Like most everything else at the FCC these days, problems that have relatively simple and straightforward solutions turn into horrible complicated messes. Take the C-Band, a slice of spectrum that in the U.S. lies between 3.7 GHz and 4.2 GHz. When first authorized for commercial satellite use back in the day, these frequencies were considered far too high to have much value for terrestrial use. These days, of course, 3.7 GHz is considered prime “midband” spectrum perfect for mobile 5G deployment, and sits right on top of the CBRS spectrum the FCC intends to auction next June. So wireless carriers want the FCC to repurpose some or all of it for 5G. In addition, a bunch of folks (including my employer Public Knowledge) support opening up portions of the band in rural areas for point-to-point backhaul (on a secondary basis, which means the backhaul guys need to protect the incumbents from interference).
The logical and straightforward thing to do would be to treat this like we did the 700 MHz auction/DTV transition over ten years ago. Tell the C-Band guys “sorry guys, we’re shrinking your available spectrum from 500 MHz to 200 MHz and taking back the other 300 MHz for auction. We’re also going to allow point-to-point backhaul on a non-interfering basis because that will really help rural ISPs. Don’t worry, we’ll set aside some of the auction money for a transition fund.” Sure, the incumbent licensees would scream (they always do), but this is a fairly proven solution that worked well to get us spectrum for 4G (and raised $20 bn for the Treasury) so why not do it again?
Or, if you really want to bribe the incumbent licensees, we could do an incentive auction. I’m not a fan, especially when it’s folks who got their licenses for free. But fine. We crossed that bridge awhile ago with the broadcasters, the authority for incentive auctions is now part of 47 U.S.C. 309(j), let’s just use it.
But nooooooo . . . . . This FCC in particular seems to love delaying everything while it rethinks all the options so it can come up with its very own wrong decision. Just as the FCC delayed deployment of the CBRS spectrum by 2 years by reopening that proceeding to redo the rules at the behest of the big carriers, now the FCC apparently wants to try a “private auction” under which the current holders of the satellite licenses (as represented by a group of licensees called “C-Band Alliance” or “CBA”) will go off behind closed doors, “auction” the public spectrum themselves, and then promise to give a piece of the money back to the FCC.
After snoozing through this for over a year, members of Congress have suddenly woken up and made this all interesting. Why? Analysts estimate that an auction of 300 MHz of C-Band spectrum would yield $50-60 billion in revenue. If the government conducts the auction, then it gets to credit $60 bn as a “payfor” to the budget for things like rural broadband or Trump’s border wall (assuming the Congressional Budget Office, aka CBO, agrees with the estimate). Notably, Senator Kennedy (R-LA) of the appropriations Committee had a little hearing with Chairman Pai where he politely but firmly made it clear to Pai that he thinks a private sale is a dumb idea and he wants a public auction. When that apparently did not work to move the needle, Kennedy jumped over Pai’s head and took the matter to President Trump, although there is no indication that Trump has decided to do anything on the matter.
Meanwhile, in the House, Rep. Mike Doyle (D-PA), Chair of the House Telecom Subcommittee, dropped a bipartisan bill, the C-Band Act, that would require the FCC to do an auction. Doyle followed this up with a hearing where the majority of the Members in attendance made it clear they wanted the FCC to run an auction so they could use that money to pay for rural broadband.
To understand why the distinction between private sale and public auction matters so much to Congress, you need to understand one of the peculiarities of how Congressional budgeting works and and terms such as “CBO score,” “paygo” and “payfor.” To state the matter quickly, if the FCC holds an auction, CBO can score the projected revenue of the auction as part of its annual budgeting process and that projected revenue can be used to “pay for” other projects under Congress’ “pay as you go” (aka “paygo”) rules. But if the licensees have a private auction, there is no CBO score even if the licensees make a voluntary donation to the FCC. So from the perspective of Congress trying to find money to do stuff, the difference is not between $60 bn and something less than $60 bn. The difference is between $60 bn and zero. Granted, no one in Congress appears to worry about deficits these days, but as Senator Kennedy observed, that money could fund “several other government projects (including the wall),” and $60 bn is not a small amount of money whether you want to fund the wall (like Kennedy) or rural broadband (like the House E&C).
But what can Congress do, especially with Chairman Ajit Pai apparently determined to give C-Band Alliance what they want (especially now that AT&T and Verizon have supported C-Band)? Funny thing, we had a similar issue back in 2002 when the Powell FCC tried to move ahead with an unauthorized incentive auction, and Congress stopped that cold despite FCC authorization of the auction.
I explain below . . .