Fact versus Fiction: Spectrum Auction Rules in Light of Unbiased, International Perspectives Reviewed by Momizat on . Fact versus Fiction: Spectrum Auction Rules in Light of Unbiased, International Perspectives C. Sean Spivey, Assistant General Counsel, CCA             Last wee Fact versus Fiction: Spectrum Auction Rules in Light of Unbiased, International Perspectives C. Sean Spivey, Assistant General Counsel, CCA             Last wee Rating:
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Fact versus Fiction: Spectrum Auction Rules in Light of Unbiased, International Perspectives

Fact versus Fiction: Spectrum Auction Rules in Light of Unbiased, International Perspectives
C. Sean Spivey, Assistant General Counsel, CCASean 3

            Last week, CCA filed an ex parte letter in the incentive auction and mobile spectrum holdings dockets.  In the letter, CCA details international policies surrounding spectrum below 1 GHz.  The Commission should look to these policies for unbiased, practical advice when deciding how much of the pie U.S. carriers can grab in the upcoming incentive auction, and how it will change its policies regarding mobile spectrum holdings.

            CCA represents over 100 wireless carriers.  Our membership stretches from national providers, to niche carriers that serve some of the most rural and hard to reach places in the country.  Some of our members hold licenses for spectrum below 1 GHz–others don’t.  A lot of our members who do hold low-band spectrum face regulatory challenges to using it.  For example, a lack of device interoperability in the Lower 700 MHz has stranded a lot of spectrum held by CCA members, which they paid handsomely for at auction (as opposed to certain other spectrum bands that were given away to the largest carriers for free).  But one thing is clear: all carriers, large and small, need access to low-band spectrum.

            As the policy debate around eligibility requirements and aggregation limits rages on, the FCC should take note of its international counterparts’ views on spectrum below 1 GHz.  In nearly two dozen countries — including Australia, Canada, the Czech Republic, Denmark, France, Germany, Greece, Iceland, Ireland, the Netherlands, Norway, Portugal, (South) Korea, Spain, Sweden, Switzerland, and the United Kingdom — regulators have restrained the amount of low-frequency “beachfront” spectrum that any one service provider can acquire.  These policymakers have done so for several reasons. 

            First, regulators have accepted basic laws of physics: i.e., that lower frequency spectrum has better propagation characteristics.  For example, in 2010 the Dutch Ministry of Economic Affairs concluded that the coverage area of a cell (tower) in a rural area using high-frequency spectrum is between 50-60 percent less than coverage using low-frequency spectrum, while in urban or suburban areas high-frequency spectrum offers a coverage area that is 83-96 percent smaller than a comparable low-frequency spectrum network.  Spectrum below 1 GHz also penetrates into buildings and other hard to reach places with better quality than high-frequency spectrum.  Because of this, regulators in the U.K. found that a carrier without below 1 GHz spectrum may be a weaker competitor in particular areas than a carrier that holds such spectrum. 

            Second, it costs less to deploy on lower frequency spectrum.  The World Bank put it plainly: lower bands can be more cost-effective than higher frequency spectrum.  Dutch and U.K. regulators agree.  In particular, the Dutch authority found that, depending on how high up on the dial a provider were to go, it can cost between eight and 15 times as much to deploy a network over higher-frequency spectrum than it would to deploy the same network over 800 MHz spectrum. 

            Finally, holding low-band spectrum is critical to staying competitive which places extra value on spectrum below 1 GHz.  The U.S. Department of Justice recently urged the FCC to ensure that its spectrum auctions don’t result in carriers with high market shares foreclosing smaller carriers from improving their customers’ coverage.  Outside of the U.S., the World Bank has similarly expressed concern about how carriers are willing to add-in additional value to their spectrum purchases for the opportunity to keep it out of the hands of other carriers (sometimes referred to as “foreclosure value”).  And while several countries, including Canada and the U.K., once refrained from placing limits on the amount of spectrum any one or two carriers could accumulate, they have now reversed course and imposed limits on below 1 GHz spectrum available at auction.  Making a sufficient amount of this spectrum available to competitors helps keep the marketplace open, which in turn helps to drive down prices for service and promotes dynamic programs and service offerings, all to consumers’ benefit. 

            Some of these policies may sound familiar.  In the past, the FCC has taken into account a carrier’s spectrum holdings below 1 GHz when evaluating the competitive effects of mergers or other transactions it is tasked with approving.  The FCC’s prior recognition of the unique nature of below 1 GHz spectrum is confirmed by the weight of international authority.  CCA urges that the Commission consider this international consensus and act consistent with its past precedent when establishing rules for the upcoming incentive auction, and revising its “spectrum screen”.      

            Carriers who say that spectrum below 1 GHz is no different from any other spectrum do so out of a desire to protect their own business interests.  Moreover, such claims are inconsistent with these carriers’ business practice of acquiring vast amounts of low-frequency spectrum at auction and on the secondary market.  The practical reality is that holding this spectrum confers a competitive benefit on the holder, and those who disagree ignore not only the laws of physics and basic economic principles, but also the reasoned policymaking of nearly two dozen countries around the globe.  It’s time to separate fact from fiction.    

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