Small Carriers Want CMAs in Future Auctions, See Little Interest in Spectrum Sharing

"There is not a real strong interest in that,” Ron Smith, CEO Bluegrass Cellular, said of sharing. “As soon as you start putting limitations on the spectrum you can use, you're going to run into problems. If you're going to say you can use it all except this centerpiece and you don’t have that centerpiece, then it’s just a workaround. … There are too many obstacles I think right now at least for rural carriers to really jump on the bandwagon and say ‘what a great idea.'”

"It’s an idea that is too early in the discussion to be able to get a sense of whether or not you really have something that you're going to be able to deal with,” said Jonathan Foxman, CEO of MTPCS. “The spectrum crunch in the rural areas isn’t at the level that it is” in urban areas with Tier 1 carriers, he said. “So I think certainly spectrum sharing as an alternative is probably maybe more important to them as they see their needs and certainly looking to see how the 600 MHz [auction] occurs, and who are the winners and losers may determine whether there’s a party who may” move toward sharing faster.

The CEOs stressed the importance of what became a dominant issue at the conference: the need for the FCC to offer licenses in the incentive auction and other pending auctions that are small enough to entice small carriers to bid.

Smith said for Bluegrass, license size is a far more important issue than spectrum aggregation and limits on how much spectrum any carrier can buy in a single market. Most small carriers prefer cellular market area (CMA) licenses as opposed to the much larger economic area (EA) licenses. “Aggregation limits for us is an issue that is important, but it’s one of several issues that are important to us in the auction,” he said. “The underlying issue for a carrier my size is whether or not the geographic areas” in the auction “are at a level that economically I can afford to participate.”

Kentucky-based Bluegrass wants to buy the CMAs located between Louisville, Lexington and Nashville, not the EAs that take in those major cities as well, Smith said. Unless the FCC figures out a solution on license sizes, “it doesn’t matter about the other issues,” he said. Bluegrass won’t bid in the H-block auction since only EAs are being offered, Smith added. “There is not a value-proposition business case that I can make to purchase an EA.”

"Ron hit it right on the head,” said Patrick Riordan, CEO of Cellcom. “The compromise should be that all spectrum auctioned should be at the CMA level. … It allows anyone to participate. As soon as you start packaging and as soon as we start talking about a compromise, the packaging lends itself to the big guys that they can still crush us.” Dividing spectrum into small licenses does not mean the incentive auction or other auctions will be too complicated for the biggest carries to participate, Riordan said. “If we can handle it, they can probably handle it,” he said. “I really think this is not too complicated for Verizon, it’s not too complicated for the FCC.”

The CEOs emphasized the importance of devices to their firms and said the recently announced agreement on 700 MHz interoperability was a big development for competitive carriers.

Doug Hutcheson, CEO of Leap, said that small carriers now have relatively good access to devices, but problems are looming. “There’s five, six new pieces of spectrum that are figuring out how to get deployed over the next four or five years and I think this issue is huge,” he said. “It’s a little bit subsided right now, but it’s a huge issue that’s coming at the industry, at us. … I think we'll make progress and fall back several times.”

"We need more industry solutions,” said Riordan, who called the 700 MHz agreement “huge.” Apple, selling the iPhone to many small carriers, recently created a new device issue by offering so many different versions, he said. “They really created 21 different phones that you need to carry now,” he said. “That’s a different model for Apple. … That’s a lot of phones to keep in inventory. To that extent, it’s problematic.”

Smith said Verizon Wireless’s unsuccessful appeal of the FCC’s data roaming order shows why industry agreements are better than orders from the commission. “We won the data roaming order [case], but the result is we still don’t have data roaming,” he said. “This will be fought out in the courts, it will be fought out in the marketplace. Industry solutions are always much better than regulatory.”

Smith and Riordan question to what extent smaller carriers will play a role in FirstNet. “We certainly would love to participate,” Smith said. “But I think that the dialogue at the level that needs to takes place” hasn’t happened yet. “I would like to believe, I would like to be optimistic that this all could come together,” Riordan said. “I haven’t the faintest idea how that could happen. … There’s just a lot more work that needs to be done.”