Tech Law Journal logo

FCC Adopts Spectrum Aggregation NPRM

September 28, 2012. The Federal Communications Commission (FCC) adopted and released a Notice of Proposed Rulemaking (NPRM) [50 pages in PDF] regarding spectrum aggregation limits and analyzing spectrum holdings.

In 2001 the FCC ended its spectrum aggregation limits, or spectrum caps. Since then, the FCC has engaged in case by case analysis of transactions that involve spectrum licenses. This NPRM asks whether the FCC should exhume its spectrum cap regulation. It also proposes new attribution rules, and asks questions about the spectrum screen, and other issues.

This NPRM contains the text of proposed rules, but only on the one issue of attribution of spectrum holdings. This NPRM contains no proposed rules regarding spectrum aggregation limits, or regarding what spectrum is to be included in the analysis.

That is, except for the attribution issue, this notice bears the attributes of a notice of inquiry (NOI). A NOI would be followed later by a NPRM. This mischaracterization has procedural consequences. By not issuing a NOI, the FCC could adopt rules without adopting and seeking comment on a second notice -- a NPRM. The FCC could, for example, adopt rules in this proceeding at the same time that it adopts rules governing incentive auctions.

Moreover, this proceeding and the incentive auctions proceeding are related. If the FCC were to adopt new spectrum caps, or tighten the spectrum screen, this would not only affect wireless companies that might bid on and acquire spectrum in the incentive auctions -- it could also decrease spectrum revenues, and hence, disbursements to broadcasters, and to build the public safety broadband network.

This NPRM states that "we seek comment on retaining or modifying the current case-by-case analysis used to evaluate mobile spectrum holdings in the context of transactions and auctions, as well as on bright-line limits advocated by some providers and public interest groups. In addition, we seek comment on updating the spectrum bands that should be included in any evaluation of mobile spectrum holdings and whether to make distinctions between different bands. We also take a fresh look at geographic market analysis and other implementation issues such as attribution rules, remedies, and possible transition issues."

FCC Chairman Julius Genachowski wrote in his statement that "we're open to all ideas and are not prejudging the outcome".

FCC Commissioner Mignon Clyburn wrote in her statement that "we must also review our spectrum aggregation policies to facilitate access, by all providers, to valuable spectrum resources".

FCC Commissioner Robert McDowell wrote in his statement that the wireless industry has thrived since 2001 termination of spectrum caps, and consumers and the economy have benefited. He added that "I am further concerned that significant language in the Commission’s most recent Wireless Competition and Section 706 reports, coupled with recent important comments doubting the benefits of usage-based pricing, or what I call “pricing freedom,” are creating a mosaic of evidence that increasingly points to greater regulation of the wireless industry."

He wrote that "Our light touch regulatory policy for mobile technologies, which includes the case-by-case analytical structure for spectrum, has enabled our wireless sector to flourish and continue to lead the world. I am hopeful that the Commission will not put all of this positive and constructive progress at risk as we explore the myriad options outlined in this notice."

FCC Commissioner Ajit Pai wrote in his statement that "Our spectrum screen currently fails to account for all spectrum suitable for mobile broadband. This includes spectrum in the Broadband Radio Service (BRS) and Educational Broadband Service (EBS) that companies like Clearwire are using today to provide 4G service across America. And our approach to spectrum attribution assumes that one company gains de facto control of another even if it holds no more than 10% equity. Together, these factors ensure that our current process for evaluating spectrum holdings consistently understates competition in the marketplace."

He also argued that "Our approach to evaluating carriers’ spectrum holdings creates needless regulatory uncertainty. As carriers plan their investments to meet consumer demand, they need to know the rules of the road, namely, which purchases will trigger the spectrum screen and which won’t.

He also wrote that "It is critical that the incentive auction be a success, and that, in turn, requires vigorous participation and competition for spectrum in the forward auction. I am thus skeptical of any steps that would depress participation in the auction, such as tightening the spectrum screen, adopting a hard cap on spectrum holdings, or imposing requirements that would enable the Commission to second-guess how wireless operators run their networks and thus reduce the value of spectrum. I am particularly concerned about two consequences that would likely result. First, constricting the spectrum screen will be bad for public safety. ... the more money we raise through that auction, the more money that will become available for the First Responder Network Authority".

AT&T's Joan Marsh stated in a release that "Wireless carriers need a clear and reliable understanding of when and under what circumstances spectrum acquisitions will be permitted, something we do not have today. With today's FCC action, spectrum policy can now be taken out of merger-specific proceedings, placed in an industry-wide, open and transparent proceeding, and ultimately subjected to judicial review."

(The FCC structures its reviews of major transactions that include license transfers in a manner that evades judicial review. The FCC withholds its approval, often for over a year, until the transacting parties agree to the FCC's conditions. By agreeing, they loose standing to seek judicial review.)

Marsh also urged the importance of "maximizing carrier participation in auctions to ensure that they are successful."

The Public Knowledge's (PK) John Bergmayer stated in a release that the spectrum screen is "a tool that is supposed to prevent just one or two licensees from acquiring too much spectrum in a given market. The current screen is outdated -- its biggest flaw being that it treats all spectrum alike, even though some spectrum bands are better-suited to mobile broadband than others. And the current screen has been ineffective as a tool to prevent concentration, as the last few years have seen Verizon and AT&T build up an ever-growing ``spectrum gap´´ between them and their nearest competitors. It would do little to promote wireless competition if AT&T or Verizon simply acquired the new spectrum that becomes available under the incentive auction process, so it makes sense for the Commission to revisit its screen now."

Free Press's (FP) Matt Wood stated in a release that "As competition dwindles and prices for wireless service increase, the Commission has an opportunity to propel competition and innovation forward. Failing to seize these opportunities would further cement Verizon and AT&T as entrenched duopoly providers."

Wood added the "Despite alarmist predictions, the U.S. is not facing a spectrum crisis; it's facing a spectrum allocation and competition crisis. The FCC must acknowledge that for too long the biggest companies have stifled competition by buying up large swaths of the nation’s most valuable spectrum. A more rational screen can ensure the nation’s airwaves are distributed equitably, helping to drive down prices and increase quality of service."

Initial comments will be due 45 days after publication of a notice in the Federal Register (FR). Reply comments will be due within 75 days. As of the October 1, 2012 issue of the FR, this notice had not yet been published. This NPRM is FCC 12-119 in WT Docket No. 12-269.

See also, the 2001 NPRM (FCC 01-28) and Report and Order (FCC 01-328), in WT Docket No. 01-14. For TLJ coverage of that proceeding, see stories titled: