$9.7B Seen as FCC's Ceiling for C-Band Clearing Incentivization
The up-to $9.7 billion in payments the FCC is proposing be spent on satellite operators seems to be a hard-and-fast figure with little to no commission wiggle room, we are told. Chairman Ajit Pai's office didn't comment. The 185-page C-band draft order released Friday says Intelsat would be eligible for up to half -- $4.85 billion -- of the accelerated relocation payments for making 2021 and 2023 spectrum clearing deadlines. SES would be eligible for $4 billion, Eutelsat for $467 million, Telesat for $374 million and Star One for $13.6 million.
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Allocating proceeds of a C-band auction is expected to top the House Commerce Committee’s telecom agenda for the next few weeks (see 2002070044). The agency on Friday also released drafts of the other items on its Feb. 28 agenda.
Losers in the draft C-band order include earth station operators, who won't be eligible for accelerated relocation payments. The FCC said clearing any given earth station "will be a relatively quick process" and it's because satellite operators have to account for operational logistics of legions of those earth stations that the transition will take a notable amount of time.
Also not in line for compensation are small satellite operators ABS and Hispasat, which had argued they should be eligible for compensation due to their U.S. market access authorizations. According to the draft, a successful transition needs to include all satellite operators with existing U.S. customers using incumbent earth stations that will need transitioning to the upper part of the band, and the two don't have those customers. The two didn't comment.
The 3.7-4.2 GHz band plan is seeing White House favor. Vice President Mike Pence in a CNBC interview said the FCC's C-band plan has President Donald Trump's backing. And National Economic Council Director Larry Kudlow told Fox Business on Friday Pai had reached "a historic deal" with the satellite operators that represented "a gigantic step forward" toward 5G deployment. A Wall Street Journal editorial said the agency's C-band proposal "could accelerate 5G by years -- if only Republican politicians would now stand down" from criticisms of the incentives aimed at avoiding satellite operator litigation or the bad precedent that would be set by the agency clawing back spectrum licenses.
There are any number of ways the total amount to be spent on accelerated relocation payments could have been calculated, but the $9.7 figure is "reasonable," the draft says. "This determination is a line-drawing exercise, in which we must attempt to capture the value to new entrants of accelerated clearing and the amount that will effectively incentivize incumbent space station operators to complete such accelerated clearing," and $9.7 billion balances the various considerations and amounts that have been suggested, it said.
"I don't see the FCC budging" on the accelerated relocation payment figure, said Mercatus Center’s Brent Skorup. He said the commission would have announced a dollar figure like it did Thursday (see 2002060057) only if it were pretty firm. He said given all the interested parties that have been pulling the FCC in different directions, the $9.7 billion is likely what it had settled on as threading that needle. That the C-Band Alliance (CBA) didn't reject the amount out of hand indicates it's a figure the incumbent satellite operators have decided they can tolerate, he said. Lobbying and negotiations will likely be more about issues such as the clearing process and timelines, he said.
An eighth-floor official told us Pai's speech making the case for $9.7 billion seemed to suggest the numbers are fairly baked in and the result of an agreement with satellite incumbents. He said the C-band process has been a contentious one and it would be difficult to change a key term now, and any negotiations between now and the February meeting are more likely about issues around the margins. A satellite executive told us the CBA will likely be pragmatic about the $9.7 billion figure and see it as an FCC ceiling, as the agency was never going to get to an 11-figure amount. The CBA didn't comment.
Spectrum consultant Tim Farrar said the issue to be finalized, and which thus could represent a potential modest extra benefit to the satellite operators, is over what will be reimbursable as an expense. Some of that detail can be left for later, he said.
A broadcast spectrum expert told us that while the FCC has considerable flexibility on incentive payments, Pai is trying to get the auction process started quickly while minimizing the chance of lawsuits and lawmaker intervention.
Beyond the draft order, "we are not out of the woods yet" on C-band issues, said Phoenix Center President Larry Spiwak, pointing to pressure from Senate Appropriations Financial Services Subcommittee Chairman John Kennedy, R-La., for lower incentive payments. Despite that, legislative action is unlikely, he said. Incentive payments for a quicker clearing are "a time-tested FCC policy," he said. The eighth-floor FCC official also told us congressional action is seen as unlikely. House Commerce Committee leaders see work on a compromise C-band bill dominating their telecom agenda in the coming weeks given the limited time before the FCC vote on Pai's proposal (see 2002070044).