Small Carriers May Sit Out Incentive Auction Unless 700 MHz Issues Addressed

CCA executives told us they hope the FCC will move forward on a mandate before the end of the year and not wait until 2013 when change in leadership at the FCC is believed by many to be likely, regardless of who is elected president in November. Chairman Julius Genachowski has urged an industry-negotiated solution, but warned the FCC might impose rules unless an agreement is reached. CCA attendees told us they see few signs an agreement will happen and the FCC needs to step in.

"I think it’s a major issue for the carriers and CCA,” said new CCA Chairman Michael Prior, CEO of Atlantic Tele-Network, in an interview. “It’s actually a little bit less of an issue immediately for our company because we don’t have much of the 700 MHz band that’s caused most of the consternation. … I think the principle is fairly simple. It feels like squarely within the FCC’s mandate to make sure that the telecommunications infrastructure is interoperable. Therefore we think that this is something they should be tackling head on."

Prior agreed that many small carriers are unlikely to bid in a broadcast TV spectrum auction unless 700 MHz issues are addressed first by the commission. “We have members who have spent … a lot of money on spectrum that they can’t economically build,” Prior said. “You can at least say this for certain, which is that uncertainty, that risk, will lower the value at an auction. It won’t lower the value for the fully national carriers. You have to be fair about that. They're big enough so that they don’t require that interoperability in order to bid on spectrum. But for anybody who has less than a fully national network, which is really almost all the carriers except for the two largest, it is an issue."

Hu Meena, CEO of C Spire Wireless, the immediate past chairman of CCA, told us the FCC needs to “step up” and resolve the interoperability issue. “I can’t imagine us participating [in the incentive auction] unless the interoperability issue gets resolved,” he said. “And we've participated in every auction since the first ones."

CCA President Steve Berry said he hopes the FCC will move forward on device interoperability after the November election. He also said he was pleased that the recent order approving Verizon Wireless’s buy of AWS-1 licenses from SpectrumCo reiterated the importance of interoperability. “We need an ecosystem that our carriers can access -- and by ecosystem I mean devices and an ecosystem that allows roaming opportunities -- potential partners for smaller carriers that don’t have a national footprint to provide a nationwide service to the consumer,” Berry said. “Interoperability is one way to get to that larger issue."

Prior said data roaming also remains a big issue for competitive carriers, which he hopes to address as chairman. “Roaming is a form of interoperability,” he said. “I think that’s an issue that has to be dealt with.” He said the FCC should issue a followup order strengthening and elaborating on its data roaming rules. “It needs to be definitive and I think they recognize that,” he said. “It needs to say here’s what constitutes acceptable data roaming practices. Let’s make it efficient. You have to respond to your partners and your respective partners for roaming within a reasonable timeframe. Here’s how we're going to look at rates. Roaming without economic rates is not roaming."

Many CCA members also remain concerned about the FCC’s USF distribution reform order approved last year, Prior said. “We're unhappy with the way the FCC came out on the USF,” he said. “We think it was a political, not a logical decision. It wasn’t technologically neutral. It favored the wireline companies and that didn’t make any sense for us from a consumer standpoint. … I think the FCC had good intentions. I really do. I think they tried very hard, but I think they made a political compromise. Since we were on the wrong side of that political compromise, I wish they didn’t.”

But Prior also said all of his focus won’t be on regulation. “I'm not sure that all of the issues we have are solved in Washington,” he said. “I think that some of the issues will be solved with cooperation amongst carriers within CCA and out, coming up with market solutions and commercial solutions and cooperating together."

Berry told us spectrum availability also tops CCA’s list. “This is the only FCC in 20 years that hasn’t provided a spectrum auction,” he said. “As a result spectrum becomes more and more scarce and the ability of smaller carriers to survive becomes more difficult.” Berry said the secondary market is only working for AT&T and Verizon. “They are willing to pay whatever it takes to acquire the spectrum,” he said. “The secondary market is broken in terms of a dynamic market where smaller carriers can find spectrum and fill out their footprint and grow.”

Berry said data roaming remains a major issue and CCA is hoping the FCC will be sustained in Verizon Wireless’s court challenge to the rules. The U.S. Court of Appeals for the D.C. Circuit heard oral arguments last week. “It really gets back again to this issue of connectivity,” he said. “Can you, if you have less than a national license, find a way to provide a product that consumers want to buy and can actually use … where they live, work and play.”