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Pai's C-Band Proposal: A Public Auction, and Soon!

Submitted on February 7, 2020
Benton Institute for Broadband & Society

Friday, February 7, 2020

Weekly Digest

Pai's C-Band Proposal: A Public Auction, and Soon!

 You’re reading the Benton Institute for Broadband & Society’s Weekly Digest, a recap of the biggest (or most overlooked) broadband stories of the week. The digest is delivered via e-mail each Friday.

Round-Up for the Week of February 3-7, 2020

Robbie McBeath
McBeath

On Thursday, Federal Communications Commission Chairman Ajit Pai announced that he has circulated draft rules that would reform the use of the C-band, make a large amount of spectrum available for 5G, and generate significant revenue for the U.S. Treasury through a public auction. It seeks to strike a compromise with the many stakeholders at the table — with billions of dollars at stake. And it gets it all done quickly, to help the U.S. "win the race to 5G." 

The Plan

The C-band is a 500 MHz segment of spectrum from 3.7 to 4.2 GHz, which is now mostly used by fixed satellite companies to beam content to video and audio broadcasters, cable systems, and other content distributors. However, satellite companies don’t need the entire C-band to provide the services they are providing today. They can provide the same services with less bandwidth, which would free up a significant amount of spectrum for 5G. The C-Band Alliance (CBA), composed of several of the foreign satellite providers currently operating in the spectrum, had launched an initiative to sell the spectrum themselves and share the proceeds with the government. But Chairman Pai's plan made the significant decision to have the FCC handle the auction. According to Chairman Pai, “A public auction is the best bet to ensure fairness.” His plan entails:

Repacking the Spectrum

Chairman Pai’s plan would repurpose most of the C-band for 5G deployment while ensuring current users of the spectrum could continue to provide their services. The proposed rules would clear the lower 280 megahertz of the C-band (3.7-3.98 GHz) and make it available for flexible use, including 5G. The 20 megahertz above that (3.98-4 GHz) would serve as a guard band. And existing satellite operations would be repacked into the upper 200 megahertz of the band (4.0-4.2 GHz), which they have said would be sufficient for them to continue providing their current services to customers.

Public Auction

The FCC would hold a public auction of the lower 280 MHz of the C-band. As the fact sheet noted, the FCC has a 25-year track record of transparent and successful auctions, conducting 93 spectrum auctions and generating $116 billion in revenue for the U.S. Treasury. Chairman Pai notes that public auctions have not only proven to be an effective tool for repurposing spectrum fairly, they also can do so quickly. The FCC has the infrastructure in place for an auction to start later in 2020, and Chairman Pai is proposing that the FCC begin the C-band auction on December 8.

Costs

Relocation costs of the C-band’s current users would be covered. It will cost money -- estimated at between $3 billion and $5 billion for all their operations to be moved to the upper 200 MHz of the C-band. Among other things, new satellites will need to be launched and filters will need to be placed on earth stations. Winning bidders in the C-band auction will reimburse satellite operators and other incumbents for reasonable relocation costs.

Additionally, satellite operators would have the opportunity to receive accelerated relocation payments if they are able to clear the lower portion of the C-band on an accelerated timeline, thus advancing the national priority of making spectrum available for 5G deployment more quickly. These payments would create powerful incentives for incumbent operators to expedite the transition, and operators would only be paid if in fact they do so. The accelerated payments could total up to $9.7 billion. Chairman Pai reiterated the public interest benefits of accelerated relocation payments:

I don’t favor accelerated relocation payments because they are in the private interest of satellite companies. The balance sheets of private companies are not my concern. I favor accelerated relocation payments because they are in the public interest. It is in the public interest to make available the C-band for 5G deployment as quickly as possible, as part of the national priority to promote American leadership in 5G. And to get the job done quickly, we need to align the satellite companies’ private interests with the public interest. That’s precisely what accelerated relocation payments will do.

Timing/Transition Schedule

Eligible satellite operators would have the option to clear according to the following accelerated timeline: (1) clearing 120 megahertz (3.7-3.82  GHz) by September 2021 in 46 of the nation’s top 50 Partial Economic Areas; and (2) clearing the remaining 180 megahertz (3.82-4.0 GHz) in those areas as well as all 300 megahertz (3.7-4.0 GHz) in the rest of the contiguous U.S. by September 2023. Under the accelerated timeframe, 5G deployments could happen in the lower 100 megahertz of the C-band in 46 of the nation’s top 50 Partial Economic Areas by September 2021 and in the remaining spectrum by September 2023. This is much sooner than September 2025, which would be the timeframe without accelerated relocation payments.

Reactions

FCC Commissioner Michael O'Rielly said, “After years of leading the charge to open up the C-band, I am incredibly excited an order has been circulated, thanks to the leadership of Chairman Pai, that will make a portion of this valuable spectrum available for next-generation wireless networks....Freeing the 280 MHz of spectrum, while protecting existing systems and remaining users, was my highest priority and where I successfully focused most of my effort. Much time and attention has been spent on the appropriate incentive payment for the satellite providers, and I am pleased that an agreement was reached that should allow them to fully and voluntarily participate in this transition. As I have always said, the satellite providers’ cooperation will be absolutely necessary for a speedy and successful reallocation, and I thank the Chairman for making this possible and for considering this item at the February meeting. Sticking to the announced auction date this December and conducting it on time will be paramount.”

FCC Commissioner Brendan Carr said the proposal is "a rare win-win-win in Washington, and I am proud to strongly support it. Unlocking the C-Band’s potential has been one of the most challenging public policy puzzles to solve that I’ve seen in my time on the FCC. Chairman Pai and his team deserve tremendous credit for where we are today. It’s the right decision, and he should be praised for our action."

Verizon Chairman and CEO Hans Vestberg said, "Today is a monumental day in our nation’s efforts to maintain wireless leadership in 5G. Chairman Pai’s historic announcement sets forth a bold vision for bringing much needed mid-band spectrum to auction this year. Most importantly, his plan ensures that this critical spectrum is not only auctioned quickly, but cleared on an accelerated basis. This speedy transition will undoubtedly ensure that the US will preserve its global leadership in 5G and will produce hundreds of billions of dollars in economic benefits for the country."

The C-Band Alliance (CBA) said, “The imminent issuance of the draft order reflects the tireless efforts of many over the past several years to ensure that this critical spectrum comes to market safely, quickly, and efficiently. Today’s comments by Chairman Pai are a significant development in this important proceeding. We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context.”

Points of Contention

The policy debate over how to handle the C-Band has been years in the making and continued immediately after Chairman Pai's speech. Complaints generally circled around the amount of money to be given to the satellite operators, how proceeds from the auction will be distributed, and questions as to whether the FCC actually has the necessary authority over the auction and its payments. 

Senator John Kennedy (R-LA) introduced the SMART Act on Jan 28, legislation that would "give the FCC authority to conduct a public auction of C-Band spectrum" and would use nearly all of the proceeds from the auction to bridge the digital divide, enable next generation public safety services, and cut the national deficit. So it was not surprising to see Sen. Kennedy on Thursday complaining about Chairman Pai's proposal:

My duty, and the FCC’s duty, is to the American taxpayers. The C-Band spectrum belongs to them, and the 5G opportunities it represents are also theirs. Unfortunately, the sum Chairman Pai suggested giving to foreign satellite companies is much too high, and it’s highly unfair to those taxpayers. We shouldn’t be in the business of spearheading Luxembourg bailouts when there are towns in Louisiana and across the country without access to broadband service.  

My colleagues and I have put a bipartisan bill on the table that would pay down our national debt, modernize public safety and finally free rural communities from dial-up prison. Our priorities are in the right place, and I encourage the FCC to consider its proposal in light of those American priorities.

Michael Calabrese, director of the Wireless Future Project at New America's Open Technology Insitute, shared some of Sen. Kennedy's concerns:

It is disappointing that Chairman Pai would propose to stretch the FCC’s authority to require auction winners to make excessive windfall payments to foreign satellite companies that are not fully using C-band spectrum. That $9.7 billion will come straight out of taxpayers’ pockets.

The FCC should give Congress a chance to pass legislation that clarifies its authority, sets reasonable incentive payments, and earmarks the revenue for rural broadband and public safety, as a bipartisan group of lawmakers in Congress have proposed.

But Chairman Pai anticipated criticisms over how satellite companies would be paid. From his remarks:

[A]s I see it, the Goldilocks principle applies here. Some may say $9.7 billion is too high. Some may say it’s too low. I say it’s just right—if you are genuinely focused on ensuring that the prompt development of the C-band is needed for American leadership in 5G. ...

Now, others might ask: Why not give satellite companies a certain percentage of auction revenues? To begin with, Congress could certainly do so. But the FCC’s ability to do so under current law—in particular, the Miscellaneous Receipts Act—is in serious doubt. Moreover, I think that it is important for any payments to be tied to the speedy clearing of the band. Again, we need to make sure that incumbent satellite operators have the right incentives to get the job done and get it done quickly.

House Commerce Committee Chairman Frank Pallone, Jr. (D-NJ) and Communications Subcommittee Chairman Mike Doyle (D-PA) focused on the question of the FCC's authority and how auction proceeds would be distributed. From their joint statement:

We believe that this proposal only reiterates the need for legislation. The questionable legal basis for the satellite incentives will likely result in litigation, which will delay the deployment of 5G.  Moreover, without Congressional action, this auction will not fund critical public safety infrastructure or bridge the digital divide.  That is why we need legislation to provide the certainty needed for a rapid rollout of 5G and ensure all Americans benefit from the auction of the public’s airwaves.  We continue to work with our Republican colleagues to achieve that end.

Chairman Pai anticipated these criticisms, too:

Some argue that the FCC should wait for Congress to legislate on the C-band. But if you believe that advancing American leadership in 5G is important, if you believe it is a priority to make 5G spectrum available quickly, and if you believe that mid-band spectrum is especially critical, waiting for Congress to act first isn’t the best strategy. In fact, some might call it the absence of a strategy. Waiting to begin the C-band auction and transition isn’t in the national interest. Now, it would be a boon for China and other countries eager to seize a leadership role in 5G. ....And critically, there’s no need to delay. The FCC already has a strong legal foundation to take all the steps I am proposing today. ...

Now, don’t get me wrong. If Congress wants to direct that auction proceeds be used to address national priorities like rural broadband, it will find no bigger supporter than me. As a Commissioner back in 2016, I first proposed that Congress adopt a “rural dividend” so that 10% of auction proceeds would go toward rural broadband deployment. I am delighted so many have jumped on the bandwagon. And in this case, if the FCC approves an order on February 28, Congress could still require this year that auction proceeds be used to close the digital divide, implement Next-Generation 911, or any other similar priority.

Chairman Pai believes his C-band proposal strikes the right balance with all stakeholders, that it is lawful, and — as he says most emphatically — that it should all get done quickly.  

The FCC is scheduled to vote on the proposal at its open meeting on February 28. 

Quick Bits

Weekend Reads (resist tl;dr)

ICYMI from Benton

Upcoming Events

Feb 11 -- How to Bridge the Broadband Gap: A Conversation with State Leaders (Pew Charitable Trusts)

Feb 13 -- Consumer Advisory Committee Meeting (FCC)

Feb 18 -- Everything is better with better broadband (Berkman Klein Center)

Feb 19 -- Section 230 – Nurturing Innovation or Fostering Unaccountability? (DOJ)

Feb 26 -- Public Reply Comments Due on Proposed Rule concerning Lifeline Program (FCC)

Feb 26 -- Disability Advisory Committee Meeting (FCC)

Feb 28 -- Open Federal Communications Commission Meeting (FCC)

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Kevin Taglang
Executive Editor, Communications-related Headlines
Benton Institute
for Broadband & Society
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