03.21.12

Is the FCC’s NPRM designed to fail?

Posted in ICO/DBSD, Operators, Regulatory, Spectrum, TerreStar at 11:48 am by timfarrar

After today’s FCC Open Meeting there is a lot of speculation about the content of the 2GHz NPRM and NOI which is expected to emerge very shortly. The FCC indicated that it would reallocate the entire 40MHz of spectrum (2000-2020MHz uplink/2180-2200MHz downlink) to terrestrial services, redesignating it as the AWS-4 band. Many have assumed that this means that DISH would secure unlimited terrestrial rights across the whole band, with no givebacks, but the FCC was careful to indicate in the press conference afterwards that “flexibility applies across the whole band” but not that DISH will get flexibility across the entire 40MHz.

UPDATE: The NPRM has now been released and it appears that there is no definitive requirement for DISH to give back any spectrum, and it would simply be allocated terrestrial licenses nationally in exchange for a buildout criteria of 30% of the population within 3 years (not dissimilar to the 100M POPs agreed to by LightSquared) and 70% of the population in each economic area within 7 years (a somewhat less onerous requirement than LightSquared). Though the possibility is raised that DISH will move up by 5MHz and possibly even give up another 5MHz of uplink spectrum, there is no mention of a larger amount of spectrum being returned to the FCC in exchange for these terrestrial rights, suggesting that Charlie Ergen has played a stunningly good hand of poker to achieve such a result. Of course, it would not be in the least bit surprising to see accusations of a windfall emerge, just as they did with LightSquared.

The FCC has also accompanied the NPRM with an NOI, which proposes a “variation of the AWS-4 band plan” intended to “extend the AWS-1 and PCS spectrum with 65MHz of usable bandwidth”. This alternate plan involves converting the MSS uplinks to downlink spectrum, so that the entire 1995-2025MHz band would be additional PCS downlink spectrum. In exchange the MSS licensee could be granted access to the 1695-1710MHz band which would be paired with 2180-2200MHz as an AWS extension band. This hardly seems to be something that DISH would be keen on, given that it would involve defining another non-standard band class, and would not be compatible with the existing 2GHz satellite services, which DISH might at some point want to explore in Europe.

What is striking is that the FCC’s proposals are hard to reconcile with the requirement in the payroll tax bill back in February that the FCC should identify a “additional 15MHz of contiguous spectrum” to be auctioned, which is why I had assumed the NOI would propose that DISH gave up 10MHz of spectrum and moved its uplinks up by 5MHz into the 2020-25MHz J-block spectrum, as I indicated back in February.

In this context it is hard to see why the FCC bothered with the NOI, unless it is to use this to put more pressure on DISH to give up part of its uplink spectrum. I had guessed that the NOI would be the FCC’s preferred outcome and so NPRM would propose far more unfavorable terms for DISH. In other words, the NPRM would be “designed to fail” in order to drive all parties to a solution which would free up a greater amount of spectrum for auction.

Now we will have to see how commentators react to the NPRM. Could further pressure be brought to bear over the potential windfall, leading to a proposal that DISH gives up an extra 5MHz of uplink spectrum and create the 15MHz block of spectrum for the FCC? If not then the FCC will presumably have to look elsewhere for spectrum to meet the Congressional mandate, unless it perhaps claimed that it is not possible to auction the H-block due to interference concerns in the 1915-1920MHz band, and so the 1995-2010MHz block would meet this mandate. More importantly, the FCC appears to be betting that DISH will actually build out a network to introduce competition to the US wireless market, and so if the end result (after the November election) is a takeover bid from AT&T, it will be interesting to see what attitude the FCC takes to such a bid. If that occurs, and goes through without any further givebacks, then the FCC might very well be seen to have failed in its attempts to maximize the value of spectrum for the public interest. On the other hand, perhaps that could be the point at which an additional 5MHz of spectrum might be given up.

FURTHER UPDATE: As an aside, the NOI doesn’t appear to do much for LightSquared’s hopes of creating substantial incremental value for its Crown Castle lease in the 1670-75MHz block. LightSquared is apparently busy trying to extend its financial runway, but it may now be more difficult to avoid the looming financial crunch at the end of the second quarter of 2012, when LightSquared must repay a roughly $300M loan to its creditors.

2 Comments »

  1. Serena said,

    April 1, 2012 at 1:25 am

    The FCC license of the 1670-1675 MHz band was granted to CCI in April 2003, for 10 years. It’s subject to the usual requirement to deploy a substantial network, or would lapse at the period end, which will be soon. Since LS is unlikely to do anything in this regard, would the FCC grant an extension, or just get back the spectrum to proceed with a refarming plan?

  2. timfarrar said,

    April 5, 2012 at 4:21 pm

    I would assume that some minimalist network would be deployed to meet the substantial service requirements (as Clearwire has done to preserve many of its licenses). This does however create some more urgency for LightSquared to make a decision on how to proceed (presumably by disposing of the spectrum) because otherwise additional costs will have to be incurred pretty soon.

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