TR Daily Parties Praise, Criticize Draft 3.5 GHz Band Item
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Tuesday, October 2, 2018

Parties Praise, Criticize Draft 3.5 GHz Band Item

Parties weighed in today on the draft 3.5 gigahertz band item that the FCC plans to consider at its Oct. 23 meeting, with some pleased at the size of the licensing areas and others criticizing them. For his part, Commissioner Mike O’Rielly, the point person on the item at the agency, defended the proposal and took aim at critics.

Under the report and order in GN docket 17-258, the FCC would increase the size of priority access licenses (PALs) from census tracts to counties, while seeking comment “in the pre-auction process on allowing package bids to facilitate bidding for the counties that comprise a complete MSA [metropolitan statistical areas] in the top 305 markets.

“CTIA and CCA argue that MSAs in urban areas will promote investment in the band in those markets, and — in combination with counties — will ‘provide[] an opportunity for parties to acquire PAL spectrum in areas that best fit their business models and investment plans,’ and will minimize burdens for applicants interested in a larger footprint in urban areas,” the item adds. “We expect that the proposed procedures for the auction will include specific procedures for a form of package bidding consistent with proposals for other bidding procedures proposed in the pre-auction public notice process. Licensing PALs by county, and seeking comment on the best flexible auction mechanism that may allow bidders to aggregate MSA bids, including possibly using package bidding for all of the counties in an MSA, could reduce secondary market transaction costs while still promoting an active secondary market.”

The draft item would “reject hybrid approaches that offer multiple size PALs in every market, such as licensing 50 megahertz of PALs by county and 20 megahertz by census tract. As discussed above, we find that using counties nationwide will support licensee diversity and increased investment. Further, there are already significant complexities inherent to the 3.5 GHz authorization and spectrum coordination model, which involve the SAS coordinating access between and among the three tiers of users, including the protection of multiple discrete types of Incumbent user.

“While SASs [spectrum access systems] may be — and likely are — capable of modifying their systems to address multiple sizes of PALs in a given geographic area, on balance, we do not believe it is in the public interest to add yet another layer of complexity to the SAS’s spectrum coordination responsibilities at this time,” item adds. “Such additional requirements could delay SAS certification and, possibly, affect the deployment timeline for the band. No party has articulated a compelling argument for the benefits of such a hybrid model (vis-à-vis nationwide use of counties) that would outweigh the potential costs inherent in increasing the complexity of the licensing and authorization framework at this stage of the SAS development cycle.”

The item also would extend the length of license terms to 10 years and make them renewable, establish end-of-term performance requirements, allow rural and tribal bidding credits, permit PAL partitioning and disaggregation, protect Citizens Broadband Radio Service (CBRS) device registration information through updated security requirements while ensuring public availability of aggregate spectrum use data, and permit transmission over wide channels without significant reductions in power, a fact sheet included with the draft item said.

The FCC adopted a notice of proposed rulemaking last year seeking comments on possible changes to its PAL rules, which were adopted in 2015 (TR Daily, Oct. 24, 2017).

Although CTIA and major carriers had originally favored scrapping licensing PALs based on census blocks and instead making them available through much larger partial economic areas (PEAs), CTIA and the Competitive Carriers Association eventually submitted a compromise proposal that called for PALs to be licensed through MSAs in the top 306 cellular market areas and on a county basis in the remaining 428 CMAs (TR Daily, April 23).

However, a broad coalition of companies and groups calling themselves the CBRS Coalition pushed for licensing the spectrum by census tracts, although they submitted a proposal that included some elements of the CTIA-CCA plan in hopes of drawing support from the FCC, such as having five county-based PALs in each area.

“Arriving at a county-based auction was not easy, as many interested parties wanted much larger license sizes and negotiated down from their preferred position twice,” Mr. O’Rielly said in his own fact sheet on the item today. “The loudest opponents remain a segment of the wireless ISPs and providers of Industrial Internet of Things (IIoT) services, who were unwilling to compromise. In the end, the county approach is supported by the representatives of the entire mobile wireless industry, the cable industry, the rural telecommunications industry, and many wireless ISPs.”

However, some of those parties had pushed for at least the retention of two census tract-based PALs in each census tract in every county, and five county-sized PALs in every county.

Mr. O’Rielly also said that the FCC “does not, and will not for the foreseeable future, have the capability to hold a forward auction for the number of market areas created by census tract licensing (i.e., 74,000). The current rules would have generated a fake auction based on one-time sealed bids, which would have undervalued the licenses and tainted the outcomes to the detriment of the American people. In fact, the Commission’s auction software will have to be modified just to handle the more than 3,000 counties this proposal adopts.” The use of census tracts also would have resulted in harmful interference that would have been hard to manage, he said.

In a speech this afternoon at the Americas Spectrum Management Conference, Mr. O’Rielly responded to various criticism.

“First, some allege that the sole purpose of this review was to turn 3.5 GHz into a 5G band for large wireless providers, at the expense of small businesses and rural deployment. Nonsense,” he said. “What this is really about is making this valuable resource available at auction and allowing the free market to decide the best use for this spectrum. These rules will permit mobile and fixed use to be offered by large and small, urban and rural, and incumbent and new providers. Nothing prevents small or rural entities from competing and winning at auction. Anyone assuming that nationwide providers will automatically win all of the licenses given their potential deep pockets didn’t follow the 600 MHz broadcast incentive auction, where small and new entrants won licenses while three of the four large providers mostly sat it out.

“It is also unfortunate that some may have been given the impression that CBRS was to be ‘their’ spectrum, that it would be available to them on the cheap, or at least offered in a way that would dissuade possible auction participants,” Mr. O’Rielly added. “The Commission should never use its rules to pick winners and losers, and it will not happen under my watch.

“Second, some entities argue that they ‘deserve’ the licenses because larger providers are currently ignoring rural America or supposedly warehousing spectrum. This is a falsehood, but, to the extent that there are issues, they should be solved through build-out requirements, which are part of this order, and our Universal Service Fund programs,” he added. “These are the better ways to deal with those parts of the country where the business case is hard to make for expensive infrastructure builds.

“Third, some claim that their investments will be stranded due to these changes. I recognize the efforts of all sorts of entities seeking to make this band operational, but this argument is disingenuous. Let’s be clear: any investments already made were done with no assurances that these entities would win a PAL at auction. Instead, I invite them to fully participate in the auction. And, if they don’t prevail, besides 80 megahertz of GAA [general authorized access spectrum], there is the secondary market and all of the other spectrum bands that the Commission is opening up for additional uses,” Mr. O’Rielly said.

“Fourth, some have suggested that these changes embody the archaic and stale policies of the past. Those ‘stale’ ideas are what have produced the highly successful and envy-of-the-world spectrum auctions, provided state of the art wireless networks, and made the U.S. the leader in wireless technologies. What it doesn’t do is retain artificial restrictions – both implicit and explicit – through license and auction structure,” the Commissioner continued. “Fifth, some allege that a census-tract auction is not administratively burdensome. After multiple meetings with our auction team, it became readily apparent that we could not conduct an auction that covered 74,000 market areas and over half a million licenses. Maybe with endless time and money our software could get there, but, as many have pointed out, we don’t have endless time and I am pretty sure we don’t have endless money.”

Mr. O’Rielly also discussed the draft item at a briefing with reporters today (see separate story).

For example, when asked whether the approach in the item would limit the pool of potential bidders, Commissioner O’Rielly told reporters that he believes it will have the opposite effect. At one point the Commission was talking about single-round sealed bids along with census-tract licenses, but now “we are seeing many more providers saying they were willing to participate,” he said.

He said that he was able to talk “the big wireless guys” down “three times” from seeking much larger license sizes.

He added that “we couldn’t get some of the wireless guys to move off of census tracts” as their preferred approach. “They wanted census tracts in PALs only.”

Commissioner O’Rielly said, “We don’t in this item mandate package bidding, or even authorize it, but it may be part of our procedures PN [public notice] as we get closer to the auction itself, and it will allow package bidding in the MSAs.”

Predictably, reaction to the item was mixed today.

“Commissioner O’Rielly is right that freeing up mid-band spectrum is critical to winning the global race to 5G. Other countries have already moved to license 3.5GHz spectrum with investment-friendly policies and it’s imperative that the United States keep pace. We urge the FCC to support these common sense proposals which will promote investment and help spur future innovation across our economy,” said CTIA President and Chief Executive Officer Meredith Attwell Baker.

“I am glad that the FCC is taking another significant step to bring this item to a close and expedite the deployment of mid-band spectrum for the good of consumers and competitive carriers,” said CCA President and CEO Steve Berry. “All Americans, especially those in rural parts of the country, will have access to the 5G services they so desperately need if the FCC adopts smart policies to implement the 3.5 GHz spectrum regime.”

Will Johnson, Verizon Communications, Inc.’s senior vice president-federal and regulatory affairs, said, “Verizon commends Commissioner O’Rielly for his leadership in crafting a proposal that will significantly improve the Commission’s approach to the 3.5 GHz band. The proposed adjustments to the Priority Access License (PAL) licensing regime will ensure this valuable mid-band spectrum provides the most benefit for consumers and 5G. These targeted changes strike the right balance between fostering innovation and encouraging sustainable investment in the band. This spectrum will play a critical role in delivering 5G services to American consumers.”

“We are pleased the FCC is moving forward on unlocking the full potential of this vitally important spectrum. Commissioner O’Rielly’s leadership on this issue has proven instrumental in reaching a path forward on outstanding issues. We look forward to this item being voted so consumers can realize the benefits of new and innovative services in this band as quickly as possible,” an AT&T, Inc., spokesman said.

“We had advocated for county sized licensing areas believing this smaller size will promote increased competition and broadband deployment, and enable new entrants to tailor their deployment plans and leverage existing infrastructure, particularly in less densely populated areas and rural communities,” said Charter Communications, Inc.

Ken Mason, Frontier Communications Corp.’s SVP-government affairs, said, “Frontier applauds the Commission’s proposed decision to adopt counties as the license size for the 3.5 GHz CBRS Auction. While Frontier believes that smaller license sizes, such as census tracts, could better promote rural broadband deployment, counties represent a reasonable compromise based on all of the competing considerations.”

Even some entities that have pushed for at least some census tracts had praise today – or at least muted any criticism – noting, among other things, the proposed inclusion of rural bidding credits.

The Rural Wireless Association said, “The choice of counties plus the inclusion of a rural service provider bidding credit acknowledges the needs and realities of wireless broadband customers in rural America and will ensure that PALs remain affordable and accessible to the small, rural providers that directly serve these customers. Throughout this complex proceeding, RWA has consistently voiced support for small license areas including counties, and it proudly joined forces with the broad-based CBRS Coalition to ensure that CBRS PALs are sufficiently right-sized so that all Americans can benefit from the innovations that band users will offer. Allowing the more urban counties to be aggregated in package bids only within Metropolitan Statistical Areas should strike an appropriate balance between nationwide and small, rural providers.”

Jill Canfield, VP-legal and industry affairs and assistant general counsel for NTIA, said, “We appreciate the Commissioner’s leadership and guidance on the issue and our members look forward to the opportunity to obtain this valuable spectrum to compliment the fixed and mobile broadband services they already offer their rural communities.”

Claude Aiken, president and CEO of the Wireless Internet Service Providers Association, said that “WISPA is concerned that the FCC’s new proposal to auction CBRS licenses by counties will slow the future deployment of fixed wireless broadband networks in rural America. To be clear, the winners here will be large companies that will foreclose meaningful opportunities for rural small businesses to compete for mid-band spectrum, which is critically important for them to deliver broadband services to millions of rural Americans that do not have access to 25/3 Mbps broadband service in their homes, farms, and businesses.

“While we are pleased that the FCC is moving forward with rules, and that those rules reject the ill-conceived idea of auctioning Priority Access Licenses (PALs) at the Partial Economic Area (PEA) level, the combination of county-sized licenses – especially where they are subject to package bidding – plus long license terms and renewability will shut out a significant number of our members from using licensed CBRS spectrum to deliver affordable, reliable broadband services to under-served rural areas,” Mr. Aiken said.

“A diverse coalition of users offered a compromise solution to the FCC in May that would have preserved two PALs in every census tract nationwide, down from seven today; while creating five PALs in every county,” he added. “We called for seven-year terms and renewability based on performance criteria. We are displeased that the FCC did not accept this broadly-supported solution.”

However, Mr. Aiken said that the group is “pleased that the proposed rules will grant bidding credits to small businesses and rural broadband providers, and we hope that these auction mechanisms will enable meaningful participation from our members, the vast majority of which will be entitled to those benefits.”

“The draft Order proposes to transform CBRS from a Citizens’ band into a traditional cellular band,” complained Michael Calabrese, director of the Wireless Future Program at the New America Foundation’s Open Technology Institute. “As feared by consumer advocates, rural ISPs and virtually every industry stakeholder other than the big mobile carriers, the loss of small and affordable licenses will stifle innovation and competition in the 5G ecosystem. The robust 5G ecosystem the nation needs would have been advanced by small-area licenses with competitive renewal. Instead the Chairman is shutting out rural providers and every other enterprise with localized needs for interference-protected spectrum. Consumers and U.S. productivity will pay the price.”

“Members of the IIoT Coalition met with FCC commissioners and discussed numerous proposals and compromise positions that we believe serve the public as a whole, not one or two stakeholders,” the Industrial Internet of Things Coalition said. “While we will withhold final comment until we have a chance to digest the proposal to be considered by the FCC later this month, we would encourage the FCC to consider how this plan will benefit the public at large, including the public served directly by the utilities, manufacturers, transportation providers, and other business enterprises that drive the nation’s economy.” —Paul Kirby, [email protected], and Lynn Stanton, [email protected]

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