Telecom Law Blog

In a series of orders issued since mid-August, the FCC has finalized its plans for the auction of 62 MHz of spectrum in the 700 MHz band, now designated by the FCC as Auction 73. The Commission also pushed back the previously scheduled auction start date by eight days to Jan. 24, 2008, and has established other important dates for Auction 73. Due to the propagation characteristics of 700 MHz band spectrum and the amount of spectrum being auctioned, Auction 73 is widely viewed as being one of the most significant FCC auctions in years. The key dates, issues and procedures relating to Auction 73 are summarized below.

Key dates

Auction 73 seminar - Nov. 20, 2007
Auction 73 application filing deadline,  Dec. 3, 2007; 6:00 p.m.
Auction 73 upfront payment deadline, Dec. 28, 2007; 6:00 p.m.
Auction 73 begins, Jan. 24, 2008

Revised 700 MHz band plan

The FCC adopted a revised band plan for the “Lower” and “Upper” 700 MHz bands. In general, the 700 MHz band encompasses spectrum from 698 MHz to 806 MHz. Some of the spectrum within this band previously was auctioned and licensed by the FCC. In the upcoming auction, the FCC will divide the total of 62 MHz being auctioned among five spectrum blocks. Some specifics for each of these blocks are:

Block Bandwidth/Pairing Frequencies Market Type/Size

The FCC also adopted several revisions to the public safety spectrum allocations within the 700 MHz band that are not reflected on the chart above. Specifically, existing 700 MHz band public safety spectrum allocations were shifted slightly, and the spectrum itself was re-designated from wideband to broadband use. Finally, the FCC also shifted the existing 700 MHz Guard Band spectrum allocations, and reduced the size of the Guard Band B Block licenses.

Performance requirements

Since the late 1990s, the FCC has imposed a “substantial service” performance requirement on most types of commercial wireless licensees in order for licensees to receive a license renewal expectancy. While the specific requirements of this standard vary by type of wireless service, under the prior Upper 700 MHz band rules, the substantial service test would have been met if a personal communications services (PCS) licensee provided coverage reaching 20 percent of the population in the license area before the expiration of the initial 10-year license term. For the new 700 MHz licenses, the FCC adopted the following new, more stringent performance requirements.

• Smaller geographic market-area licensees (Economic Area licenses and Cellular Market Area licenses) will be required to provide service to cover at least 35 percent of the geographic area of the licensed market within four years of license issuance (by Feb. 17, 2013); and 70 percent of the geographic area by the end of the license term (by Feb. 17, 2019).
  
  
• Large multistate region (REAG) market licensees will be required to provide service to cover at least 40 percent of the population of the licensed market within four years of license issuance (by Feb. 17, 2013); and 75 percent of the population by the end of the license term (by Feb.17, 2019).
  
  
• The FCC did not identify specific build-out requirements for the nationwide Upper D block license. This licensee will be required to partner with an adjacent Public Safety Broadband Licensee, and to negotiate a Network Sharing Agreement to be approved by the FCC, which will govern construction deadlines, among other issues.
  
  
• If a licensee does not meet the four-year performance benchmarks, the FCC will reduce its license term from 10 to eight years, thereby imposing an accelerated construction schedule.
  
  
• If a licensee fails to meet the end-of-term construction requirements, the FCC will automatically reclaim any unserved areas of its license area and re-license those areas.

Open access

One of the more controversial aspects of the FCC’s new rules is its decision to impose “open platform” requirements on the winning bidder of the 22 MHz Upper C Block license. In response to proposals made by public interest groups and potential new wireless market entrants such as Google, the FCC decided to impose certain limited open-access requirements in the form of special service rules. These rules require Upper C Block licensees to allow their customers to use any device to access the wireless network, or to transmit any wireless application over the spectrum, provided the device or application is in compliance with technical standards necessary for the security of the wireless network.

Despite aggressive lobbying, the FCC refused to impose additional open-access obligations requiring Upper C Block licensees to make spectrum available to third parties on a wholesale/leased basis, or to impose interconnection requirements. In adopting these first-ever wireless open-access rules, the FCC stated that the rules would facilitate “innovation at the edge of the network” by allowing the development of hardware and applications such as Wi-Fi or VoIP compatibility that may have been restricted by wireless carriers under their current authority to exercise strict control over spectrum pursuant to existing license authorizations.

Despite recent rumors that the FCC might weaken these newly adopted open-access requirements via a declaratory ruling, FCC Chairman Kevin J. Martin recently advised Congress that the Commission has no plans to modify the new C Block open access rules.

Public Safety/Private Partnership

As mentioned above, the FCC will require that the winner of the 10 MHz Upper D Block nationwide license form a Public Safety/Private Partnership with an adjacent nationwide Public Safety Broadband Licensee, to develop a shared, interoperable broadband network for both public safety and commercial use. Under the new rules, public safety will have priority access to the Upper D Block commercial spectrum in times of emergency, and the commercial licensee will have preemptible, secondary access to the adjacent public safety broadband spectrum.

The FCC has already begun accepting applications for the Public Safety Broadband Licensee.

Auction procedures

The FCC adopted three noteworthy changes to its auction procedures for Auction 73. First, in order to reduce the potential for anti-competitive bidding behavior, the Commission will use anonymous bidding for the auction, regardless of any pre-auction assessment of how competitive the auction will be. Under the rules for Auction 73, until bidding ends, the FCC will only release the names of entities that have filed applications to bid in the auction. Unlike past auctions, the FCC will not release: 1) the licenses that bidders have applied to bid on; 2) bidders’ upfront payment amounts or bidding eligibility; or 3) any other information that could identify a bidder.

Second, the FCC will use package bidding procedures to auction the 12 Upper C Block REAG licenses, in order to assist bidders that are seeking to create a nationwide footprint. Under the FCC’s new procedures, bidders may bid on any one of the 12 REAG licenses individually, or they may place a bid on any combination of three pre-defined “packages” of C Block licenses. Bidders will not be allowed to choose their own package of C Block licenses to bid on.

Finally, the FCC established reserve prices for this auction. These prices will allow the FCC to decline to award licenses within a spectrum block if the sum of all high bids for licenses in that block does not meet the FCC-established aggregate reserve price for that block. The reserve prices adopted for each block are: Block A - $1.8 billion; Block B - $1.37 billion; Block C - $4.6 billion; Block D - $1.3 billion; and Block E - $900 million.

Auction 76

The Commission also announced that it will promptly re-auction any licenses not assigned by Auction 73 in a subsequent auction designated as Auction 76. While the FCC will use the same aggregate reserve prices in Auction 76, it will modify the performance or access requirements imposed on the licenses in the re-auctioned block. If the FCC determines that it is necessary to conduct Auction 76 due to Auction 73 reserve prices not being met, the FCC will announce the start date for Auction 76 within five business days after bidding ends in Auction 73. In addition, Auction 76 will begin within three weeks of the FCC’s Auction 76 announcement. Participation in Auction 76 is limited to applicants that qualified to bid in Auction 73, who file a separate, abbreviated application for Auction 76 by the Auction 73 application filing deadline of Dec. 3, 2007.

Status of legal challenges

The FCC’s Second Report and Order, in which it adopted final rules for Auction 73, was released on Aug. 10, 2007. Several petitions for reconsideration of the Second Report and Order were filed on Sept. 24, 2007, and remain pending at the FCC. It is expected to issue its reconsideration order prior to the start of Auction 73. In addition, the Commission’s new open-access requirements are the subject of a legal challenge filed in the federal appeals court in Washington, D.C.

For more information, please contact:

Theresa Cavanaugh, Washington, D.C., (202) 973-4200, terrycavanaugh@dwt.com
Chris Fedeli, Washington, D.C., (202) 973-4200, chrisfedeli@dwt.com

This advisory is a publication of Davis Wright Tremaine LLP. Our purpose in publishing this advisory is to inform our clients and friends of recent legal developments. It is not intended, nor should it be used, as a substitute for specific legal advice as legal counsel may be given only in response to inquiries regarding particular situations.

Copyright © 2007 | Davis Wright Tremaine LLP