WASHINGTON-The Federal Communications Commission on Thursday began a process that it hopes will lead to a secondary market for spectrum, and it put the private-wireless industry on notice that it might be subject to auctions if it wants additional spectrum.
Secondary markets
A key policy objective of FCC Chairman William Kennard got off the ground last week as the FCC adopted a policy statement and notice of proposed rule making that it hopes will lead to the creation of a spectrum secondary market.
“The policy statement and [NPRM] that we adopt today will facilitate the creation of fluid markets in spectrum so that spectrum users can efficiently match short-term supply with short-term demand. It will also promote efficient spectrum usage through longer-term leases or spectrum trading agreements. I am convinced that we can create a secondary market in wireless bandwidth just as there is an emerging commodity market for wireline bandwidth,” said Kennard.
Kennard has long wished that a spectrum secondary market would develop in much the same way one has developed for wireline bandwidth, but at a forum last spring, the wireless industry said there were major legal and regulatory impediments that had to be eliminated before that could occur.
One major impediment is case law dating back decades that says the licensee must retain day-to-day control of the spectrum-making spectrum leasing unattractive and unprofitable. This impediment is expected to be largely removed when the proposed rules are adopted sometime next year.
Other impediments are also expected to be removed, but exactly how they will be removed remains unclear. Diane Cornell, chief of staff in the FCC’s Wireless Telecommunications Bureau, said that two of the proposed approaches would be to make the lessee live under the same restrictions as the licensee or to apply less restrictive standards to the lessee. One of the restrictions is the cap that limits the amount of spectrum that a carrier can control in a geographic area to 45 megahertz in urban areas and 55 megahertz in rural areas.
The Cellular Telecommunications and Internet Association was pleased with the FCC’s actions but warned that the policy statement and NPRM were not a “panacea for good sound spectrum-management policy.”
The Rural Telecommunications Group was pleased with the decision. The group said it “has been out front in urging the commission to allow leasing of spectrum across the board so that rural telephone companies and others who were unable to purchase spectrum in auctions can work with spectrum holders to put this spectrum to use in the less-populated parts of the country.”
“To date, the rollout of new spectrum-based services has been greatest in most populated areas of the country because auction winners must recoup their significant investments. Secondary market mechanisms such as spectrum leases and joint ventures will allow these auction winners to work with rural telephone companies who are ready, willing and able to serve the less-populated areas that might otherwise never be served,” said RTG General Counsel Carrie Bennet.
“There is an irony that the FCC is trying to figure out ways to put spectrum to better use while at the same time dumping more spectrum onto the market that no one is sure they can really use,” said Jeffrey Nelson, spokesman for Verizon Wireless, noting the scheduled auction of heavily encumbered spectrum at 700 MHz scheduled for March 6.
FCC Commissioner Gloria Tristani did not agree with the portions of the policy statement dealing with broadcast spectrum noting that broadcasters did not participate in the public forum earlier this year.
The Balanced Budget Act of 1997
The FCC declined to propose auctions as a licensing tool for the private-wireless spectrum below 800 MHz but said that any additional allocation-including one that is expected at 27 GHz-could be subject to auctions.
The rules adopted last week implement the Balanced Budget Act of 1997. As such, the FCC was required to exempt public-safety from auctions. Rather than limiting public-safety to police, fire and emergency rescue, Congress expanded the definition to include “the safety of life, health and property.”
This definition left the FCC in a quandary with many entities claiming they fit under the definition.
The American Automobile Association lobbied hard to have its tow-truck dispatch service included.
In addition, the United Telecom Council, the American Petroleum Institute and the American Association of Railroads filed a petition urging the FCC to create a separate pool for “Critical Infrastructure Industries.” The FCC denied this request but appears to have included many of these industries under the public-safety services exemption.
UTC said it was disappointed but that the important thing was that its members-utility companies-would not be subject to auctions.
The FCC did not release the complete list of exempt entities and the Industrial Telecommunications Association, which has fought against public-safety classifications for anything but “guns and hoses” declined to comment until it was sure it knew what entities were exempt.
That is not to say that ITA was unhappy with the rules calling them a “good first step.”
In addition to adopting rules, the FCC also proposed rules meant to establish a certain date when more spectrally efficient-or narrowband-technologies must be used exclusively. The current rules call for the FCC to stop accepting non-narrowband technologies after Jan. 1, 2005, but companies can continue to use them indefinitely.
