The three Republicans at the FCC approved new rules Wednesday that basically take 2.5GHz spectrum away from schools in order to auction it to wireless network operators and others for 5G.
Yes, that sounds bad. But that's the basic thing that's happening here.
However, like most things in life, the real story is much, much more complicated, and it's not nearly as black and white as it appears. It involves 50-year-old regulations, spectrum entrepreneurs and allegations of financial trickery. If you want to dig into all that, read on. But if you're looking for the bottom line, here it is: The FCC's ruling does it fact free up valuable midband spectrum for 5G, but only in random rural areas. So it won't magically solve the 5G midband spectrum shortfall that CTIA, AT&T and others have been complaining about, nor will it magically cross the digital divide and bring Internet connections to rural Americans. Instead, it just makes some midband spectrum more readily available in places like BFE, where someone might be able to see a 5G business model if they squint hard enough.
Spectrum rules developed under President Kennedy
As outlined in a detailed and thoughtful post by Walter Piecyk, an analyst at Wall Street research firm BTIG, Wednesday's 2.5GHz order by the FCC involves a lot of spectrum in the Educational Broadband Service (EBS) band. As Piecyk wrote, the EBS band is "quite messy" because it was originally intended for schools to use for educational TV broadcasts under rules written in the 1960s. "EBS spectrum has historically been licensed from a specific point with a 35 mile radius, typically from the location of the educational institution using it," Piecyk wrote, adding that most EBS coverage areas are "smaller than 35 miles and the shape of the licensed area is irregular. The existing EBS license areas can also overlap."
When you're talking about educational TV broadcasts, that's fine, but when you're talking about 5G spectrum licenses and coverage areas, it's not.
Enter Sprint (or rather, Sprint's forefathers). While the likes of AT&T and Verizon avoided the messines of EBS, executives at companies Clearwire, Nextel and Sprint saw an opportunity. They basically went to schools that had EBS spectrum and leased those spectrum licenses, in some cases for up to 30 years. By doing so, they cobbled together the massive trove of 2.5GHz spectrum licenses that Sprint is now using for 5G, spectrum that also sits at the heart of T-Mobile's proposed $26.5 billion merger with Sprint. In fact, the FCC estimates that over 95% of current EBS license holders lease most of that spectrum to "non-educators."
But Sprint isn't using all of the 2.5GHz spectrum in the US -- just the spectrum where most Americans live and work. As Piecyk noted, the FCC calculated that fully 50% of EBS spectrum is currently unused, but that vacant spectrum covers just 15% of the US population. "Sprint’s predecessors have done a good job at aggregating EBS spectrum in the population dense markets," Piecyk explained.
FCC to the rescue?
This is why the FCC's chairman is moving forward with the 2.5GHz proceeding. "At long last, we remove the burdensome restrictions on this band, allowing incumbents greater flexibility in their use of the spectrum and introduce a spectrum auction that will ensure that this public resource is finally devoted to its highest-valued use," said FCC Chairman Ajit Pai in his remarks Wednesday. "These groundbreaking reforms will result in more efficient and effective use of these airwaves and represent the latest step in advancing US leadership in 5G."
The FCC's ruling basically allows Sprint to keep all of its 2.5GHz spectrum, and paves the way for the rest of the band to be auctioned off at some unspecified point in the future, after first allowing rural Indian tribes to grab any 2.5GHz licenses they might want. Interesting, the agency also rejected a request from AT&T that would have required Sprint to disclose its 2.5GHz leasing terms and conditions.
Of course, not everyone is happy with the FCC's vote. "The FCC's decision to shut schools out of future EBS band is illogical, harmful and may be illegal as well," wrote John Windhausen Jr., executive director of the SHLB Coalition, which works to promote broadband at schools, libraries and other "anchor institutions."
Continued Windhausen: "The FCC claims that the EBS spectrum is widely underutilized today, and that most licenses are leased to the commercial providers, so why would the FCC award even more licenses to these same companies? The FCC majority has fallen for the 'ear candy' promises of the large commercial carriers that the spectrum will be used to promote 5G, even though these same commercial carriers already have over 600MHz of spectrum that they are not using."
The FCC's two Democrats voted against Pai's 2.5GHz proposal for similar reasons. "This order turns its back on the schools and educational institutions that have made the 2.5GHz band their home since 1962," argued Democratic Commissioner Jessica Rosenworcel. "Today the FCC takes the innovative effort to infuse this band with learning opportunities -- an initiative that dates back to the Kennedy administration -- and reverts to uninspired and stale commercial spectrum policy. This is a shame."
Rosenworcel instead proposed that the FCC conduct a nationwide incentive auction of 2.5GHz spectrum, and use the funds raised from the auction to create a "Homework Gap Fund" for connectivity for students who lack broadband at home.
But Pai offered a scathing rebuke to that proposal: "It's been 427 days -- 14 months to the day -- since we started the 2.5GHz proceeding. One of my colleagues suggested -- yesterday -- that we hold an incentive auction in this band with no details offered whatsoever on how to do so," he said. "Of the many problems with that suggestion, one stands out: It would delay an auction of this key midband spectrum by several years, according to our career staff, thus substantially slowing down progress on 5G. I believe that we need to make it a priority to auction mid-band airwaves right now -- not in several years' time -- and accordingly, I am not willing to support such a delay."
However, in a move that further underscores the acrimonious climate at today's FCC, Rosenworcel's office contacted Light Reading after this article was published to point out that she has publicly floated the idea of an incentive auction for 2.5GHz several times over the past year.
Who might bid on 2.5GHz licenses?
So the 2.5GHz spectrum that the FCC will auction is mostly going to be in rural areas. Which companies are going to want that? In the debate leading up to the FCC's vote, several rural wireless and cable operators stepped forward to express their interest.
"We highlighted our desire to use the 2.5GHz band to help close the digital divide," wrote executives with cable company Midcontinent Communications (Midco) of their recent meeting with FCC officials. Midco runs operations in South Dakota, North Dakota, Minnesota, Kansas and Wisconsin, and is planning an expansive fixed wireless effort. "Specifically, 40MHz of the potentially 195MHz available would allow us to offer speeds of over 230/25 Mbps about 4 miles away from the vertical asset for near line-of-sight customers, 100/20 Mbps about 8 miles from the vertical asset for near-line-of-sight customers, and areas all the way up to 18 miles away where we could still offer 25/3 Mbps, low latency service. We requested, therefore, that the Commission institute rules to allow Midco and other fixed wireless providers to have access to the spectrum and eliminate the commercial middlemen under the current licensing scheme."
And Ted Carlson, chairman of regional wireless network operator U.S. Cellular, visited the FCC at the beginning of July to stress his company's interest in 2.5GHz licenses because of the spectrum's ideal propagation characteristics. "A carrier needs 64% more cell sites using C-Band spectrum than 2.5GHz spectrum to provide a comparable service," U.S. Cellular executives wrote of their meeting with FCC officials. "When comparing 2.5GHz to CBRS, 169% more cell sites would be required using CBRS."
And Claude Aiken, president and CEO of the Wireless Internet Service Provider Association (WISPA), said the FCC's new rules are ideal for his association's members. "In addition to eliminating antiquated educational use and other restrictions for existing licensees, WISPA applauds the FCC for making a significant amount of spectrum in rural areas available for small providers via 'right-sized' licenses, 'right-sized' spectrum blocks and bidding credits," he said. "We appreciate Chairman Pai's public recognition of the benefits the auction rules will create for small providers, and we look forward to working with FCC staff to help implement the auction of 2.5GHz spectrum as soon as possible so hundreds of small providers can make good on this tremendous new resource for their businesses and broadband-hungry customers."
Opponents remain concerned
Nonetheless, there's no getting around the notion that the FCC is taking away a valuable resource from American students, some of whom are facing four-day school weeks due to budget shortfalls. Indeed, Reuters noted that the U.S. Education Department told the FCC in June that it should maintain an "educational use requirement" for 2.5GHz licenses, arguing that revenues from spectrum license sales should be set aside to help students who lack the Internet access required to do their homework.
"Today's vote doubles down on the same auction-driven spectrum policies that have left rural America unserved and low-income students forced to do their homework on WiFi in McDonald’s parking lots," added John Schwartz, president and founder of Voqal, a company that acts as a middleman between schools that want to lease EBS spectrum and companies like Sprint that want access to that spectrum. "Instead of updating EBS and expanding on the strong track record of licensees such as Voqal -- which is proud of our record of serving schools and low-income communities -- the Commission has voted to commercialize a vital public asset.”
But Voqal recently fell under the critical gaze of Republican FCC Commissioner Brendan Carr, who sent a lengthy letter to Voqal last week outlining a number of concerns he had with the company and its financial operations. A Voqal representative said Wednesday the company will respond to Carr's letter and added that the company rejects any allegation of financial impropriety.