FCC Agrees to Ask Questions About Possible Spectrum Cap

"Stakeholders from throughout the mobile ecosystem have increasingly been saying it’s time for a fresh look, that we can take steps to increase certainty and predictability for the marketplace,” Genachowski said. “So today we launch a rulemaking to review the FCC’s spectrum holding policies and make changes as appropriate.”

The NPRM asks whether the FCC should continue to use its current screen as it evaluates transactions or move toward “a different approach such as bright-line limits,” said an FCC news release. In November 2001, under former Chairman Michael Powell, the FCC agreed to eliminate in 2003 formal caps on spectrum holdings by carriers.

The NPRM also asks about including additional spectrum bands in evaluating spectrum holdings and possibly treating spectrum from different bands differently, the release said (http://xrl.us/bnrtgo). The notice also seeks comment on the need to update the FCC’s geographic market analysis, “including to consider the impacts of mobile spectrum holdings at the national as well as local levels” and whether to change the FCC’s attribution rules.

McDowell questioned the premise that the FCC’s current policy, which is to look at spectrum holdings “on a case-by-case basis ... within the unique context of each auction or proposed transaction,” is “broken at its foundation.” But McDowell said he doesn’t oppose asking questions. “I agree that the commission -- and all government agencies for that matter -- have an obligation to review regulations from time to time,” he said. “Moreover, I respect the views of the service providers and civil society groups that have asked us to do this. I also recognize that many wireless carriers expressly asked the commission to undertake a rulemaking on this issue.” McDowell approved in part and concurred in part with the NPRM.

Pai was more pointed in his criticisms. “Considering the stakes associated with the incentive auction, we should, at a minimum, do no harm,” he said. “It is critical that the incentive auction be a success, and that, in turn, requires vigorous participation and competition for spectrum in the forward auction. I am thus skeptical of any steps that would depress participation in the auction, such as tightening the spectrum screen, adopting a hard cap on spectrum holdings, or imposing requirements that would enable the commission to second-guess how wireless operators run their networks and thus reduce the value of spectrum."

Pai also questioned whether the FCC should have launched a notice of inquiry first, as a preliminary step. “I find it odd that ... today’s notice of proposed rulemaking contains no notice of proposed rules,” he said. “In fact, the word ‘propose’ does not appear in the document. Nor do we reach any tentative conclusions. We simply ask a lot of questions about where things stand, which is typically what we would do in a notice of inquiry."

Genachowski fired back at Pai’s suggestion the FCC start with an NOI. “This would needlessly add red tape, slow roll the review and delay possible improvements to current policies,” he said. A second FCC official told us Pai was mistaken. “The attached rules are in fact the proposed rules,” the official said. “The item doesn’t contain any specific proposals for changing the rules concerning mobile spectrum holdings,” a spokesman for Pai said in response. “There are no tentative conclusions.”

"There is no question that it is time for the commission to update its policies on measuring how spectrum aggregation impacts competition in the wireless industry,” said Commissioner Mignon Clyburn. Many changes have occurred since the FCC last examined the screen in 2003, she said. “The two most significant are the dramatic increase in demand for wireless services especially mobile broadband, and the reduction in the number of carriers, providing competitive mobile service options for consumers,” she said. “It is also worth noting that, in the spectrum provisions of the [Spectrum] Act passed earlier this year, Congress reaffirmed the commission’s authority to, and I quote: ‘adopt rules of general applicability, including rules concerning spectrum aggregation that promote competition.'"

"It has been nearly a decade since the commission put in place its current approach to spectrum holdings,” said Commissioner Jessica Rosenworcel. “Ten years ago the agency eliminated the spectrum cap in favor of a case-by-case analysis of how much spectrum any one entity can hold. A decade is a lifetime in the world of wireless, and perhaps even several generations."

AT&T Regulatory Vice President Joan Marsh said the carrier supports the NPRM, something it sought during AT&T’s failed attempts to buy T-Mobile last year. “Wireless carriers need a clear and reliable understanding of when and under what circumstances spectrum acquisitions will be permitted, something we do not have today,” Marsh said. “With today’s FCC action, spectrum policy can now be taken out of merger-specific proceedings, placed in an industry-wide, open and transparent proceeding, and ultimately subjected to judicial review.

"Despite alarmist predictions, the U.S. is not facing a spectrum crisis; it’s facing a spectrum allocation and competition crisis,” said Free Press Policy Director Matt Wood. “The FCC must acknowledge that for too long the biggest companies have stifled competition by buying up large swaths of the nation’s most valuable spectrum. A more rational screen can ensure the nation’s airwaves are distributed equitably, helping to drive down prices and increase quality of service. In considering how to approach incentive auctions, it’s imperative that the commission promote opportunities for current competitors, innovators and entrepreneurs alike to have access to licensed and unlicensed spectrum.”