FCC Wants All Carriers, Big and Small, to Take Part in AWS-3 and Incentive Auctions, Sherman Says

The incentive auction is unlike any auction the FCC has ever held, Sherman said. “One of the things that has really become apparent to me in my short time at the commission is it’s really hard, it’s very complicated and there’s a lot of things that can knock it off the rails,” he said.

Sherman, a former Senate aide who worked on the 2012 spectrum law that allowed the FCC to hold the incentive auction, said Congress was clear that it wanted the FCC to consider different sizes of licenses. “It was a long process and a lot of back-and-forth and got very contentious at times,” he said. “One issue that wasn’t really a compromise was the fact that the FCC should be directed to consider license sizes of all variations so that smaller bidders would have an opportunity to participate.”

Sherman did not confirm the agency will propose a new license size for the incentive auction -- Partial Economic Area (PEA) licenses. “Because it involves broadcasters voluntarily turning in spectrum, you really can’t have a lot of different [license] sizes and run the auction in a smooth manner,” he said. “It’s really driven by auction design.” The PEA proposal by CCA and other small carrier associations “was incredibly valuable” and “changed the debate,” he said. “If there can be a place to land on the PEA model that would give smaller carriers a real opportunity to bid.”

Spectrum aggregation limits were more controversial in Congress, with many Republicans wanting to make sure “every party should be allowed to bid,” Sherman said. “On the Democratic side of the aisle there were real concerns that the FCC need to keep some tools available to structure an auction in a way that allows multiple parties to bid and gives smaller players a fair shot at acquiring spectrum.” Under the 2012 law, the FCC “can’t say, ‘no, you can’t participate,’ but we certainly can say ’these licenses are available only to certain types of carriers or these licenses are available to everyone or we're going to put a cap on how much you can acquire,'” Sherman said.

The session with Sherman started with brief videotaped remarks from Chairman Tom Wheeler, who planned to speak at CCA but had to stay in Washington to testify before Congress. CCA President Steve Berry worked for Wheeler when Wheeler was president of the CTIA. “What a great job you all have done collectively to build [the Rural Cellular Association] into the CCA and to be able to deliver the competitive message,” Wheeler said. “The things that you have done have been significant to make sure that the concept of competition in wireless is always before us and always before the Congress.”

Wheeler promised to speak at CCA’s fall show in Las Vegas. Wheeler repeated his mantra on the importance of “competition, competition, competition.” “It is clear that in a time like we're living through right now of incredible technological change, regulators can’t be as smart as innovators and we need to encourage innovation,” he said. “We need to encourage new ideas. We need to encourage delivery of new services."

84 MHz the Incentive Auction Sweet Spot

In an afternoon session Wednesday at CCA, T-Mobile Vice President Kathleen Ham said Wheeler made the right call in delaying the incentive auction until next year. “It’s a very complicated auction, they've got to get it right and they have a statute that they're following,” she said. “They have to be guided by that.” T-Mobile expects an auction near the end of 2015, she said.

T-Mobile initially advocated Major Economic Area licenses for the auction, but is open-minded on the PEA proposal, Ham said. “We're sympathetic to the smaller carriers’ interest in getting to some smaller areas here,” she said. “It’s important to have broad participation in the auction. We think that’s going to raise the most revenue.” Ham said 84 MHz of spectrum for sale “is really the sweet spot that you need to get in this auction.” Ham also said the FCC seems very interested in the broad 35 x 35 MHz band plan submitted for the 600 MHz band. Various iterations of MEAs have been used in past FCC spectrum auctions (http://fcc.us/1eQVoo4).

"Chairman Wheeler absolutely did the right thing moving it back,” said NAB Executive Vice President Rick Kaplan, former chief of the Wireless Bureau, of the auction. “It just wasn’t practical, the timeline that had been set out before.” Kaplan expects the auction to start as late as the beginning of 2016. “It’s extremely hard to predict” how much spectrum the auction will yield, he said. “Kathleen is right, 84 MHz is a sweet spot,” he said. “When the broadband plan was being developed [at the FCC], they were talking about 120 MHz, but nobody really thought through how that would work.” Even getting 84 MHz “is going to be tough in some of the major markets,” Kaplan said.

"We need as many blocks as possible, but we don’t know how much spectrum is going to be available in any given area,” said Ben Moncrief, director-government relations at C Spire Wireless. “That question is one of those that’s still to be decided.” Moncrief said his company hopes the FCC won’t approve package bidding, as advocated by Verizon and AT&T. “Certainly it could undermine the value of PEAs if the major carriers ... are allowed to come in and sort of gobble up all of the PEAs with one package bid,” he said.

Sprint wanted bigger spectrum licenses, but is also sympathetic to the needs of smaller carriers, said Vice President-Spectrum, Legal and Government Affairs Larry Krevor. Sprint like T-Mobile is a member of CCA. “We have participated in the PEA discussion, we're fine with PEAs, we support them,” said Krevor. Carriers want a mix of low-, medium- and high-band spectrum, Krevor said. “The propagation characteristics and other characteristics of different spectrum make different bands more suitable than others for different applications as you build the big network.”