How Upcoming Auctions Affect the LMR Industry
Wednesday, January 22, 2014 | Comments

In the Middle Class Tax Relief and Job Creation Act of 2012 (the Spectrum Act), Congress directed the FCC to conduct auctions for spectrum to support commercial wireless systems. It also provided the FCC with authority to conduct a one-time auction of broadcast spectrum.

LMR companies should consider participating in these auctions depending on their spectrum needs. And even without mission-critical communications companies buying spectrum, the additional frequencies in the market will likely have a positive impact on the two-way radio industry.

Up for Auction

The Spectrum Act directs the FCC to auction several different spectrum bands. First, it requires the FCC to auction the spectrum at 1.915 – 1.92/1.995 – 2 GHz, the so-called Personal Communications Services (PCS) H block. The auction was scheduled to begin Jan. 22. Interest in that band has been limited for several reasons — it is comparatively little spectrum, and it is in between spectrum licensed to satellite TV provider Dish Network and Sprint, viewed as the likely winners of the auction.

However, interest in the band has diminished further, probably because of regulatory relief that the FCC provided to Dish. Dish asked the FCC to allow it to decide, well after the auction is over, how to use its adjacent AWS-4 band spectrum. The uncertainty may have caused Sprint not to pursue the H block, which it publicly coveted for years. Other carriers also announced that they will not be in the H block auction. However, while most large carriers appear to be staying away, the FCC conditioned the relief it provided to Dish on Dish remaining in, at a significant price. Dish committed to bid a minimum of $1.56 billion for the H block, ensuring at least some return for the spectrum.

The other bands to be auctioned are generally known as the AWS-3 spectrum, which consists of the 1.695 – 1.71, 1.755 – 1.78, 2.155 – 2.18 and 2.02 – 2.025 GHz bands. These bands attracted more early attention than the H block, although there are potential impediments to their use as well. All of the spectrum, except for 2.155 – 2.18 GHz, is expected to be used for uplink (handset use), even though there are greater needs for downlink (base station) spectrum because the volume of information transmitted is typically greater in the downlink direction.

Also, two of the bands (1.695 – 1.71 GHz and 1.755 – 1.78) are used by the federal government and will need to be shared with those incumbents, at least for some initial period. While it is too early to tell exactly who will be interested in this spectrum and how high the price will go, several major carriers have been active in the proceeding that will establish the service and auction rules for the band.

While Congress didn’t direct the FCC to auction specific broadcast frequencies, it gave them authority to auction TV spectrum. In a first-of-its-kind process, the FCC will conduct a “reverse” and a “forward” auction. In the reverse auction, broadcasters will put their spectrum up for sale and will sell it if they get the minimum price they’re seeking. The forward auction will be much like current spectrum auctions — among bidders that want the spectrum the broadcasters are relinquishing — at the price that the broadcasters are willing to sell. What was expected to be a complex process has turned out to be even more complicated and contentious than imagined, and new FCC Chairman Tom Wheeler announced that this incentive auction will not occur until 2015.

In addition to the auction of this newly available spectrum, the FCC will continue to conduct auctions for spectrum that has already been auctioned once. Some of this spectrum has never been licensed, while other spectrum has been “recaptured” because of the licensee’s failure either to make a required auction payment or to meet a buildout or other service requirement.

Auction Opportunities

Sign Up for the Auctions. Large carriers at high prices will take much of the newly available spectrum; however, commercial operators may not be interested in spectrum across the country. Some of the spectrum will be licensed throughout economic areas (EAs), which are comparatively small. Particularly in rural areas, major carriers may not bid on spectrum where they already have sufficient spectrum and no interest for more. The FCC’s spectrum use rules have increasingly permitted licensees to use auctioned spectrum how they see fit, so auction winners need not provide the same types of services that will compete directly with major carriers.

Also, some of the spectrum may not be configured ideally for larger carriers. If spectrum — particularly channels designated for handset use only — is licensed on an unpaired basis, for example, large carriers may not bid on a particular band, making it available for mission-critical communications companies that may be able to use it for mobile-only operations. The broadcast incentive auction spectrum may also produce excess “odd lots,” an amount of spectrum available only in limited markets. Major carriers may avoid this spectrum in favor of an amount of spectrum that is uniformly available across the country.

In addition to the spectrum that will be auctioned for the first time, LMR companies should watch re-auctions for spectrum that may become available. Spectrum that is available in a re-auction is generally less expensive than it was the first time it was auctioned.

Partnering Opportunities. If LMR providers don’t become the licensee of auctioned spectrum, they can still benefit from the spectrum becoming available to others. First, spectrum licensees will need to meet buildout obligations, and mission-critical communications firms often have access to towers and other facilities that carriers may need to use. It will not be only wireless operators that may need access to towers and other local buildout assistance. When broadcasters are “re-packed” as a result of the incentive auction, they will likely require local assistance switching their facilities to a new channel. Some of the money that is raised through the auction will be used by the First Responder Network Authority (FirstNet), which will also likely need local partners to help it build and maintain its network.

Second, carriers may not need all the spectrum they obtain at auction. They may be willing to use the FCC’s leasing process to allow smaller providers to use the spectrum. Even if they don’t allow mission-critical communications companies to build out networks with auctioned spectrum, they may allow others to sell onto their networks, through resale or agency relationships.

Large carriers will likely participate actively for the spectrum that the FCC will make available as a result of the 2012 Spectrum Act. However, two-way radio firms should not dismiss the opportunity to participate in the auction where carriers are not bidding and should pay attention to the auction winners in any case. As experts in system design and implementation, mission-critical communications companies can be valuable partners to those that are successful in the upcoming auctions.


Russell H. Fox is a member of the communications section of the law firm Mintz, Levin, Cohn, Ferris, Glovsky and Popeo. This article represents the view of the author and not any of the firm clients. Fox may be reached at RFox@mintz.com.

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