Wireless Spectrum Auctions

CTIA asked President Bush to give Commerce Secy. Donald Evans “sufficient time” to complete 3rd-generation wireless spectrum assessment by delaying pending auctions. Govt. has been working toward July 31 deadline that FCC faces for spectrum allocation decision under timelines set out by President Clinton in executive memorandum last Oct. Request to Bush came as speculation has grown that Commerce Dept. wouldn’t necessarily be prepared to craft 3G decisions within tight schedule of executive memorandum anyway. Last week, House Telecom Subcommittee Chmn. Upton (R- Mich.) said panel’s hearings on issue were delayed because department wasn’t ready to unveil its “game plan” (CD May 14 p1). “Previous Administrations ignored this [3G] issue until it finally reached crisis proportions, leaving your Administration to inherit the crisis and make the tough decisions,” CTIA wrote Bush.

Flurry of back-and-forth ex parte filings is continuing at FCC on 3rd generation wireless allocation issues. Catholic TV Network (CTN) took exception to contentions by Verizon Wireless that reallocating up to 60 MHz of Instructional TV Fixed Service (ITFS) spectrum for 3G wouldn’t harm incumbents. Verizon had argued segmentation of 2.5 GHz band occupied by Multichannel Multipoint Distribution Service (MMDS) and ITFS licensees would be possible. Verizon argued MMDS operators who lease ITFS spectrum have no long-term ownership rights. “Given the independent and interleaved nature of ITFS and MDS operations, it is simply ludicrous to argue that the Commission could reallocate the same 60 MHz of spectrum in every market with no adverse impact to incumbent licensees,” CTN said. Verizon comments “are simply another attempt to distract the Commission’s attention from Verizon’s true intention: to derail the deployment of a service that will directly compete with Verizon’s own DSL service.” Separately, in ex parte filing this month, Motorola outlined benefits of using 1.7 GHz band occupied by military for advanced wireless services. Company argued Dept. of Defense global training and operational requirements aren’t compatible with global use of 1710-1850 MHz band for commercial mobile services. Instead, filing said use of this band for 3G in U.S. would provide “global spectrum alignment.” Motorola said Commission shouldn’t pair 1710-1755 MHz with 2110-2150 MHz, in part because this would provide 85 MHz of spectrum, which isn’t enough to meet demand through 2010. Motorola said this pairing wouldn’t leave room for future growth using additional spectrum at 1755-1850 MHz. On issue of reimbursement of govt. users who relocate, Motorola acknowledged existing law guarantees reimbursement but it is subject to congressional authorization. Company advocated “streamlined process” that would identify costs before auction with “clear rights for both parties” and use of auction revenue to directly finance relocation. This plan also would allow federal users to modernize systems, Motorola said. Motorola contended DoD doesn’t have to vacate 1.7 GHz band altogether to make room for 3G. This could be averted by developing “system-by-system” solutions for accommodating govt. requirements and crafting solutions that would “consider realistic 3G requirements and DoD requirements,” Motorola said. How to attain global spectrum harmonization for 3G services was among issues that also emerged last week during European Institute roundtable on telecom and e- commerce in Washington. Veena Rawat, deputy director-gen. of spectrum planning and engineering for Industry Canada, said she was heartened that U.S. is considering 1.7 GHz for 3G because this would align with choice Canada has already made. “Before we talk about global harmonization we must harmonize with our neighbors here,” she said. Ruprecht Niepold, head of European Union’s mobile and satellite unit, also stressed importance of 3G harmonization, but said he expects more serious discussion about flexible spectrum allocation when attention turns to phasing out existing 2G services.

MDS America has “proved Northpoint system can co-exist” with DBS on day-to-day basis, CEO Kirk Kirkpatrick told us Wed. in interview on proposed plans for U.S. service. FCC issued experimental license to MDS America Fri. (CD May 7 p7). Company could offer new challenge for Northpoint and to DBS, which is opposed to allowing terrestrial services in 12.2-12.7 GHz band (CD May 8 p7). FCC is considering several spectrum-sharing options for satellite services, but Northpoint debate has been most contentious. MDS America, which competes with Northpoint, may end up as ally in proceeding (CD April 27 p7).

Some wireless technology developers are recommending FCC set aside 5 GHz of spectrum or more when Commission finalizes proposal for service rules for spectrum at 92 GHz. Expectation is that as early as this fall FCC will launch rulemaking, although industry already has been bouncing ideas off Commission for what developers would like to see in that spectrum. On issue whether band should be made available on unlicensed basis or via licenses, panel organized by Wireless Communications Assn. (WCA) has floated idea of hybrid approach that would license some segments and allow others to be unlicensed at more restricted power levels, said Donny Burt, vp-advanced technology, e-xpedient/CAVU. Among “last mile” technologies that can be offered in that band, developers said, are gigabit ethernet-based systems that can connect buildings and extend metropolitan area networks.

Verizon Wireless in filing at FCC balked at request by New ICO (CD April 4 p1) seeking flexibility to offer terrestrial mobile services using mobile satellite service (MSS) spectrum. New ICO sent letter to FCC Chmn. Powell last month suggesting that it would have to fold unless it received approval for new spectrum from domestic and international regulators. Verizon said request would violate Sec. 309(j) of Communications Act, which requires that spectrum used to provide commercial terrestrial services be auctioned. “New ICO received its MSS licenses for free,” Verizon said: “Given the enormous sums that Verizon Wireless and other mobile operators have paid for licenses, this would yield a tremendous windfall to New ICO and confer on them an unfair competitive advantage.” Verizon said New ICO’s suggestion that “MSS is no longer viable” should mean that spectrum be reallocated for advanced mobile services. Carrier said 1990-2025 MHz and 2165-2200 MHz have been identified internationally for 3G services. “Given the difficulty that the Commission is having in identifying spectrum for 3G, it should not overlook this obvious opportunity,” Verizon Wireless wrote. On other 3G issues, Verizon cited “flawed assumptions” in recent FCC report on use of 2.5 GHz band for advanced wireless services such as 3G. It said band segmentation was possible without harming Multichannel Multipoint Distribution Service (MMDS). “Importantly, MDS operators have no long-term ownership rights to leased ITFS [Instructional TV Fixed Service] spectrum,” carrier said. “Thus, a reallocation of some ITFS spectrum would not undermine their spectrum rights. Moreover, if MDS operators believe that they need additional spectrum to deploy broadband fixed services, they can bid in the auction.”

Nextel said Tues. it bought assets of Let’s Talk Cellular & Wireless for $32 million. Assets include bulk of company’s holdings, including 200 retail stores, national distribution center based in Dallas, hq in Miami, store inventory. Nextel said stores would remain open and convert to Nextel brand. Separately, Fitch affirmed ratings for Nextel’s senior secured bank facility and senior unsecured debt. Fitch cited company’s strong first- quarter results, including adding 500,000 subscribers in each quarter last year, average $73 revenue per user, low customer churn. It said rating also reflected expectation that company had enough spectrum to pursue its business plans. “Nevertheless, additional spectrum would enhance Nextel’s competitive position and improve capital efficiency,” Fitch said. “The primary opportunity for Nextel to acquire additional spectrum would be in the much-delayed 700 MHz auction, currently scheduled for September 2001.” Nextel shares rose 15% on Nasdaq Tues. to close at $18.69.

Following meeting last month on interference issues, satellite digital audio radio service (SDARS) licensees and Wireless Communications Services (WCS) operators don’t appear to be closer to agreement on terrestrial repeaters. In recent ex parte filings at FCC, XM Radio and Sirius Satellite Radio proposed rules that would cap number of high-power repeaters that could be deployed without first coordinating with WCS licensees. WCS licensee AT&T Wireless (ATTW) offered counterproposal, providing technical analysis that carrier said would demonstrate why SDARS plan still would cause interference to fixed wireless operations. XM submitted draft rule to FCC for terrestrial repeaters in effort to rebut concerns that repeaters operating at levels above 2 kw could cause interference. XM told FCC that AT&T Wireless “recently disclosed that its concerns with terrestrial repeaters are based on its having designed the front end of its receivers to tune to the entire 2305-2360 MHz band, covering both the WCS and the DARS band, and that it has no filtering to eliminate DARS transmissions in the 2320-2345 MHz band.” XM said it shouldn’t have to bear costs of AT&T’s “failure to adopt reasonable engineering practices.” Sirius raised similar arguments, saying WCS licensees should have used receivers with enough front-end selectivity to reject “the amount of interference that the rules already permit from nearby WCS operations.” XM proposed rule that would: (1) Put no additional limitations on low-power repeaters. (2) Define “medium-power” repeaters as operating between 2 and 10 kw. Such repeaters provide more targeted transmissions that increase power in given direction, using sectorized antennas and focus energy into relatively narrow beamwidth. Such antennas decrease probability that WCS base station would be located within that range. Every medium-power repeater would be coordinated with WCS licensees. (3) Limit to 250 number high-power repeaters, operating at 10-40 kw, that XM would operate without coordination. In Mon. ex parte filing, AT&T referred to meeting last month in which SDARS and WCS licensees exchanged technical data. SDARS licensees provided details on planned repeaters in Atlanta, Boston and San Francisco. AT&T said its interference analysis found: (1) If SDARS licensees operated terrestrial repeaters at levels of 10-13 kw each, “interference to the ATTWS fixed wireless base station would preclude the provision of service to more than 171,000 households in Atlanta alone.” (2) If SDARS licensees operated repeaters at 40 kw, interference to base station would preclude AT&T fixed wireless service to almost 435,000 households there. (3) If high-power repeaters were replaced with multiple standard power repeaters operating at 2 kw, SDARS licensees could “achieve the same coverage for their own service but reduce the size of the exclusion zone in Atlanta” by 43.2%. Carrier wrote: “Both sets of licensees paid for their spectrum at auction or in the secondary market. It is reasonable to expect that both services should bear the burden of establishing a viable co- existence.” AT&T urged FCC to adopt rule in which SDARS licensees could deploy terrestrial repeaters at peak power of up to 400 w/MHz, evenly distributed across band for total of 2 kw per 5 MHz. Proposal also would limit out-of-band emissions generated by SDARS terrestrial repeaters to levels specified by licensees that have less than transmitter power levels.

Verizon Wireless emphasized to FCC why it thought Commission should postpone granting licenses won in $17 billion Jan. PCS auction, with carrier laying out alternative payment proposal if agency decided to ignore its advice. Verizon has been asking Commission to consider deferring grant of C-block licenses until U.S. Court of Appeals, D.C., makes decision in NextWave case. Most licenses up for bid in auction had been reclaimed from NextWave after FCC cancelled its licenses for nonpayment. Verizon Wireless won largest single block of licenses in auction, purchasing nearly $8.8 billion (CD Jan 29 p1). Last month, NextWave also asked FCC to delay spectrum awards until D.C. Circuit issued opinion (CD March 13 p4). “Requiring payment now would be premature because the money would have to be held in reserve for possible return to the high bidders,” Verizon wrote in supplemental comments filed with Commission this week. “It would create significant problems without any countervailing benefits.” Verizon said that in past auctions, bidders were able to make final payments and immediately start building out spectrum. “Here, however, some bidders may determine that it is financially imprudent to invest still more funds until the cloud on the licenses they won are removed,” carrier said. “Lenders who are already committed to fund a bidder’s payment may balk at supplying still more funding without any certainty that they are secured by unconditioned licenses.” Verizon also argued that “litigation uncertainties” could increase borrowing costs. Without clear signal from FCC on repayment date, auction participants could have to secure financing arrangements that were more expensive or impose breakage costs for early repayment. If Commission decides to move ahead on granting licenses, Verizon proposed plan that would allow high bidders to either pay for NextWave spectrum immediately or defer payment but agree to pay interest on final payments. Under proposal, applicants would have to make final payments for all licenses that weren’t tied up in NextWave litigation within 10 days of public notice granting licenses. Applicants that won NextWave licenses could also make entire final payment within 10 business days or wait until 10 days after D.C. Circuit issued decision affirming cancellation of licenses. In latter case, applicants would be required to pay interest. NextWave spokesman said: “Verizon is absolutely right to say that requiring companies to pay billions of dollars for those contested licenses before the court rules is contrary to the public interest and violates basic, common sense.”

PanAmSat wants FCC to require early demonstration of compliance with operational and additional operational limits of companies before allowing spectrum sharing by NGSO FSS, GSO and terrestrial companies. Voicing strong opposition to portions of plan, PanAmSat filing argued against reconsideration petition from Skybridge as satellite companies weighed in with opinions on FCC decision on proposed spectrum sharing in 2 separate bands.

FCC unanimously approved Deutsche Telekom’s (DT) merger with VoiceStream and Powertel, imposing no special conditions on $34 billion deal and provoking renewed commitment from Sen. Hollings (D-S.C.) to seek restrictions on foreign govt. ownership in U.S. telecom companies. FCC adopted order 4-0, with Comr. Furchtgott- Roth dissenting in part on separate deal on national security issues between federal agencies and companies. Order, approved Tues., is expected to be released as early as today (Thurs.) Commission said in news release it found DT would “have neither the incentive nor the ability to engage in unfair competition, specifically predatory pricing, in the U.S. domestic mobile telephony market.”