One might conclude from remarks by Michael O’Rielly, Federal Communications Commission commissioner, that some form of the C-Band Alliance proposal for auctioning as much as 300 MHz of mid-band spectrum will be allowed to proceed.
“I am so pleased to report that the FCC is near completion of its review process and is finalizing details for its reallocation, which should come later this fall,” he said. Reading between the lines, O’Rielly seems to suggest that a private auction will proceed.
“Given what is already in the pipeline and how long it takes for the Commission to set up and operate an auction, we are talking years, and I mean years, before completion,” he said.
Significantly, O’Reilly said “we can certainly ensure transparency, accountability, fairness, and openness without having to run the auction ourselves.”
The argument has been made that the FCC should conduct a public auction for these frequencies rather than allowing the private sector to do it. Moreover, the argument has been made that it is unfair for these private, foreign satellite companies to receive all of the proceeds from any spectrum auction, private or public.
“In the grand scheme of things, if it is a contest between speed and the government trying to extract a significant piece of the transaction through a lengthy process, I’ll take the speedy resolution,” he said.
As George Ford, Phoenix Center chief economist has argued, a private transaction such as this is in the public interest.
The largest, most promising source of U.S. mid-band spectrum suitable for repurposing to mobile wireless use is the C-Band, a 500 MHz swath of mid-band spectrum (3.7-4.2 GHz band) presently allocated for the provision of satellite communications, say T. Randolph Beard, George S. Ford and Michael Stern of the Phoenix Center for Advanced Legal and Economic Public Policy Studies.
Satellite service providers, operating through the C-Band Alliance (“CBA”) consortium, have indicated that a large portion of this band could be quickly repurposed through a private sale, a proposal now being evaluated by the Federal Communications Commission.
Perhaps the most compelling argument for a private transaction is the CBA’s proposed timeline, the researchers argue. Assuming the FCC adopts, largely, the CBA proposal by year-end 2019, the Alliance claims it can conduct a private sale in the first-half of 2020 and clear at least 60 MHz for terrestrial operations in as little as eighteen months.
Is such a private sale in the public interest? The researchers say it is. “It makes sense for the government to allow the consortium to serve as an agent in conducting the sale, thereby ensuring the rapid and efficacious repurposing of the band,” they argue. “For many reasons, a public auction is a less desirable approach” than a public auction.
“While the government may increase its revenue through a public auction, it does so only at the cost of an outsized reduction in total economic welfare,” they say.
The satellite operators possess a significant information advantage over federal regulators with respect to how much spectrum can be repurposed, how much investment is required to accommodate the change, how to avoid interference problems, among other important considerations.
This private information and the rapid pace of redeployment are both valuable and warrant compensation. Payment for information and efficiency is not “unjust.”
Compensation to the agent (owners of the spectrum licenses) for its private information is efficient and not “unjust enrichment,” they argue.
Third, considering the possibility that the principal may demand compensation from the agent, any such compensation (i.e., a regulatory payment) should take the form of a fixed payment rather than a share of auction proceeds.
Fourth, while a public auction may be used to increase the government’s proceeds from repurposing the band, such enrichment is more than matched by a reduction in total economic welfare, they argue.
The Commission is also actively pursuing allowing unlicensed wireless services in the 6 GHz band, which presenting provides C-Band uplinks.
“This is a prime location for unlicensed spectrum because it can be combined with the 5 GHz and 5.9 GHz bands to provide the large spectrum channels needed to achieve 5G-like results,” said O’Reilly. “Opening this band to additional uses is doable as long as the incumbent protections are reasonable, but this is an example where clearing may not be feasible.”
But O’Reilly also suggests the FCC is looking at other bands, such as the 3.7 GHz to 4.2 GHz band, and perhaps 7.125 to 8.5 GHz, for mobile, indoor wireless or other use cases.
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