FCC Must Choose Between Many or Few with Spectrum Rule Change

May 15, 2018 Cheryl Bolen

A proposed rule change before the Federal Communications Commission for spectrum licenses in the 3.5 GHz band presents a clear choice between the needs of the few and the needs of the many—though with some complications.

The FCC is on the cusp of making a decision about a spectrum auction that has pitted the nation’s largest wireless carriers against a broad and eclectic coalition of shippers, railroads, ports, electric companies, manufacturers, and rural internet service providers.

Stakeholders in the long-running debate over this rule change have now presented the commission with their compromise proposals and several interested parties say they expect a decision soon.

Indeed, a late-afternoon meeting among key stakeholders was held at the commission May 11, where there was constructive discussion of a possible middle ground, a source familiar with the discussions told Bloomberg Government.

Battle Over Size

The FCC is currently reconsidering a rule adopted unanimously in 2015 that would govern the use of spectrum in the 3.5 GHz band, known as Citizens Broadband Radio Service (CBRS) spectrum.

Although the rule was reopened last year with several areas of concern, it is the geographic size of the license areas that has most divided the stakeholders. Small carriers and industrial entrepreneurs say they will be shut out of the market if the areas are too big, while the national wireless carriers say hundreds of thousands of spectrum licenses are effectively unmanageable.

The rule as adopted would allow seven licenses in every census-tract area within the U.S. There are currently more than 74,000 census tracts in the U.S., and the large national carriers, represented by their trade association CTIA, petitioned the FCC last year to increase the size of the license areas.

CTIA is now proposing a hybrid approach that would include large-area licenses over cities and smaller, county-size licenses in rural areas. The U.S. has about 3,200 counties. There are just 306 Metropolitan Statistical Areas (MSAs) over urban areas.

Too Complex

CTIA’s approach would reduce the more than 74,000 license areas and resulting 500,000 licenses to roughly 2,700 license areas and 19,000 total licenses, which would dramatically reduce auction complexity for the commission and bidders alike, according to an April 20 letter by the association.

“Getting new rules for the 3.5 GHz mid-band spectrum right will be crucial to helping the U.S. reclaim 5G global leadership from China and South Korea and the FCC should act to make investment-friendly changes to the rules,” Kara Graves, director for regulatory affairs at CTIA, told Bloomberg Government.

“Basing the new rules on Metropolitan Statistical Areas and county-based geographic area licenses would clearly benefit both urban and rural providers and such a compromise is supported by rural and smaller carriers,” Graves said.

Even Smaller

CTIA has won the support of the Competitive Carriers Association, but the vast majority of small and rural wireless carriers want even smaller license-size areas and are part of the loosely-affiliated CBRS Coalition.

That group includes Cox Communications, Edison Electric Institute, Exelon Corp., FedEx Corp.‘s Corporate Services, General Electric Co., Motorola Inc., the Port of Los Angeles, Southern Linc, and Union Pacific Corp., among many rural wireless carriers and others.

Their compromise, contained in a letter filed May 9 at the commission, would allow five licenses in each county and two licenses in each census tract.

The 2015 rule with all census-tract area licenses made the most sense for its members, who are predominately small, rural broadband providers, said Claude Aiken, president and CEO of the Wireless Internet Service Providers Association.

“We understand with the new rulemaking that that’s not something that we’re going to be able to keep,” Aiken told Bloomberg Government, adding that the FCC told stakeholders to find a compromise, particularly on the geographic area of the licenses.

Their compromise has support from the widest range of stakeholders, including rural mobile providers, telephone companies, rural electric cooperatives, cable companies, and industrial Internet of Things providers, Aiken said.

Complexity Addressed

Rebutting the idea that thousands of small licenses would be too complex and hard to manage, Aiken said the economists who designed the FCC’s spectrum auction process have said it certainly can be done.

In addition, those tasked with managing the interplay among licensees in this band say this is technically feasible, Aiken said.

“We need to get the policy right so that any auction is broadly competitive and serves the needs of rural America as well as urban America, as well as the needs of a range of stakeholders,” Aiken said.

The CBRS Coalition proposal would result in far fewer than 500,000 licenses, and is a significant reduction from the original 2015 rule, Aiken said. The proposal also would permit the large carriers to aggregate and buy up as many small contiguous licenses as they’d like, he said.

However, for a majority of the businesses who want to participate in this auction, buying a license for a large area simply does not make sense for them, Aiken said.