National, Rural Carriers Offer Dueling Perspectives on Best Path for Incentive Auction Licensing Areas

Top U.S. wireless carriers Verizon Wireless and AT&T told the FCC it should move forward with its original proposal to license the 600 MHz band and AWS-3 spectrum based on Economic Areas, rather than adopt the Competitive Carriers Association’s alternate proposal to license the spectrum based on Partial Economic Areas (PEAs). The PEAs, as proposed by CCA, would essentially be a subdivision of EAs and would be based on EA and Cellular Market Areas (CMA). The FCC had sought public input on the CCA proposal, which also has support from other rural carriers, and comments were posted online Thursday and Friday.

CCA said it continues to urge the FCC to use the CMA licensing area for the upcoming incentive auction, but believes the compromise PEAs “would promote many of the benefits of smaller licenses and are strongly preferable to [EAs], given the foreclosure risks associated with such larger geographic units.” CMAs have been the traditional choice for past spectrum auctions, but PEAs “would reasonably balance the competing interests at stake based on the unique nature of the incentive auction,” CCA said (http://bit.ly/KJuRgy). CCA rejected another proposal, which NTCA and the Rural Wireless Association released Wednesday, that would split the forward incentive auction into separate auctions for urban and rural markets. The urban auction would license the 600 MHz spectrum using EAs, while the rural auction would use CMAs (CD Jan 9 p2). The NTCA/RWA proposal would make an already complicated auction “significantly” more complex, and demote rural carriers “to a secondary and uncertain bidding process,” CCA said. The Wireless Internet Service Providers Association endorsed the CCA proposal (http://bit.ly/1d8DhsL).

Larger licensing areas like EAs “offer mobile providers flexibility in deployment and the ability to take advantage of economies of deploying across larger contiguous areas,” Verizon Wireless said. If the FCC chooses to adopt a geographic unit smaller than EAs for the incentive auction, it should allow licenses to “nest” into existing licenses and should allow package bidding, the carrier said. Package bidding would increase auction participation by ameliorating bidder concerns about not acquiring a full package of licenses sufficient to allow for regional or nationwide coverage at a particular frequency, particularly when the licenses cover an area smaller than an EA, Verizon Wireless said. To make a package bid attractive in an auction based on PEAs, the FCC should take AT&T’s advice and establish a package bid based on the top 100 PEAs based on population, rather than the top-10 PEA package CCA proposed, Verizon Wireless said (http://bit.ly/1hE7NOH).

Nothing in the CCA proposal “persuasively counsels” that the FCC should adopt anything other than EA as the geographic unit for licensing the incentive auction, AT&T said. The EA strikes the right balance between the FCC’s “public interest goals of encouraging widespread geographic buildout, including in rural areas, and providing licensees with sufficient flexibility to scale their networks,” AT&T said. Like Verizon Wireless, AT&T supports package bidding. If the FCC adopts a licensing area smaller than the EA, “the need for package bidding would become even more acute than it already would be with EAs,” AT&T said. The FCC should also reject the NTCA/RWA proposal, AT&T said, noting that it “adds complexity to what has already been widely acknowledged as one of the most complicated proceedings in Commission history” (http://bit.ly/1is1WJQ).

EAs are “too large to ensure the meaningful participation by small businesses and rural carriers in the Incentive Auction,” which would violate the Communications Act of 1934, NTCA and RWA said in a joint filing. The FCC should use CMA as its licensing area rather than even the PEA, which NTCA and RWA said was too large to accommodate their members “in certain areas, particularly west of the Mississippi River, and the Commission will likely face individual carrier petitions seeking PEA modifications to fit carriers’ individual service contours.” The groups said their own proposal for a bifurcated auction “is ideal for the Incentive Auction because it enables the Commission to achieve the statutory goals of promptly deploying spectrum based services to rural areas, promoting the meaningful participation of small businesses and rural carriers in the Incentive Auction, disseminating initial licenses to a broad range of carriers, and promoting competition” (http://bit.ly/1isaeRW).

U.S. Cellular said it continues to “strongly” support using CMA as the licensing area for the 600 MHz and AWS-3 bands, and opposes “any form of package bidding in either Auction.” Use of CMAs as the licensing area is “necessary to ensure that the auctions provide reasonable opportunities for small and regional carriers to acquire licenses,” U.S. Cellular said. “Without the participation of these carriers, there will be a continued lack of adequate competition in the wireless industry and reduced network deployments in rural and other underserved areas in contravention of the Commission’s policies and statutory obligations.” Licensing areas larger than the CMA “could prevent many small and regional carriers from participating in the auctions because their geographic size and high population totals would make them prohibitively expensive,” U.S. Cellular said. A PEA-based plan would mitigate some of the disadvantages seen in an EA-based plan, but “still could prove unaffordable to smaller carriers,” U.S. Cellular said. PEAs also “nest” within EAs and do not conform to CMAs, meaning smaller carriers “could be forced to acquire spectrum rights outside of their existing service areas simply to upgrade their current networks,” U.S. Cellular said (http://bit.ly/1isdfSv).

Five North Carolina and South Carolina-based carriers, led by Atlantic Telephone Membership, said the FCC should adopt the CCA proposal if it decides not to designate the CMA as the licensing area for the incentive auction. “Licensing the band on the basis of EAs will prevent small, rural and regional entities from acquiring spectrum and will effectively prohibit most rural and small entities from participating in the auction at all,” the Carolina carriers said (http://bit.ly/1cV4o6f). Public Service Wireless Services also endorsed the CCA proposal as the best alternative if the FCC does not use CMAs, saying the proposal’s use of PEAs would promote “significantly more opportunity, competition, and license dissemination than auctioning the 600 MHz band spectrum on the basis of EAs. Licensing the band using PEAs also will promote deployment to rural areas more rapidly than using EAs” (http://bit.ly/KQ3uCp).

A group of rural carriers represented by the Blooston Mordkofsky law firm pushed for the FCC to use the CMA licensing area in the incentive auction, arguing that the CCA proposal “would offer inadequate improvement over EA licensing for the many Blooston Rural Carriers that provide service in the West and Midwestern states.” The Blooston carriers did offer some support for the NTCA/RWA proposal, which they called “a useful approach for tackling the complicated issues raised by the dual auction format of the 600 MHz band proceeding” (http://bit.ly/1cV4UkH). The Peoples Telephone Cooperative also supported the NTCA/RWA proposal, which it said “equitably balances the concerns of wireless carriers large and small to obtain spectrum that fits their business plans. It would also assist the Commission in meeting its statutory responsibilities to make available spectrum-based services to consumers in urban and rural areas alike” (http://bit.ly/1fk3iZl). King Street Wireless also endorsed the NTCA/RWA proposal over CCA’s, arguing that it would be “far superior” to use a combination of CMAs and EAs rather than introducing PEAs (http://bit.ly/1d8CCYi).