Wireless Spectrum Auctions

Homeland security was dominant theme in President Bush’s FY 2003 budget proposal released Mon., with new money for securing telecom facilities among leading priorities. Some $3.5 billion would be allocated to assist first responders to emergencies in wake of Sept. 11, including support for landline and wireless telecom networks, twelvefold increase over FY 2002. Administration also outlined proposals for auctioning broadcast spectrum for 3G wireless and again proposed fines for broadcasters continuing to use analog spectrum after 2006.

FCC isn’t moving to return NextWave re-auction deposits as quickly as expected in new development that could tie up $3.1 billion in down payments for several more months, industry sources said. Commission now is said to be likely to return portion of down payments closer to time that U.S. Supreme Court makes decision on whether to grant FCC’s petition for review of U.S. Appeals Court, D.C., ruling that had overturned agency’s decision to cancel NextWave’s licenses for missed payment. NextWave’s opposition brief to Commission’s petition for certiorari is due Fri. at Supreme Court, which is expected to decide by spring whether to hear appeal, possibly by late Feb. or early March. Item on returning part of down payments had reached 8th floor at FCC and decision on return of at least most of deposits for Jan. 2001 re-auction winners had been expected as early as last week (CD Jan 25 p6).

FCC set June 19 for start of auction for lower 700 MHz band now occupied by Ch. 52-59 TV broadcasters, meaning bidding on spectrum would take place at same time as Ch. 60- 69 auction. Lower 700 MHz band consists of 758 licenses for fixed, mobile and broadcasting services. Both lower and upper bands face congressional deadline of Sept. 30 for auction proceeds to be placed in U.S. Treasury. Spectrum in lower 700 MHz band will be offered for auction as two 12 MHz blocks consisting of pair of 6 MHz segments and two 6 MHz blocks of contiguous, unpaired spectrum in each of 6 economic area groupings (EAGs). Auction also will offer one 12 MHz block consisting of pair of 6 MHz segments in 734 metropolitan statistical areas (MSAs) and rural service areas (RSAs), which are smaller than EAGs. Wireless Bureau seeks comments on options for how 758 licenses in lower band should be grouped: (1) Grouping all licenses together in what would be simultaneous multiple round auction. (2) Or including only 734 MSA/RSA-based licenses in lower band auction and grouping 24 licenses based on economic areas with upper 700 MHz auction, where FCC has adopted similar approach of larger blocks of spectrum. Commission has said it chose combination of larger and smaller geographic areas for lower 700 MHz licenses to accommodate broad range of bidders. Public notice calls for upfront payments for each license and minimum opening bids. Bureau also seeks comments on proposal to award all licenses in lower 700 MHz band auction in single, simultaneous multiple-round auction. Comment is sought on proposed upfront payment for each license, activity rule, bidding procedures such as round structure, reserve price or minimum opening bid and minimum acceptable bids. Comments on those and other issues are due Feb. 6, replies Feb. 13.

Federal, state and local govts. need to make broadband rollout top priority, Silicon Valley advocacy group TechNet said Tues., and that means facilities-based telecom competition. “It’s all about how to encourage competition in the last mile,” said Microsoft COO Robert Herbold, member of TechNet’s broadband working group and also of President Bush’s Council of Advisers on Science & Technology (PCAST). TechNet Pres. Rick White, former Democrat on House Telecom Subcommittee, said TechNet “would encourage opening the local loop as much as possible.” However, in its White Paper A National Imperative: Universal Availability of Broadband by 2010, TechNet said FCC shouldn’t mandate open access for cable broadband networks. Group declined to take position on Bell-friendly bill sponsored by House Commerce Committee Chmn. Tauzin (R-La.) and ranking Democrat Dingell (Mich.), which many Tauzin-Dingell opponents hailed as victory in that TechNet didn’t actually endorse controversial legislation.

U.S. Supreme Court Mon. granted extension until Feb. 1 for responses to be filed on FCC’s request for review of U.S. Appeals Court, D.C., ruling that returned PCS licenses to NextWave. NextWave, Alaska Native Wireless (ANW) and VoiceStream had backed additional time in interest of possibly reaching settlement agreement over licenses. Verizon Wireless had balked at request for 30-day extension, telling court Fri. that there was “no current prospect of the parties’ reaching a new settlement” and that proposed 30-day extension would cause it “irreparable harm.” Verizon had told court, however, it didn’t oppose 14-day extension, which is what Supreme Court granted Mon. Verizon acknowledged last week that it wasn’t interested in another round of settlement negotiations until deposit on NextWave licenses it made after Jan. 2001 reauction was returned. But several industry observers said backing of VoiceStream and ANW, designated entity that has financial backing from AT&T Wireless, could point to new shape that settlement prospects are taking. “It kind of shows where the rift is,” industry observer said. FCC filed petition for review at Supreme Court Oct. 19 over U.S. Appeals Court, D.C., ruling that overturned agency’s cancellation of NextWave’s licenses for missed payment. Congress ultimately failed to pass settlement agreement reached by NextWave, re-auction winners and govt. over licenses by Dec. 31 deadline. As result, that earlier agreement terminated at year-end, NextWave told high court. “An additional 30-day extension is needed to permit exploration of possible alternative settlement arrangements for resolving the dispute between NextWave and the government over NextWave’s rights to the spectrum licenses,” NextWave told court. Acting Solicitor Gen. Paul Clement indicated he didn’t object to request for more time, NextWave said. ANW and VoiceStream told Supreme Court that request for more time wouldn’t affect effort by Jan. 2001 re-auction winners to get deposits on their licenses returned by FCC. Filing was made by Arctic Slope Regional Corp., Council Tree Communications and VoiceStream. Arctic Slope was original intervenor in NextWave court proceedings. Arctic Slope and Council Tree are among managing members of what came to be ANW when re- auction was held. Carriers that won NextWave licenses in re- auction year ago -- including ANW, Verizon Wireless and VoiceStream -- asked Commission to refund $3.1 billion in down payments that agency has been holding for nearly year. ANW and VoiceStream argued to high court that: (1) Extension of time wouldn’t have “any bearing” on separate matter of refund from FCC on NextWave licenses. “Indeed, because this case would not be heard until next term in any event, we do not believe the requested extension would prejudice any party,” they said. (2) More time would help in exploring settlement options over license disputes. Carriers said they disagreed with Verizon Wireless that “there are no prospects for settlement at this time.” While not balking at shorter extension, Verizon Wireless had said it would suffer “irreparable harm” if court granted full 30-day request. Carrier told court that from its perspective, there wasn’t any current prospect of reaching new settlement over licenses.

Companies that won NextWave’s licenses in re-auction year ago asked FCC Fri. to refund $3.1 billion in down payments that agency has been holding without interest since Feb. Re-auction winners said that with proposed settlement falling through and new solution not immediately apparent, “the time has come” for Commission to return money. They said they were losing at least $430,000 a day in interest, assuming “conservative” rate of 5%, and urged agency to act on their petition by Jan. 18.

Stakeholders in NextWave case talked Thurs. about possible options in response to unwillingness of Congress to codify proposed settlement by end of last year. Although FCC and Dept. of Justice supported $16 billion deal with bankrupt carrier that would have required return of auctioned C-block licenses, congressional action was needed to put $10 billion back into U.S. Treasury and allow NextWave to keep $6 billion after taxes. Sources said decision whether to revive proposal in some form was unlikely before end of day, but said negotiations would continue.

FCC late Fri. reallocated for “new flexible services” 27 MHz of spectrum transferred from federal govt. Spectrum included several small blocks transferred under Omnibus Budget Reconciliation Act of 1993 and Balanced Budget Act of 1997. Spectrum is in 216-220, 1390-1395, 1427-1429, 1429- 1432, 1432-1435, 1670-1675 and 2385-2390 MHz bands transferred to nongovt. uses. Agency said new allocations would permit “new and innovative wireless technologies” while at same time preserving primary status of Wireless Medical Telemetry Services and elevating to primary status Low Power Radio Services in 216-217 MHz band, which include auditory assistance and law enforcement applications. Agency said notice of proposed rulemaking would be released soon that would propose service rules for reallocated frequency bands, some of which must be licensed through auction by Sept. 2002.

Congressional inaction on NextWave legislation last week came as other wireless carriers in similar or related straits await final word on fate of their own licenses. Congress left town Thurs. for holiday break without voting on $16 billion settlement legislation, meaning Dec. 31 deadline for Capitol Hill approval of deal’s terms was expected to pass without action. Without blessing by lawmakers by that date, parties to settlement -- which include Justice Dept., FCC, NextWave, Verizon Wireless and others -- may walk away from deal. Some industry observers said negotiators who negotiated deal still might be able to stay together for short time early in 2002 to continue advocating for settlement on Hill, although prospects for that scenario were unclear at week’s end. Attention also is starting to refocus on continued court action, specifically petition for certiorari that FCC filed at U.S. Supreme Court in Oct. seeking review of U.S. Appeals Court, D.C., ruling that overturned agency’s cancellation of NextWave licenses for missed payment. That came as several other carriers still were awaiting resolution of NextWave-related litigation to gain certainty about fate of their own licenses.

Congress headed toward Christmas break late Thurs. without passing implementing legislation for $16 billion NextWave settlement agreement worked out by Jan. re-auction winners, NextWave and U.S. govt. Both NextWave and Verizon Wireless acknowledged defeat on Capitol Hill on meeting settlement’s deadline for passage of legislation by Dec. 31, although what happens next is less clear. NextWave said “consumers will be best served by ending pending litigation and putting NextWave’s licenses into productive use as quickly as possible.” Company said it had continued to construct its wireless network during settlement proceedings “and we will be in a position to start providing service to the public in the new year.” Verizon Wireless CEO Denny Strigl said settlement, “which resolved the legal disputes surrounding the NextWave licenses,” expires Dec. 31 in absence of Hill action and agreement “could be implemented only with the endorsement of the Congress.” He said company appreciated work of Congress on issue and regretted that Congress couldn’t provide endorsement. “America’s wireless consumers will be denied the benefits the prompt use of the spectrum would have afforded them,” he said. Strigl didn’t indicate where company would go next on licenses. Under agreement, participants can walk away from settlement, and several industry observers turned attention to whether coalition of re-auction winners and govt. negotiators was likely to continue pressing for settlement in early part of next year. Fate of NextWave legislation became clearer early Thurs. when House Speaker Hastert (R-Ill.) told reporters that provisions implementing settlement weren’t part of measures that would be considered on basis of suspension of rules. “I think it’s probably dead,” Hastert reportedly said. “If it’s a good deal today, it will probably be a good deal next week.”