Should Satellite Companies Be in Charge of Selling Their 5G Spectrum?

The satellite industry is sitting on a treasure trove of prime, mid-band spectrum that could be used for 5G services. But the big debate right now is: What is the best way to move that spectrum from satellite providers to actual 5G users?

It's a debate that's creating some interesting bedfellows: T-Mobile US Inc. , Charter Communications Inc. , Google (Nasdaq: GOOG) and others on one side, versus AT&T Inc. (NYSE: T), Verizon Communications Inc. (NYSE: VZ), Intelsat Ltd. , SES S.A. (Paris: SESG), Eutelsat Communications S.A. and others on the other. And it's a topic that's so heated that the companies involved in the debate are making a range of filings with the Federal Communications Commission (FCC) on the topic -- despite the fact that most FCC staff aren't even reading those filings due to the ongoing government shutdown. (See CBRS Players Begin to Fret Over Government Shutdown.)

Nonetheless, it's a debate with potentially billions of dollars hanging in the balance. According to the most optimistic tally, what's at stake is fully 500MHz of spectrum in the 3.7GHz-4.2GHz band -- spectrum that most agree strikes the perfect balance between capacity and coverage for 5G. After all, the FCC's most recent major mid-band spectrum auction -- the AWS-3 auction of 65MHz of spectrum ranging from 1695MHz to 2180MHz -- raised a whopping $44 billion in total bids almost exactly four years ago.

C-Band excitement
The debate over the 3.7-4.2GHz band -- widely referred to as the C-Band -- kicked off in earnest last year, when the FCC opened a proceeding to see whether the satellite industry could relinquish some of its spectrum in that band for 5G. The action came as no surprise: The FCC has been pushed by the Trump administration to find any unused or underused spectrum it can because "it is imperative that America be first in fifth-generation (5G) wireless technologies."

The move also has plenty of precedence: The FCC's 600MHz auction and 700MHz auctions both essentially took spectrum from the broadcast TV industry and auctioned it to the wireless industry.

Now here's where things get interesting in the C-Band: Instead of simply sitting back and waiting for the government to swoop in and auction off its unneeded spectrum holdings, the satellite industry decided to see what it could get out of the deal. In October of last year, four of the sector's biggest C-Band spectrum owners -- Intelsat, SES, Eutelsat and Telesat -- formed the C-Band Alliance (CBA) to "accelerate making mid-band spectrum available for 5G services." Their pitch? To be the "facilitator" of the sale of around 180MHz of C-Band spectrum under a "market-based mechanism."

Their argument is relatively simple: We're currently using the spectrum, mainly for the widescale distribution of video services, which means that we would be the best ones to figure out how to get off of it and sell it to someone else. Oh, and we'll keep the proceeds and, in part, use them to purchase the new satellites we'll need to move off that 180MHz worth of spectrum.

Verizon mostly agrees with the CBA. "There is no time to waste," the operator said, arguing that the CBA's proposal would free up the spectrum for sale quickly.

"The C-Band Alliance has expressly committed to protect the quality and reliability of incumbent FSS operations and tentatively committed to a transition timeline. It should be amenable to a reasonable, Commission-adopted framework aimed at ensuring that the market-based mechanism will be executed in a manner consistent with Commission's policy directives," Verizon explained.

AT&T also said the CBA should be the one to dole out C-Band spectrum, as long as it does so in part "according to well-established auction rules approved by the FCC."

T-Mobile counters
But T-Mobile is having none of it. "The purported benefits of the C-Band Alliance proposal are illusory," the operator stated in a meeting with FCC official in December, shortly before the government shut down. Instead, T-Mobile argued that the FCC should to take over the allocation of C-Band spectrum itself -- and that the agency should free up a total of 500MHz of spectrum in the band, more than double what the CBA has proposed.

Specifically, T-Mobile is urging the FCC to conduct an "incentive auction," similar to the recent 600MHz auction, wherein wireless providers would bid on C-Band licenses during a forward auction and then satellite operators would accept or reject those bids in a reverse auction. T-Mobile's affinity for incentive auctions comes as little surprise -- the operator plunked down $8 billion in bids in 2017 during the FCC's 600MHz incentive auction of TV broadcasters' unwanted spectrum. (See T-Mobile, Dish & Comcast Big Winners in $19.8B 600MHz Auction.)

T-Mobile also blasted the CBA's proposal to sell off the licenses, arguing that the process would be closed and that it also goes against Congressional legislation putting the FCC in charge of spectrum auctions.

Others are siding with T-Mobile. "A privately-managed transition of this magnitude, run by self-interested stakeholders, would leave lingering questions about the fairness of the process," Charter pointed out. Google also expressed concern about a privately run auction.

The CBA, it seems, is ready for the fight. Headed by Preston Padden -- a longtime media executive who worked on behalf of TV broadcasters during the FCC's 600MHz incentive auction -- the satellite industry's C-Band Alliance has been going all out to squash T-Mobile's C-Band argument. Specifically, the CBA in December sent a letter to more than 300 "potential participants in the U.S. 5G ecosystem," including small, regional and rural wireless carriers and local exchange carriers, detailing the CBA's plans for the auction and urging them to contact the Alliance "if you are interested in learning more about and/or participating in these market-based processes."

More recently, the Alliance called in an auction expert -- Paul Milgrom of auction-theory firm Auctionomics -- to outline what he argued were a number of flaws in T-Mobile's proposal. Milgrom also hinted at what is likely at the heart of the CBA's opposition: money.

"If T-Mobile’s further proposal to encourage the satellite companies to give up the full 500 MHz in exchange for 80% of the auction revenues succeeds, that would eliminate the C-Band satellite businesses entirely," he wrote.

And so the argument goes, back and forth, with each side trying to score points through economic arguments, support from other players, and whatever other leverage is available. However, at least for the foreseeable future, these efforts are falling on mostly deaf ears as the government shutdown effectively halts 5G spectrum planning at the FCC.

Mike Dano, Editorial Director, 5G & Mobile Strategies, Light Reading | @mikeddano

Mike Dano 2/5/2019 | 4:59:33 PM
update I tweaked my explanation of the current usage of C Band spectrum to make it more accurate. Woo hoo.
daveburstein 1/25/2019 | 4:44:00 AM
Brilliant reporting I've calculated there's easily a US$10 billion giveaway heere.
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