The FCC wants to auction your privates
In a effort that does not appear to have support from any association, group or individual operator, the FCC has issued a Notice of Proposed Rulemaking (NPRM) in WT Docket No. 99-87, proposing the auction of private radio spectrum below 800MHz. The rules suggested in this auction could create upheaval in business plans, bring an abrupt end to the promise of UHF and VHF trunking and place operators in serious jeopardy.
Released on March 25, 1999, the NPRM seeks comments on issues ranging from the fundamental question of whether the spectrum can be auctioned to the specific procedure that the auction would use. In essence, the FCC is asking, can we do this, should we do this, to whom should we do this, and how should we do this? Press releases from the Utilities Telecommunications Council (UTC), past efforts by Industrial Telecommunications Association (ITA) and public pronouncements by Small Business in Telecommunications (SBT) provide a unified voice in response that answers the FCC in the negative.
Issues The first issue raised in the NPRM involves the use of private spectrum for public safety purposes and whether the auction is possible, given the statutory prohibition against using auctions for allocation of public safety spectrum. Indeed, this may inhibit the FCC.
Public safety entities have long obtained use of private radio spectrum via interservice sharing for safety of life functions. Local governments operate on industrial channels across the country, and the FCC recognizes that an auction may affect the continuing use of industrial channels by public safety agencies. Without substantial complaint from the public safety organizations, the FCC is likely to deem the auction possible because it will claim that the proposed auction would not (yet) propose relocating or reducing the operational limits of existing public safety systems.
The second issue raised involves whether changes to Section 309(j) of the Communications Act have created an opportunity for auction of private spectrum, which authority was previously limited to the FCC’s auctioning of commercial channels. The answer is likely to be that the FCC has the necessary authority now. However, the FCC is forgetting that the legislative history of those changes included a Congressional admonition to use other methods of licensing.
The third issue is whether the FCC should create separate frequency pools for utilities, railroads and power companies because their operations may be quasi-public safety in nature. This is a sticky wicket for the FCC. Some of the industrial giants are claiming that their use of the spectrum is too sensitive, too vital and too well-lobbied for allocation by auction.
The fourth issue is whether it is appropriate to remove all remaining distinctions between private radio employed for commercial purposes and commercial licenses operating either above 800MHz or pursuant to radio common carrier rules. The FCC is suggesting that applying auctions would be a way of removing those regulatory distinctions.
The final issue is how, if all of the other issues are determined to support auction of private radio spectrum, the spectrum would be auctioned and to whom.
The why of it To understand why the FCC would propose to auction this spectrum, the forces supporting this move should be examined within the petri dish of legislation. It is a murky environment that is filled with dogmatic viruses that swim against the tides of reason, so follow closely.
First, there is a contingency within Congress that believes that the FCC should be put out of business. It isnt sure how this ought to be accomplished, but it is sure that it ought to be done. The proponents of this position can come from either side of the aisle, and the idea usually is deemed meritorious by the far left and the far right.
The far left thinks that selling spectrum is nifty because the money can go for entitlement programs. It balances the supposed benefits of social security against the benefits of paying for a viable FCC and decide that the FCC can be scaled down. Besides, if the FCC didn’t have to do all of that pesky license work, it could accomplish more important things like encouraging minority ownership of broadcast stations and improving children’s television.
The far right believes that spectrum equals business, and business is best served when the federal government is not involved. It sees the FCC regulations as intrusive, burdensome and anticompetitive. These proponents want to take the referee out of the ring and let everyone fight it out, relying only on supply and demand to ensure that the best service wins.
Second, there is the egghead contingency, that visualizes a utopia of operation where the spectrum is used by a few large operators for the good of the American public. These corporate behemoths are supposedly motivated by supply and demand as well, but they are not believed to possess the ability to manipulate either. Rather, they will simply serve as administrators who will take on the duty of making sure that Chucky’s Tower Service and IBM each have enough spectrum to operate.
Third, there are the anti-antitrust, free-wheeling economist types who believe that all communications are the same and that any regulation that recognizes a difference between forms of communications for the purpose of delineating markets is simply wrong. Former Chairman Reed Hundt was one of these. His past efforts to deregulate by auction included an underlying assumption that there is no true difference between paging, cellular and microwave. It’s all just spectrum for communications.
Finally, there’s the deregulation crowd that is seeking to reduce the FCC’s administrative burdens above all else. This crowd believes that the FCC should be out of the licensing, enforcement and equipment authorization business. The public is to be served by others or via the Internet. It should not, however, be served by human beings issuing licenses and by decisions that simply clog up the works.
These groups all exist in government, and together they have found a common goal, to shut down the primary function of the FCC by whatever means are most expedient. And the one area they would dearly love to shut down is the licensing of private radio spectrum. It’s time-consuming and costly, and it doesn’t make the six o’clock news.
What now? Many readers depend on the availability of private radio spectrum for the operation oftheir business, either as a two-way dealer using private channels to fuel continued growth or as a private entity seeking spectrum to increase the operational efficiency of plants and operations. The NPRM’s proposals directly threaten the supply of those channels.
If your livelihood or business is threatened, you must become vocal, active and politically involved in changing the course of the FCC. I suggest the following:
1. Get involved via associations to create a comprehensive, unified voice in objecting to the proposals.
2. Let your objections be known via individual comments to the FCC’s proposals.
3. Write your elected officials and tell them why this proposal will adversely affect your business.
4. Get local businesses that rely on radio in your area to contact local, elected officials.
Tell elected officials that if they don’t go on record as being opposed to this action, no votes, no campaign money, and no future help for perpetuating their job status should be expected.
At this writing, most associations have not fully declared their intentions regarding this NPRM. However, Small Business in Telecommunications (SBT) will be opposing these proposals. I suspect that ITA and UTC will also be banging heads with the FCC over this one, and a number of other groups are likely to step up to let their voices be heard. Even APCO may not be pleased with the FCC’s attempt to create a bright line between public safety and private spectrum.
Also, if you have been dragging your feet in acquiring channels, apply for them now. Past experience shows that the FCC’s modus operandi is to declare a freeze while it is considering an auction. So, get those applications in today!
Invective Now that you know the whats and whys and hows, it is time for my humble opinion. I, therefore, respectfully and with all deference given to the wonderful people who occupy the honored position of FCC commissioner, ask the simple question, “ARE YOU NUTS?!!”
The labyrinth of licenses that include the private radio spectrum make a bowl of spaghetti look organized. The channels are shared, narrowed, overlapping, waived, adjacent, non-contiguous, paired and unpaired, historically divided into service areas, subject to a bushel of treaties, and serve areas as big as the continental United States and as small as single plant. But with one wave of a magic auction wand, it is expected that order will come from chaos and peace will reign in the land.
There are varying limitations on height, power, use, geographic location, number, availability, service areas and coordination responsibilities.
Litigation, complaints, interference, bogus equipment and pending business plans exist that depend on continued certainty in the allocation of private spectrum. Yet, all of this will go away because something proposed to be called a “band manager” will step forward, offer a few million dollars at auction, and do all of the work that the FCC used to do.
There are laws, protections, acts and precedent extending back to 1927 that protect the rights, duties and responsibilities of licensees to assure the provision of efficient services to the American public. But all of these will become historical footnotes because all future licensing (which used to be within the exclusive jurisdiction of the FCC for the purpose of serving the public interest) will be a function of arms-length negotiations between a band manager and someone begging for channels.
Underlying these sweeping and unrealistic assumptions are some flawed premises: 1. The public is best served by the biggest entities. 2. All telecommunications service should come from commercial operators. 3. There is a direct relationship between money offered to the federal government and service to be provided to the American public.
Under the FCC’s proposal, band managers will buy bands of channels at auction. Then they may do with the spectrum as they like, including leasing use of the channels to others to construct and operate facilities. Those leases would expire when the band manager’s license expires. This forced consolidation of market power is so anticompetitive that it flies in the face of every known antitrust case since Teddy Roosevelt.
The FCC proposals, if adopted, would require that local distribution companies must go begging to the band manager in direct competition for use of spectrum that might otherwise be targeted by larger concerns. Chucky’s Towing would then be in competition for use of channels with Yellow Freight. Let’s guess who’s going to win that one when the band manager has no obligation to even take Chucky’s call.
If the FCC hasn’t learned its lesson from the PCS Block C auctions about money and sincerity in serving the public, then I’m tempted to recite the story about the farmer, the mule and the two-by-four for the purpose of getting one’s attention. Let’s make this clear. He that puts up the dough doesn’t have any greater incentive to produce a viable service than the guy that gets it for free. The federal court in the recently decided Fresno Mobile Radio, et al. v. FCC didn’t buy that argument, and I don’t either.
Perhaps my biggest objection can be summed up succinctly by saying that these proposals are lousy for small business and lousy for industrial concerns. Small businesses would be deprived of spectrum unless they were willing to kowtow and pay an entity for the privilege of using radio. Industrial operators would be frozen in spectrum availability, unless they were willing to spend investment dollars for spectrum rather than production and distribution. Either way, the American public is shafted.
Either the public will lose the benefit of competitive services from small business, or it can pay higher prices for goods and services to offset higher costs of operation of plants. For this multibillion-dollar price, the public will receive some paltry sheckles in the proposed auction and an FCC that has just assigned its primary function to a private entity. Notice that I didn’t say anything about lower tax or spending burdens. There is nothing in the NPRM that suggests that if this proposed regimen becomes law, the FCC will refuse a higher operational budget in the future.
Will this happen? I don’t know. I was the idiot who said that the FCC would never even propose anything this stupid. If you want to make sure it happens, do nothing.
When the FCC wanted to auction the SMR channels, many operators did nothing. They assumed that the FCC would do whatever it wanted and that their opinion meant nothing. Wrong. If the industry had gotten off of its collective duff, banded together based on principal rather than old, time-worn allegiances, and had stated in a unified voice “No,” the FCC would have had great difficulty in moving toward auction.
Instead, many non-SMR operators acted as though that fight had nothing to do with them. Well, that rulemaking was the precursor to this one. So, sticking one’s head in the sand has been shown to be a faulty strategy because the FCC has shown its shovel.
There’s one more thing that will ensure that this NPRM becomes law: capitulation of principals to achieve political expediency. The issues raised by the FCC are an invitation to infighting among groups, as each tries to lessen the impact for its constituency. This only works if we let it happen. Each adversely affected group should fight against these proposals and not try to cut a separate deal for a unique segment. We should not divide so the agency can conquer.
I’m ready if you’re willing to see this fight through. This is bad politics, bad law, and bad economics that won’t benefit anyone. If you need help, call me. At least you know where I stand.