TR Daily Sen. Kennedy Criticizes CBA Proposal for C Band
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Thursday, October 17, 2019

Sen. Kennedy Criticizes CBA Proposal for C Band

Sen. John Kennedy (R., La.), the chairman of the Senate Appropriations financial services and general government subcommittee, today repeatedly questioned the C-Band Alliance’s proposal for a “private sale” of spectrum in the 3.7 to 4.2 gigahertz band.

“Are we going to allow a private spectrum deal with foreign-owned satellite companies who say they can do it faster, or are we going to hold a public auction? … I confess my bias at the moment is for a public auction. Luxembourg should not reap the profits; the American taxpayer should,” Chairman Kennedy said during his opening remarks at a subcommittee oversight hearing on the FCC’s spectrum auctions program this morning.

Emphasizing the importance of transparency, Sen. Kennedy said, “That’s why public auctions work, because everybody gets to see how the sausage is being made.”

He added, “I have seen estimates that the initial value of the C band, not the total 500 MHz, but the 300 to 400 MHz that the FCC is talking about auctioning, could be worth as much as $60 billion.”

Intelsat S.A., SES S.A., Eutelsat S.A., and Telesat formed a consortium—the C-Band Alliance—last year to lobby for a market-based proposal for repurposing spectrum in the 3.7-4.2 GHz band for 5G terrestrial services. The satellite operators, incumbent users of the C band, emphasized their ability to clear the spectrum more quickly than they said could be done under a traditional FCC auction process. Eutelsat quit the consortium last month, saying it wasn’t “aligned” with the other members and wanted to take a “direct active part in the discussions on C-band clearing and repurposing” (TR Daily, Sept. 3). However, Eutelsat has said recently it might be willing to rejoin the CBA if the conditions were right.

FCC Chairman Ajit Pai, the sole witness on the first panel of the hearing, said that FCC spectrum auctions have generated $116.5 billion for the U.S. Treasury, with administrative and personnel costs totaling only 1.7% of auction revenues.

He noted the Commission has two more spectrum auctions scheduled in the near future, including an auction of licenses in the upper 37 GHz, 39 GHz, and 47 GHz bands beginning Dec. 10, and an auction of licenses in the 3.5 GHz band starting in June of next year.

Beyond that, the agency is planning an auction of licenses in the “dramatically underused” 2.5 GHz band, he said. The Commission has not yet set a start date for that auction, “but I am aiming for it to start next year,” he added.

As for the C band, Chairman Pai said that his goals are to make available “significant” spectrum for 5G services, to make 5G spectrum available “quickly,” to generate revenue for the federal government, and to ensure services currently delivered using C band spectrum “continue to be delivered to the American public.”

During the question portion of the hearing, Sen. Kennedy said that the C band “is a strategic American asset owned by the American people,” and that foreign satellite companies are “offering to handle the allocation of this very valuable C Band and keep most of the money. Why in God’s name would we do that?”

“Why don’t we do it and keep all the money for the American people?” the senator added. “This asset is ours. Why do we need them?”

Sen. Kennedy asked, “How do we know how the C-Band Alliance, which is going to conduct this sale itself, hasn’t already pre-sold it?”

Chairman Pai said, “As far as I know, they have not.” He pointed out that they can’t sell licenses for the spectrum without the FCC’s approval.

Chairman Pai also said that he cannot know for sure what conversations the CBA has had with other parties.

“Don’t you think we should ask them?” Chairman Kennedy asked.

“The only argument I can find to doing the deal with [the] C Band [Alliance] is that they say they can do it faster and it would take the FCC seven years. Is it true?” he asked.

Chairman Pai said the FCC is studying how quickly it could complete the process. “Several years is the estimate. … One [year] would be fairly ambitious,” he said.

Sen. Kennedy said, “Would you consider calling all your people in charge of auctions and say I want this done in three years, and I’ll give you a bonus in two and a half years or two years? … There’s going to be one who’s going to say it’s going to take us seven years, and that’s the one you fire.”

Sen. Kennedy suggested that the CBA “can do it faster because they’ve got the deal pre-sold.”

Sen. Jerry Moran (R., Kan.) asked Chairman Pai for his “thoughts about the urgent need for unlicensed spectrum while protecting incumbents” in the 6 GHz band.

“I truly believe American consumers can have the best of both worlds” with respect to protection for utility incumbents and unlicensed broadband, Chairman Pai said.

Sen. Moran asked for an update on the broadcaster repacking process in the wake of the 600 megahertz incentive auction.

Chairman Pai said, “We are now halfway done.” He added that the repacking plan has 10 phases. Phase 5 ended on Sept. 6 and Phase 6 ends tomorrow, and he expects that the repacking will be “two-thirds of the way through” at the end of Phase 6.

Sen. John Boozman (R., Ark.) also sought information about the 6 GHz band. “There is real concern not only among electrical grid users but also among first responders,” he said. “It’s my understanding that the Department of Energy has offered to make its national laboratories available for testing.”

Chairman Pai said, “I’m working with our professional staff on engineering issues. … I would be happy to take a look at the Department of Energy proposal in due course.”

Sen. Boozman asked, “Who would be liable if incumbent users were disrupted by unlicensed use?”

Chairman Pai said he would have to consult with the FCC’s Office of General Counsel.

During a second round of questioning, Chairman Kennedy asked, “If we get a competitive bid for C band and brought in $60 billion, why couldn’t we allocate $20 billion for rural broadband?”

“That would be a decision Congress would have to make,” Chairman Pai responded.

“If we do a public auction, could we not exclude from bidding a company perceived to be an enemy of the United States?” Sen. Kennedy asked.

Chairman Pai said he would have to look at the law.

Sen. Kennedy said, “If a certain country with the second largest economy said, ‘We’ll buy it,’ we could say no?”

Chairman Pai responded, “If I understand your question, I think we would have the power to do that if it presented a threat to national security.”

Sen. Kennedy said, “My reading of the Communications Act is that you have to conduct a public auction.”

Chairman Pai said the agency is looking at the legal issues involved in the CBA proposal.

“I think you can do it in two, two and a half years, I have that faith in you,” Chairman Kennedy said. “If you accept a private deal, we’re going to be in litigation for a lot more than seven years.”

Chairman Pai said that the FCC is looking at the litigation risk of the various options.

Sen. Kennedy asked whether the “private auction” raises concerns about nation security. Mr. Pai said that is a very important concern.

“What if they have it pre-sold to Huawei? That would not be cool, Mr. Chairman. You would get a call from the president on that,” Sen. Kennedy said.

“I’m really trying to understand the advantages of the private deal, and I don’t see them,” he added.

“When I ask [CBA] why can you do it faster, I never get an answer,” he said.

Sen. Kennedy asked when the Commission will make a decision on the C band.

Chairman Pai said, “I have said we will make a decision this fall.”

Sen. Kennedy said, “I’m thinking about doing a second hearing and asking your auction folks to come over and ask them straight up, ‘I understand people are saying it would take you seven years to do it, and why is that?’”

During the second panel of the hearing, David Williams, president of the Taxpayers Protection Alliance, told the subcommittee that 5G services will need at least 300 MHz of the C band, more than the 180 to 200 MHz the CBA has discussed making available. He pointed out that “China and Japan are in the midst of freeing up at least 500-megahertz total mid-band spectrum in their countries.”

Thomas Schatz, president of Citizens Against Government Waste, opined that U.S. deployment might require 400 MHz. In any event, both witnesses agreed that the amount that the satellite industry has agreed to vacate is insufficient for expected 5G needs.

Both Mr. Williams and Schatz opposed the CBA proposal to conduct the sale.

“The C band,” Mr. Williams said, “is the people’s airways. It is owned by the taxpayers.” If the C-Band Alliance were able to conduct the sale and keep the proceeds, Mr. Williams said, “we would be leaving $60 billion on the table” that would otherwise go to U.S. taxpayers.

Mr. Schatz argued that telecommunications law clearly states that the spectrum is an asset of U.S. taxpayers and that no one but the FCC has the right to sell it. “The government has a strong interest in making sure this process works like other auctions,” he said, “because spectrum is unlike any other public asset in terms of its value and strategic importance for the future of the economy and national security.”

The mid-band spectrum that the satellite industry wants to sell was originally licensed to them for free. Mr. Schatz questioned “whether the satellite companies have or can obtain the authority to sell something that they do not own, but only have a license to use.”

Both witnesses contended that a sale by the C-Band Alliance would remove the transparency that would be present if the FCC conducted the sale. If the C-Band Alliance sells the spectrum, Mr. Williams said, “we will have no guarantees how it will be sold” and no ability to pursue public goals for 5G such as extending coverage to rural areas and bridging the digital divide.

“The CBA has been evasive about their plans,” Mr. Williams said. “We have zero assurance that rural areas will be addressed in a private sale.” He then asked, “What if something goes wrong in a private sale? There will be virtually no oversight.” The spectrum sale process, he added, “has always been transparent” in the past. If the sale is private, information that has always been available to the FCC will no longer be available.

Chairman Kennedy asked why it should “take the FCC seven years to complete the sale.”

Mr. Williams disagreed with the premise. “It won’t take seven years,” he said, adding that he thought that the FCC could do it in two and a half to three years. Mr. Schatz guessed that the private sale might be rumored to be quicker because the C-Band Alliance may have already determined to whom they are selling. However, he said, “a private sale will take the seven years” because of the lawsuits that would arise to challenge the private sale.

He also contrasted the FCC’s experience with selling spectrum and relocating incumbents to the CBA’s lack of experience in both those areas, which he suggested could slow down the process.

Sen Kennedy wanted to know what was meant by the C-Band Alliance’s reference to a “voluntary contribution.” Mr. Schatz responded that the C-Band Alliance would be under “no requirement to pay anything to the Treasury. They have no commitment to the taxpayer.” A voluntary contribution, he said, was the term that the C-Band Alliance used to refer to a possible payment to the Treasury if anything were left over after profits had been taken. Whatever the U.S. taxpayers receive as a voluntary payment, they will have to accept because there will be no recourse.

In response to a question from Sen. Kennedy about whether the C-Band Alliance could bid on spectrum licenses if the sale were public, Mr. Schatz answered that they certainly could, although he doubted that they would because the C band incumbents are not involved in 5G implementation. —Lynn Stanton, [email protected], and Robert B. Barnett Jr.

MainStory: FederalNews Congress FCC SpectrumAllocation

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