The FCC’s Spectrum Frontiers proceeding, which is focused on making millimeter wave (“mmW”) spectrum available for flexible commercial mobile and fixed use, seems poised to move into a new phase even as the current phase is playing out. At its next meeting on December 12, 2018, the agency will vote on rule changes to facilitate a consolidated auction of spectrum in three spectrum ranges designated in 2016 and 2017 for flexible mobile and fixed use: the so-called Upper 37 GHz Band (37.6-38.6 GHz), the 39 GHz Band (38.6-40.0 GHz), and the 47 GHz Band (47.2-48.2 GHz). The FCC reportedly anticipates completing the auctions by the end of 2019, following the present auction of 28 GHz Band licenses (in 27.50-28.35 GHz) and the immediately-following auction of 24 GHz Band spectrum (in 24.25-24.45 and 24.75-25.25 GHz). A draft order has been made available to the public.
Of particular interest, the recently released draft item would lay the groundwork for the FCC’s second incentive auction (after the “inaugural” broadcast incentive auction completed in March 2017). A 39 GHz incentive auction would be structured quite differently than the 600 MHz broadcast incentive auction and attempt to reduce encumbrances in the 39 GHz Band by offering existing licensees the option to relinquish their licenses in exchange for payment. The FCC leadership appears bullish that the three auctions will draw significant interest from major service providers looking to support next-generation applications, including 5G wireless connectivity and the Internet of Things. Naturally, the first-in-time 24 and 28 GHz auctions may give some sense in advance of that interest. Through November 26, 2018, after 18 rounds, the 28 GHz Band auction had generated under $200 million in bids, albeit that spectrum is encumbered in many of the largest markets and in slightly more than 50% of all counties nationwide, including the most populous. The 24 GHz Band auction may prove a much better test of the appetite for participants to pay high prices for so-called “high band” spectrum.
The FCC’s draft item would modify the band plans for the Upper 37 GHz Band, 39 GHz Band, and 47 GHz Band to move from 200 megahertz channels to 100 megahertz channels to facilitate repacking of incumbents, ensure consistency with international allocations, encourage equipment standardization across spectrum bands, and promote secondary market transactions. The new licenses would be auctioned on a Partial Economic Area (“PEA”) basis. Auction participants would be allowed to bid on licenses that overlap the contiguous Upper 37 GHz Band and 39 GHz Band.
However, in order for the modified band plan to work as hoped, the FCC wants to clear out as much encumbered spectrum in the 39 GHz Band as possible. The 28 GHz Band, for example, as we mentioned earlier, is heavily encumbered. In the 39 GHz Band, like the 28 GHz Band, incumbents prior to the designation of the spectrum for flexible mobile and fixed use in 2016 were grandfathered by the Commission and generally hold licenses in non-contiguous spectrum blocks that often overlap multiple PEAs. As a result, to serve its purposes, the draft order would offer incumbents three options:
- First, incumbents could choose to have their licenses modified by the FCC to conform to the new license areas while preserving the licenses’ value. The draft item states that the FCC will provide each incumbent with a proposed modification plan well before the auction starts to help them with their decision;
- Second, incumbents could propose alternative license modifications that preserve their licenses’ value, which would be subject to FCC approval. The draft item states that the FCC will announce in advance of the auction procedures for incumbents to submit such proposed modifications and the review criteria by which it would evaluate such proposals; or
- Third, incumbents could elect to relinquish all of their existing licenses in exchange for either (1) “vouchers” of “equivalent value” to use in bidding for new licenses at the auction or (2) cash incentive payments based on the value of their licenses as determined through the auction.
The 39 GHz Band incentive auction would have two phases. In the “clock” phase, auction participants would bid on generic 100 megahertz license blocks. In the “assignment” phase, clock phase winners would bid on specific frequency blocks for their licenses. Incumbents that choose to modify their licenses in accordance with either the FCC’s proposal or their approved alternative plan would receive their new license blocks during the assignment phase.
As with the details of the incumbent license modification process, the final auction bidding and assignment procedures would be announced by the FCC later ̶ likely by early next year. In the meantime, incumbent licensees in the 39 GHz Band and service providers seeking to participate in the auction should take a close look at the FCC’s draft item to ensure that the auction plan would adequately safeguard existing spectrum rights while creating opportunities for increased commercial flexible use of the spectrum. Ex parte discussion with the Commissioners and staff will be possible through December 5, the expected sunshine notice date for the December 12 Open Meeting.