Getting Spectrum from a Jobs Bill: Keeping the New Broadband Spectrum Law on Track

Hands down, the two biggest stories of the week in telecom policy wonkland were 1) the World Conference on International Telecommunications in Dubai and 2) the continuing debate on the Federal Communications Commission’s proposed media ownership rules. But as important as these topics were – and, we admit, we’ll be returning to them soon – we didn’t want to end the week without calling some attention to another key event – a House hearing on FCC spectrum policy.

When President Barack Obama signed into law the Middle Class Tax Relief and Job Creation Act of 2012 on February 22, 2012, the Federal Communications Commission (FCC) gained authority to 1) hold voluntary incentive auctions and 2) allocate necessary spectrum for a nationwide interoperable broadband network for first responders. The new law also provides $7 billion for public safety broadband network build out, and up to $1.75 billion for relocation costs for broadcasters. According to the Congressional Budget Office, the spectrum auction will raise $15 billion over the next eleven years. Lawmakers are relying on spectrum revenue to raise $7 billion for the public safety network, $135 million for State planning, $300 million for research and development, and $115 million for next generation 911 services.

On December 12, the House Commerce Committee’s Subcommittee on Communications and Technology held an oversight hearing, Keeping the New Broadband Spectrum Law on Track, on the FCC’s implementation of the new law. Each of the five FCC commissioners testified. In a briefing memo shared on December 10, House Republicans shared concerns that the FCC plans to give away large swaths of spectrum reclaimed from television broadcasters. Committee staff said the FCC “runs the risk of short changing First Responders, squandering much of the legislation’s potential, and violating the act.”

In a September 28, 2012, notice of proposed rulemaking (NPRM) (docket number 12-268 if you’re scoring at home), the FCC proposed auctioning reclaimed broadcast spectrum in 5 MHz blocks. The uplink band -- for sending signals from users to the network -- would begin at 698 MHz where broadcast channel 51 is currently located, expanding downward toward channel 37. The downlink band -- for sending signals from the network to the user -- would begin at 608 MHz where channel 36 is currently located, also expanding downward. Broadcast stations that remain would reside below the downlink band as well as in the “duplex gap,” the space separating the uplink and downlink bands. The FCC also proposed placing two, 6 megahertz “guard bands” between the new mobile broadband spectrum and the reorganized broadcast spectrum, possibly rounding up to 10 megahertz. Guard bands are blocks of restricted-use spectrum interposed between two uses to prevent interference.

In the NPRM, the FCC suggests it would give away for nationwide, unlicensed use, the two guard bands; spectrum in the duplex gap; spectrum from channel 37; and spectrum currently used by wireless microphones; as well as spectrum that it clears on less than a nationwide basis. Republicans charge that the FCC cannot afford to give away spectrum, especially since we cannot know in advance how much spectrum broadcasters will relinquish. In the current fiscal climate, the memo reads, the FCC should also be striving to raise additional revenue to offset potential budget cuts or reduce the deficit. Although the Republican staff allows that the law allows for the FCC setting aside spectrum for guard bands and unlicensed use, the memo suggests “auctioning spectrum does not prevent the FCC from implementing band plans with guard bands or allowing unlicensed use within them.” Republican are interpreting the law to mandate that the FCC auction all the spectrum it clears.

House Democrats are supportive of the FCC’s proposal for unlicensed spectrum. At the hearing, Rep. Henry Waxman (D-CA), the ranking Democrat on the full Commerce Committee, said unlicensed spectrum has been an "incredible economic success story" and that additional unlicensed spectrum will allow businesses to "invent things we can't even imagine." Rep. Anna Eshoo (D-CA), the subcommittee's top Democrat, said Republicans were putting too much emphasis on maximizing government revenue at the expense of pursuing policies that would benefit the industry and consumers. In a letter to the FCC earlier in the week, Rep Eshoo joined Rep Darrell Issa (R-CA) in urging the FCC to stay the course when it comes to freeing up more unlicensed spectrum. "[T]he commission should implement the incentive auction and resulting reorganization of the band in a manner that optimizes the value of both licensed and unlicensed spectrum access," they wrote. They cited several examples of the public benefits of unlicensed, including progress in opening the so-called "white spaces" between current TV channels the FCC has opened up to unlicensed use.

Back in September, the FCC also adopted the NPRM on act implementation, it also adopted an NPRM on spectrum aggregation, seeking comment on whether the agency should restrict the amount of spectrum that entities could acquire in auctions mandated by the act. The FCC sought comment on ensuring that its policies provide the certainty and predictability needed to make informed investment decisions, including participation in upcoming incentive auctions and secondary market transactions, while also promoting the competition needed to sustain a healthy wireless marketplace.

The NPRM sought comment on a number of issues, including:

  • Continuing the current approach to evaluating mobile spectrum holdings in the context of transactions and auctions—a case-by-case analysis, or moving to a different approach such as bright-line limits;
  • Including additional spectrum bands in evaluating spectrum holdings;
  • Updating the FCC’s geographic market analysis, including to consider the impacts of mobile spectrum holdings at the national as well as local levels;
  • Whether the FCC should make distinctions among bands in assessing spectrum holdings; and
  • Updating the FCC’s attribution rules.

House Republicans assert that open, competitive auctions are the most efficient way of deploying scarce spectrum. Excluding parties from the auction, as the FCC’s NPRM contemplates, would likely hinder the broadband objectives of the act as well as reduce auction proceeds. It would also violate the act which forbids the FCC, “[n]otwithstanding any other provision of law,” to “prevent a person from participating in a system of competitive bidding” if that person “complies with all the auction procedures and other requirements to protect the auction process established” by the FCC and “meets the technical, financial, character, and citizenship qualifications that the Commission may require.” Republicans read the law as a prohibition on the FCC excluding carriers from participating in the auction.

At the hearing, Subcommittee Chairman Greg Walden (R-OR) said, “The FCC must avoid overly prescriptive auction rules and instead rely on market mechanisms that have a proven track record of success. Remember, the revenue generated, which was used in part to help pay for the middle class tax cut and extension of unemployment benefits, will also be used to help pay for the interoperable public safety broadband network under FirstNet, to fund next generation 9-1-1 service and to invest in public safety research and development. A broadcast incentive auction that fails to raise the revenue needed for these projects, or that unnecessarily gives away billions in cleared spectrum, is a failure.”

Democrats on the Subcommittee also raised concerns about consolidation, though no member used the names AT&T and Verizon. “The FCC must have the authority to write auction rules that aim to avoid the concentration of spectrum in the hands of just a small group of companies,” said Rep. Waxman.

FCC Chairman Julius Genachowski argued that additional unlicensed spectrum will allow for new technological innovations. "Unlicensed spectrum has a powerful record of driving innovation, investment, and economic growth – hundreds of billions of dollars of value creation for our economy and consumers," Chairman Genachowski testified.

In his written testimony, FCC Commissioner Robert McDowell said the FCC must:

  • ensure that the rulemaking and auction processes are transparent and the final rules intuitive so that all stakeholders – no matter their technology preference or size – have a meaningful opportunity to understand and participate;
  • avoid imposing anything that functions as a spectrum cap;
  • refrain, for now, from reserving new airwaves to create a “nationwide unlicensed spectrum band” within the new 600 MHz Band;
  • pragmatically balance the tension between flexible-use spectrum policies and adequate interference protections to account for the technological improvements that will undoubtedly develop while the proceeding is underway and after the rules are implemented; and
  • steer clear of encumbrances that scare away bidders and lead directly to unintended harmful consequences.

FCC Commissioner Mignon Clyburn stressed the need for a balance between licensed and unlicensed spectrum. “Unlicensed spectrum plays a critical role in advancing more efficient use of spectrum, and commercial wireless carriers are increasingly using unlicensed Wi-Fi services and small cell architecture to offload their smartphone traffic,” she said. “The unlicensed spectrum proposals in the NPRM would also encourage development of wireless services that can make effective use of unused spectrum, or White Spaces, in broadcast TV bands.”

Simplicity, fairness, balance, and public safety are the four guiding principles for Commissioner Jessica Rosenworcel. She went on to suggest: “As a next step, I believe it is time to develop a series of incentives to serve as the catalyst for freeing more federal spectrum for commercial use. What if we were to financially reward federal authorities for efficient use of their spectrum? If we want to convert more airwaves to commercial use, I believe it is time to work with our government partners so they can realize value from using spectrum efficiently—instead of only seeing loss from its reallocation.”

“The broadcast incentive auction,” said Commissioner Ajit Pai, “is our best opportunity to push a large amount of spectrum well-suited for mobile broadband into the commercial marketplace.” His guiding four principles:

  1. Faithfulness to the statute: It is the FCC’s job to implement this legislation, not to rewrite it to conform to the agency’s policy preferences.
  2. Fairness for all stakeholders. This is especially important because the incentive auction will fail unless both broadcasters and wireless carriers choose to participate.
  3. Simplicity: The FCC must keep our rules as simple as possible. The broadcast incentive auction is inherently complicated; unnecessary complexities are likely to deter participation.
  4. Timeliness: The FCC needs to complete this proceeding in a reasonable timeframe. Commissioner Pai suggested a deadline for conducting these auctions no later than June 30, 2014.

But he raised concerns about the FCC proposal:

  • The NPRM appears to envision an auction that will yield no net revenues;
  • The only closing condition set forth in the NPRM is that the revenues from the forward auction must cover the costs of the reverse auction. “It is essentially like ending a traditional auction as soon as the reserve price is met.”
  • If the FCC starts picking and choosing who may participate in the forward auction -- such as by setting a spectrum cap or narrowing the spectrum screen despite the robust competition in the wireless market -- it will result in less participation, less revenue, less spectrum available for mobile broadband, and less funding for public safety.

The FCC recently extended the public comment period on the incentive auction proposal. Comments are now due January 25, 2013 and Reply Comments are due March 12, 2013.

And we should not leave you without mentioning another key spectrum policy development. Also on December 12, the FCC launched a new proceeding on spectrum sharing. Based on recommendations from the President’s Council of Advisors on Science and Technology (PCAST), the FCC proposed to make available 100 megahertz of shared spectrum in the 3.5 GHz Band (3550-3650 MHz) using small cell and database technologies. The proposal, the FCC says, lays the groundwork for the widespread deployment of small cell technologies across 100 megahertz of spectrum, and would spur significant innovation in wireless technologies and applications throughout the economy, while protecting incumbent users in the band.

The proposal envisions three tiers of users, each with different levels of rights and protections in the 3.5 GHz Band:

  • The first tier, Incumbent Access, would include authorized federal users and grandfathered fixed satellite service licensees. These incumbents would be afforded protection from all other users in the 3.5 GHz Band.
  • The second tier, Protected Access, would include critical use facilities, such as hospitals, utilities, government facilities, and public safety entities that would be afforded quality-assured access to a portion of the 3.5 GHz Band in certain designated locations.
  • The third tier, General Authorized Access, would include all other users – including the general public – that would have the ability to operate in the 3.5 GHz Band subject to protections for Incumbent Access and Protected Access users. A spectrum access system, incorporating a geo-location enabled dynamic database, would govern access to the 3.5 GHz Band.

The White House was quick to endorse the effort. In MIT’s Technology Review, David Talbot writes, “[T]he move spells the beginning of the end of a system in which spectrum is either exclusively owned by a private company, walled off for government and military use, or unlicensed and crowded.”

We’ll have our eye on both proceedings in the coming months – and we’ll see you in the Headlines

By Kevin Taglang.