Wheeler Proposal for 3.5 GHz Band Seen Moving Forward Despite Industry Concerns

Carriers have repeatedly expressed concerns about large exclusion zones and the small size of proposed licenses in the FCC’s proposal, plus abbreviated license terms for those who buy licenses under one of the three proposed tiers. AT&T, Verizon and other industry companies raised numerous concerns about the band in recent reply comments (CD Aug 19 p5) in docket 12-354. Two of the national carriers, T-Mobile and Sprint, didn’t file reply comments, an industry official observed.

In April, the FCC proposed a three-tiered access and sharing model -- with tiers for federal and non-federal incumbents of the band, a priority access tier that would be licensed by the agency and a third tier for general authorized access (http://bit.ly/1hkyeHW). The FCC approved the NPRM at its April 23 meeting, over objections from commissioners Ajit Pai and Mike O'Rielly that proposed exclusion zones are too big for the band to reach its potential as a laboratory for spectrum sharing (CD April 24 p4).

An FCC official told us Wheeler has two real choices: Putting off a decision until more consensus develops or imposing rules that are likely to be controversial. Carrier executives say under the rules as proposed, their companies are unlikely to bid in any auction of priority access spectrum. One-year licenses and very small license sizes are “not something that works for carriers,” said a carrier executive. While the rules would allow bidding up to five years in advance for a license, that’s still not much certainty, the official said. “If the carriers are interested, you'll certainly have a large, embedded base of equipment that will bring scale to this band.”

Tom Struble, legal fellow at TechFreedom, who worked on the issue as a Wireless Bureau staffer, said many questions remain about the CBRS proposal. The large size of exclusion zones “would be a huge problem for carriers,” which would “severely limit” the potential deployment of small cells and the buildout of heterogeneous networks (HetNets) providers need to increase the carrying capacity of their networks, Struble said. Proposed license terms are only one year, though they can be extended, versus 10 years for more typical licenses, he noted. “Carriers are worried that they may invest a lot of money building out a small cell network only to lose their licenses in a few years and have to eat all of their investment costs,” Struble said. “Essentially, they want more long-term certainty before they're willing to invest millions/billions in building out their HetNets."

Armand Musey, managing director at business valuation firm Goldin Associates, said he sees the abbreviated license terms as the single biggest issue for carriers. “It may be hard to commit capital to an infrastructure build-out with only a one year lease, unless there are clear renewal expectations,” he said. “If I were Wheeler, I'd focus on making sure licensees have enough time to recoup their investment."

Many ‘Moving Parts’

The 3.5 GHz proceeding “has a lot of moving parts,” said Doug Brake, telecom policy analyst at the Information Technology and Innovation Foundation. Many questions also remain about how a Spectrum Access System would work, he said. “SAS administration, fee structure and the particulars of each incumbent’s protections are hard problems,” he said. “There is also the issue of baking in control and enforcement mechanisms to foster the trust needed for investment and build-out of critical services. ... And, of course, there is still work being done to reduce federal radar protection zones. In short, there are so many hard problems with an ‘innovation band’ like this that I would not be surprised if it was delayed."

Michael Calabrese, director of the New America Foundation’s Wireless Future Project, said the carrier objections about the length of licenses are a “red herring,” especially since priority access licensees would effectively be able to lock in licenses for five years at a time. “Very small cell routers and base stations will typically not have a useful life exceeding five years and, under the commission’s three-tier access framework, will always be able to use a far larger amount of unlicensed spectrum in the same band, albeit on a best efforts basis,” Calabrese said. Verizon and AT&T and their suppliers have an obvious goal, pushing “rules tailor-made to their increasingly unsustainable business model,” he said. In a world where 80 percent of total mobile data traffic will soon travel over Wi-Fi and other small cell offload, the administration’s goal of “dynamic small-cell sharing of this underutilized naval radar band is clearly the best public policy long-term,” he said.

"This is essentially a political fight,” said Public Knowledge Senior Vice President Harold Feld. “As such, there is no reason why the FCC cannot resolve this at the end of the year. The carriers did not introduce anything new from a technical perspective.” The question for the FCC is whether it has the “courage” to move forward on the kind of innovative sharing proposals advocated by a landmark July 2012 report by the President’s Council of Advisors on Science and Technology (PCAST) (CD July 23/12 p1), Feld told us. “If the answer to that is ‘yes,’ then we can get rules done by the end of the year,” he said. “If the answer to that is ‘no,’ then we're never going to get rules done. Incumbents have routinely used this sort of ‘death by a thousand cuts’ compromise tactic to kill promising competing technologies, such as ultrawideband. The question is whether the incumbents can once again use political pressure to push the commission into backing away from the right technical decision."

"No one seems to be on the bandwagon” for the latest proposal for the band, other than “idealistic unlicensed advocates who are really trying to get the whole enchilada here,” countered a former FCC spectrum official who has not been directly involved in the proceeding. The lawyer said the FCC should proceed with caution: Spectrum rules “last a very long time and you don’t want to rush things and there are too many things here that are not aligning properly.”