Partner Greg Kunkle Authors Article on Law360: FCC Aims High With Spectrum Policy In 2016

Date: Jan 28, 2016

Law360, New York (January 22, 2016, 12:20 PM ET) --

Wireless spectrum, particularly in the range preferred by commercial telecommunications providers, is increasingly scarce. To continue to satisfy the nation’s demand for wireless communications, the Federal Communications Commission has been forced to become increasingly creative in its approach to spectrum allocation. 2016 looks to be the year the FCC will place a big bet on the value of spectrum and begin to see whether two novel approaches to spectrum management, the broadcast incentive auction and the Citizens Broadband Radio Service, are hits or misses.

Broadcast Incentive Auction

Later this year, the FCC will conduct its broadcast incentive auction whereby it will seek to transition a large amount of wireless spectrum from television broadcasters to wireless telecommunications providers. While often referred to as a single event, the broadcast incentive auction will actually consist of two separate but interdependent, auctions — a “reverse” auction and a “forward” auction.

For broadcasters, the FCC will conduct a reverse auction, through which the commission will seek to incent TV broadcasters to voluntarily return spectrum usage rights to the commission. Broadcasters may participate in several different ways. They may offer to relinquish their licenses and go off the air completely, offer to share a channel with another licensee, or offer to move from a current channel to a lower channel in the TV band.

This last step, known as repacking, is critical to the broadcast incentive auction’s success. The FCC believes that it will be able to move enough television broadcast stations to VHF channels 2-13 so as to free up a significant portion of the UHF band (channels 14 and above) for other uses.

Obviously, TV broadcasters are only going to agree to relinquish their most valuable asset, their licensed spectrum rights, if they expect to receive substantial consideration in return. This is where the forward auction comes in.

Under the forward auction, spectrum freed up in the reverse auction will be sold to wireless carriers. The FCC has decades of experience with auctioning spectrum to wireless carriers. The important twist here, though, is that the amount of spectrum available for sale will not be known until the reverse auction is complete. Interested wireless carriers will register for the auction without knowing how much spectrum will be available. In addition, in the initial phase of the forward auction, participants will not be bidding for specific licenses, but for categories of spectrum blocks from which specific frequency-specific licenses will be assigned later based on the reverse auction results.

Other recent FCC spectrum auctions have been very successful, with proceeds measured in the tens of billions of dollars. So the FCC is expecting a large amount of money from the forward auction. The reverse auction will determine how the TV broadcasters share this pool of money. The FCC hopes that this prospect is enough to attract significant participation from broadcasters.

The broadcast incentive auction is clearly a complicated process. There are a lot of interdependent parts, and several novel ideas must work in practice for the auction to be a success. It’s a “never-been-done-before” type of endeavor with a big upside. But it could also be an embarrassment if it doesn’t go as planned, leaving one FCC commissioner to state, he is “praying it is not a failure.”[1] The FCC’s willingness to go out on a limb shows the commission sees a bigger risk in not addressing the country’s increasing demand for spectrum by continuing to maintain the status quo.

Citizens Broadband Radio Service

The broadcast incentive auction isn’t the only spectrum policy innovation that will play out this year. The FCC’s plan to implement a Citizens Broadband Radio Service (CBRS) in the 3.55-3.7 GHz band has garnered less attention from the press, but, if it works, it could prove valuable to multiple segments of the wireless industry.

The 3.55-3.65 GHz portion of the band is currently used by U.S. Department of Defense radar systems. Several years ago, the band was identified as a candidate for shared use with nonfederal wireless users. The FCC has spent the last few years working on a plan for how to open the spectrum for broadband use, while at the same time protecting critical DOD facilities. The 3.65-3.7 GHz portion of the band was later added to the proposal to bring the total amount of spectrum to 150 MHz, a significant amount.

Under its new CBRS rules, the commission will largely turn management of the 150 MHz of spectrum at 3.55-3.7 GHz over to one or more yet-to-be-named third-party database managers. Those database managers would be responsible for dynamic assignment of operating parameters to users and licensees. The band would be a mix of federal incumbents, auctioned license winners and unlicensed secondary users. Use of dynamic channel assignment allows the FCC to protect federal radar sites, which may be mobile, by modifying the operating parameters of other users in nearly real time. In theory, the dynamic channel assignment would allow more intensive use of the band than otherwise achievable through the conventional approach of exclusive licensing.

For their part, wireless carriers view the CBRS as providing access to a very large amount of spectrum that could be used for small cell and in-building coverage. CBRS-compatible chips in wireless devices would enable carriers to offload very high-capacity applications from their wide area LTE networks in certain areas.

One criticism of the CBRS is that it replaces what had been a successful spectrum allocation at 3.65-3.7 GHz. This band, which was allocated only less than ten years ago, was used by hundreds of licensees including wireless Internet services providers, electric utilities, oil and gas companies, and other industrial users for high-bandwidth services. It remains to be seen to what extent the CBRS will be suitable for these users. One potential hurdle — if accessing the dynamic spectrum database requires critical infrastructure companies to connect sensitive control systems to the Internet, expect many of those entities to take their wireless applications to other bands due to cybersecurity concerns.

The CBRS is an experiment in spectrum policy. As one Commissioner states, “Will it work? […] We will see.”[2]

—By Greg Kunkle, Keller and Heckman LLP

Greg Kunkle is a partner in Keller and Heckman's Washington, D.C., office. He is president of the Land Mobile Communications Council.

The opinions expressed are those of the author and do not necessarily reflect the views of the firm, its clients, or Portfolio Media Inc., or any of its or their respective affiliates. This article is for general information purposes and is not intended to be and should not be taken as legal advice.

[1] https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-78A6.pdf

[2] https://apps.fcc.gov/edocs_public/attachmatch/FCC-15-47A5.pdf
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