Wireless Spectrum Auctions

Thomas Sugrue, who departed last week as longest-running chief of FCC Wireless Bureau, said that during his tenure he had seen debate shift on Enhanced 911 and had come to new appreciation of potential need for receiver performance standards. His successor, John Muleta, joined FCC Mon. Sugrue told Communications Daily he took “satisfaction” in tremendous growth in wireless services and technologies since he became chief in Dec. 1998. “It has changed the communications landscape in the U.S.,” he said, noting he didn’t take credit for rise: “That reminds me of a rooster taking credit for the sunrise.”

FCC should do more to promote access to wireless services by rural customers, Comr. Adelstein told NTCA annual meeting in Phoenix Mon. He also stressed need for continued support from universal service for network build-outs “at levels that are specific, predictable and sufficient.” As for wireless, Adelstein said universal service shouldn’t be used to support “artificial competition from providers that don’t provide the same or better service than what consumers already receive.” He also urged changes in FCC policies that he said didn’t make sense in that area, such as allowing small carriers to get discounts in buying spectrum at auction. “This is a great idea,” Adelstein said, “but the current rule actually attributes the outside business activities of co-op board members in determining the co-ops’ eligibility for bidding credits.” Citing challenge against that pending at FCC, he said he was “taking a good hard look at this… Unfortunately, this is an example of how the FCC doesn’t always understand how co-ops in rural America work. I plan to use the full power of my office to make sure we get this rule fixed as soon as possible.” Reflecting concerns on license area size that rural carriers had raised at FCC, Adelstein said he also was concerned that large wireless license areas raised auction prices so high that rural telcos “can’t even afford to make a first bid.” In future auctions, Adelstein said he would support use of smaller wireless license areas that would better reflect rural customer bases. “In addition, we need to revisit the FCC’s build-out rules. I'm concerned that the current rules can indirectly undercut the ability of rural carriers to get access to spectrum in their own neighborhoods,” he said. On universal service front, he said that although it didn’t directly support advanced services, it was key tool that laid groundwork for creating future broadband networks. “The 2 foundational pillars of the [Telecom] Act are universal service and competition,” he said. “Federal support is intended to promote universal service, not to subsidize artificial competition -- or, for that matter, to keep it at bay.” Neither of those “pillars” should be promoted at expense of other, he said. State PUCs have key role in determining if competitor is eligible for universal service support, he said. “Specifically, states must make sure that the new market entrants receiving universal service meet all the obligations required by the Act. These include providing service throughout the service area and advertising its availability.”

Eldorado Communications last week withdrew its application for review of FCC Wireless Bureau decisions that dismissed obligations of NextWave re-auction winners. Wireless carriers, including Verizon Wireless, had opposed Eldorado’s challenge. Eldorado had asked for reversal of bureau decision that granted NextWave re-auction winners relief on their bid obligations pending conclusion of litigation on those PCS licensees. Eldorado competed with NextWave in original C-block auction, later filing for Chapter 11 bankruptcy and returned spectrum to govt. Eldorado told FCC that Supreme Court’s decision last week in NextWave case made moot its challenges to applications of re- auction winners for any of those licenses. Court sided with NextWave in upholding U.S. Appeals Court, D.C., ruling that reversed Commission decision to cancel NextWave’s licenses for nonpayment.

Mobile satellite service (MSS) providers will have option to use ancillary terrestrial component (ATC) to supplement their satellite services under certain conditions, FCC said Thurs. Text of order wasn’t available by our deadline, but news release outlined key points, which included 8 different gating criteria and covered interference concerns for 2-GHz and L-band. Commission also adopted rulemaking on Big Leo band to address additional spectrum issues. As part of 5 interlocking items released Thurs., Commission reallocated 30 MHz from MSS band at 2 GHz for 3G wireless. CTIA still called actions “split decision for consumers,” saying it was likely to challenge ATC order.

T-Mobile USA, citing “unique” circumstances of NextWave re-auction, asked FCC last week for refund of penalty it paid for one bid withdrawal. T-Mobile, which bid in Jan. 2001 re- auction of NextWave spectrum through subsidiary, had withdrawn bid for one C-block license in Richmond, Va. Salmon PCS, which had financial backing from Cingular Wireless, ultimately was winning bidder for that license in bid that was less than T-Mobile’s withdrawal bid. T-Mobile told FCC in Fri. filing that it paid $4.6 million withdrawal penalty. In petition for declaratory ruling, T-Mobile said it wanted FCC to rule that broad language and public policy underpinnings of recent NextWave refund order “compel the refund of the penalty.” U.S. Supreme Court upheld U.S. Appeals Court, D.C., ruling that overturned FCC decision to cancel NextWave’s licenses for missed payment (CD Jan 28 p1). That D.C. Circuit ruling had thrown results of Jan. 2001 re- auction of those PCS licenses into disarray. Before Supreme Court decision, FCC last fall had issued order that outlined ways re-auction bidders could exit from auction amid continued legal uncertainty. That final refund order “provided complete monetary relief to applicants withdrawing their applications by refunding all monies on deposit and not assessing any default payments,” T-Mobile told FCC. “It would be illogical, inconsistent and inequitable to deny this same complete monetary relief to T-Mobile in the context of its bid withdrawal, and substantial societal costs would flow from continued retention of T-Mobile’s funds,” carrier said. It also argued FCC authority under its rules to impose final penalty was “erased” when Salmon withdrew its winning bid. “Similarly, because the occurrence of a future auction of the Richmond license is uncertain, the Commission’s rules do not authorize the imposition of any interim penalty,” T-Mobile said. All 22 winning bidders in NextWave re-auction had opted to have their pending applications for licenses dismissed. That meant auction was voided and “cannot be resurrected for the sole purpose of assessing some final penalty against T-Mobile in the event that a future auction of the Richmond license does occur.” Penalties for withdrawal in such cases are assessed only during course of auction when withdrawn bid for particular license is more than the winning bid. “There is no more basis to assess any interim penalty against T-Mobile than there is against the other bidders that withdrew bids for licenses that were ultimately the subject of withdrawn winning bids -- and imposition of any interim penalty against those other bidders would be absurd,” T-Mobile said.

Wireless carriers raised concerns to FCC late Mon. that “interference temperature” touted by agency’s Spectrum Policy Task Force report wasn’t yet backed up by real-world information, such as noise floor data. Responding to task force recommendation, several commenters cautioned Commission against basing spectrum allocation and policy decisions on technology advancements that hadn’t yet materialized. Among common themes that emerged in comments this week was need for more unlicensed spectrum, requirement for additional public safety bands, concern over auctioning of satellite spectrum.

In ruling that could mark end of protracted NextWave litigation, U.S. Supreme Court Mon. upheld lower court decision that reversed FCC on cancellation of carrier’s licenses. Court ruled 8-1, with dissent by Justice Stephen Breyer, that Bankruptcy Code barred FCC from revoking licenses held by bankrupt debtor for failing to make timely payment. Writing for majority, Justice Antonin Scalia said that reading of bankruptcy law didn’t conflict with Communications Act, which he said didn’t require FCC to cancel licenses as penalty for missed payment. “What the petitioners describe as a conflict boils down to nothing more than a policy preference on the FCC’s part,” he wrote.

Verizon Wireless, Salmon PCS, Alaska Native Wireless (ANW) and VoiceStream PCS BTA I filed joint opposition this week at FCC to auction relief challenge filed by Eldorado Communications. Eldorado asked FCC Wireless Bureau to reverse decision to grant NextWave re-auction winners relief on their bid obligations. Eldorado also has filed challenge at U.S. Appeals Court, D.C., arguing that bureau decision should be overturned because it conflicted with federal statutes, FCC regulation and Commission case precedent. Verizon, Salmon PCS, which has financial backing from Cingular, ANW, which has financing from AT&T Wireless, and T- Mobile unit VoiceStream PCS all participated in Jan. 2001 re- auction and availed themselves of FCC order allowing them to dismiss pending license applications. They charged that Eldorado’s challenge at FCC was “a transparent attempt to hold Auction No. 35 participants hostage while Eldorado pursues its grossly untimed request for additional relief” for participants in original C-block auctions. Eldorado competed with NextWave in original C-block auction, later filing for Chapter 11 bankruptcy and returning spectrum to govt. Carriers argued that Eldorado lacked standing and its application for review should be dismissed. DCC PCS filed similar objection last week (CD Jan 15 p3). Carriers said: “The application in effect seeks a stay of the orders by which the FCC granted the requested dismissals of Auction 35 applications and made related refunds without Eldorado even attempting to satisfy the heavy burden it must bear to warrant such extraordinary relief in the context of its own defaults” in original C-block auction. Eldorado isn’t injured by relief granted to re-auction winners, filing said. Instead, it was put at disadvantage by earlier FCC decisions granting relief to initial round of C-block winners when they ran into financial problems. “But those earlier decisions are well beyond review, and any challenges at this time would be grossly untimely,” filing said. “Eldorado cannot be allowed to use decisions unique to Auction 35 as a means to rejuvenate long-expired appeal time frames applicable to those prior auction actions.”

Senate Communications Subcommittee Chmn. Burns (R-Mont.) unveiled ambitious telecom technology agenda Wed. that included spectrum reform and E-911 as its “centerpiece.” Legislation to control spam would be first priority, but agenda also included several telecom-related measures: (1) Tax incentives for broadband build-out. (2) Wireless privacy. (3) Universal service reform. (4) Development of U.S.-Asia free trade network. “We can pass some of this agenda,” said Burns, who acknowledged passage of all items on the agenda would be difficult: “If we don’t offer something, we'll get none of it through.”

With U.S. Supreme Court expected to rule relatively soon on fate of NextWave’s PCS licenses, some industry observers expect carrier could face challenges linked to drop in wireless spectrum values if court decided against FCC. Several analysts pointed to $750 million Verizon Wireless agreed to pay last month for NorthCoast PCS spectrum, including 10 MHz in N.Y.C., as sign of how far spectrum prices had fallen. Verizon had bid $4.1 billion in Jan. 2001 for 2 10 MHz licenses in N.Y. that since had been returned to NextWave. Others cited 28 of top 30 markets that NextWave spectrum covered, meaning that carriers still could pursue spectrum in market-by-market acquisitions.