700 MHz players await FCC action

After a year of debate, multiple hearings before Congress and several FCC proceedings, rules governing the use of valuable 700 MHz spectrum are expected to be made public this month, according to numerous Beltway sources.

With the last reply comments in the FCC’s latest 700 MHz proceeding submitted early in June, there was some speculation that commissioners would decide on a band plan and auction rules for the spectrum by the end of the month. However, the agenda for the FCC’s regular June meeting — to be conducted in Portland, Maine — was dedicated to video competition.

Theoretically, the commission could approve a 700 MHz item on circulation — not associated with a pubic meeting — which is how many FCC orders are issued. But the high-profile nature of the 700 MHz proceeding makes it more likely that the item will not be addressed until the regular July meeting.

“With something this important, I think the commissioners want to be able to make their statements in a public setting, so they’ll probably wait until the regular July meeting [to issue a 700 MHz rulemaking],” said one Beltway source who spoke on the condition of anonymity.

Complicating the matter is the flood of input the FCC has received from interested parties on various issues — most notably, the band plan for the frequencies and rules for the auction that Congress has mandated must begin by late January 2008.

Most speculation continues to focus on a public/private partnership proposed by Frontline Wireless that would establish a 10 MHz E block license within the 60 MHz of spectrum scheduled to be auctioned. Under the Frontline proposal, the E block licensee would be obligated to negotiate an agreement with a national public-safety licensee to build a nationwide wireless broadband network for public safety using the E block spectrum and 12 MHz of the 24 MHz of spectrum dedicated to public safety in the band.

The key aspect of the proposal is that the E block licensee would pay for the network, something public safety likely would not be able to do on a nationwide basis.

“I submit to you that [a nationwide public-safety network] will never be built unless we do it this way,” said James Barksdale, Frontline Wireless partner, in testimony before the Senate Commerce Committee.

On a funding level, most national public-safety leaders agree that a public/private partnership is needed to make a nationwide broadband network for public safety a reality.

“If public safety has to pay the cost of that network by its user fees, I think [the cost] would be astronomical,” said Wanda McCarley, president of APCO. “We believe there is no other viable method to fund such a broadband network.”

While there is growing support for a public-private partnership to build such a network, there remains some dispute how such a partnership should be structured.

Frontline Wireless has proposed that the E block auction winner be obligated to negotiate a deal with a national public-safety licensee and be bound by the decision of an arbitrator — possibly the FCC — regarding any disputes. The arbitration decision would not be binding for the public-safety licensee, but public safety could only refuse to partner with the E block licensee if it found another partner to build out a nationwide network on its 12 MHz of spectrum.

In contrast, public-safety officials have advocated that the E block licensee reach an agreement with the public-safety licensee or the forfeit its rights to the spectrum. Opponents to this idea contend that such an arrangement effectively would give the public-safety licensee “veto” power over the auction.

Another point of contention concerns which companies should be eligible to bid in an E block auction. Frontline Wireless has proposed that the E block winner be obligated to pursue a wholesale business model — with public safety being the sole retail customer — and to follow controversial open-access principles that would guarantee other carriers roaming privileges on the network, theoretically, for less cost. Such an arrangement would make it more likely that another nationwide operator would enter a wireless market that has consolidated quickly during the past few years.

If E block bidding was unencumbered, large, deep-pocketed incumbent wireless carriers like Verizon Wireless and AT&T Mobility likely would win the bid simply to prevent a new competitor from entering the market, even if they just planned to “warehouse” the spectrum.

For this reason, many public-safety proponents believe buildout requirements are essential for an E block licensee. Meanwhile, given that the wireless wholesale-only business model is unproven and would likely prevent most established operators from bidding, public-safety representatives prefer that no such stipulations be included in any E block rules.

“Everybody thinks that public safety is proposing that we do the Frontline proposal, and that’s not it. All we’re doing is saying is, ‘Let’s have an auction, let’s have a public/private partnership and let public safety set the terms.’” McCarley said.

Indeed, the potential impact any encumbrance — be it public-safety obligations or open-access requirements — might have on auction revenues is an issue that has captured the attention of Congress. The 700 MHz auction is budgeted to generate an additional $10 billion in revenue for the U.S. Treasury, with $1 billion being earmarked for public-safety communications interoperability (see news story on page 20).

Many in Congress fear that encumbrances on the E block could have a detrimental effect on the auction revenues. During the Senate Commerce Committee hearing, Sen. Ted Stevens (R-Alaska) suggested that it would be better to let the spectrum be auctioned to the highest bidder and dedicated as much as $5 billion from the proceeds to public safety, which could use the funds to build the nationwide network.

But Barksdale said $5 billion would not be nearly enough money, because the network is expected to cost at least $12 billion and even more money would be needed to operate and maintain it.

“What [advocates of a government-funded model] forget is the $12 billion to build the network that we all dream of is going to be paid for by the … taxpayers, whether it’s state, local or federal,” Barksdale said. “Add that to the auction price, and [our proposal is] a terrific deal for the government and taxpayers.”

Although Republicans have expressed concern with the notion of a public/private partnership using any of the 700 MHz commercial spectrum slated to be auctioned, Democrats on the Senate Commerce Committee seemed open to the proposal. While Congress would like to maximize auction revenues, “we should not let that fact seduce us into forgetting the importance of designing service rules that also meet other critical policy goals, committee Chairman Daniel Inouye (D-Hawaii) said during the hearing.

“We are well past the question of whether we should help first responders build and operate a nationwide, interoperable broadband network,” Inouye said. “Instead, it is time that we focus on what we must do to accomplish this goal as quickly as possible.”

PATH TO AN AUCTION

Key dates in the 700 MHz transition