensure that the fastest networks reach the most Americans and for the lowest cost feasible, as required by the Rural Digital Opportunity Fund Report and Order,” according to the fact sheet.

The text of the 42-page draft RDOF PN called for comments to be submitted by March 27 and reply comments by April 10.

“Even though many interested parties may be familiar with our systems and processes from their participation in the CAF Phase II auction, we will again provide timely educational materials and hands-on practice opportunities to help all potential bidders understand the procedures ultimately adopted to govern the auction,” the draft RDOF PN said.

Also tentatively slated for a vote at the Feb. 28 meeting is a second further notice of proposed rulemaking in PS docket 15-80 that would propose giving state and federal agencies “read-only access to communications outage data for public safety purposes while also preserving the confidentiality of that data,” the tentative agenda said.

This outage information would improve state and federal agencies’ “situational awareness, enhance their ability to respond more quickly to outages impacting their communities, and help save lives, while also preserving the confidentiality of this data,” according to a fact sheet released with the item.

“The Commission grants read-only access to outage report filings in NORS [the FCC’s Network Outage Reporting System] to the [National Cybersecurity and Communications Integration Center at the Department of Homeland Security], but it does not currently grant access to other federal agencies, state governments, or other entities. The Commission publicly shares limited analyses of aggregated and anonymized data to collaboratively address industry-wide network reliability issues and improvements,” the draft second FNPRM noted.

“The Commission grants direct access to the DIRS [Disaster Information Reporting System] database to the NCCIC at DHS. The Commission prepares and provides aggregated DIRS information, without company identifying information, to the NCCIC, which then distributes the information to Emergency Support Function #2 (ESF-2) participants, including other units in DHS, during an ESF-2 incident. Agencies use the analyses for their situational awareness and for restoration priorities for communications infrastructure in affected areas. The Commission also provides aggregated data,” it added.

The draft second FNPRM would “[p]ropose to provide direct, read-only access to NORS and DIRS filings to qualified agencies of the 50 states, the District of Columbia, Tribal nations, territories, and federal government,” according to the fact sheet.

The draft second FNPRM would also “[p]ropose to allow these agencies to share NORS and DIRS information with other public safety officials that reasonably require NORS and DIRS information to prepare for and respond to disasters” and would “[p]ropose to allow participating agencies to publicly disclose NORS or DIRS filing information that is aggregated and anonymized across at least four service providers.”

It would also “[p]ropose to condition a participating agency’s direct access to NORS and DIRS filings on their agreement to treat the filings as confidential and not disclose them absent a finding by the Commission that allows them to do so” and would “[p]ropose to establish an application process that would grant agencies access to NORS and DIRS after those agencies certify to certain requirements related to maintaining confidentiality of the data and the security of the databases.”

The text of the draft indicated that it would allow 30 days for comments following publication in the “Federal Register” and an additional 30 days for reply comments.

Rounding out the tentative agenda are two items in the FCC’s media regulation modernization initiative: a report and order in MB dockets 17-317 and 17-105 that would require qualified low-power television stations and noncommercial educational translator stations to send carriage election notices to multichannel video programming distributors using e-mail and a notice of proposed rulemaking in MB dockets 20-35 and 17-105 that would seek comment on modifying or eliminating the requirement for cable TV system operators to maintain in their online public inspection files information regarding their attributable interests in video programming services. —Paul Kirby, [email protected]; Lynn Stanton, [email protected]

MainStory: FCC FederalNews SpectrumAllocation WirelessDeployment Satellites PublicSafety BroadbandDeployment UniversalServiceLifeline

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