FCC Settles on County Sized Priority Access Licenses to be Auctioned in the 3.5 GHz Band

Report and Order

(GN Docket No. 17-258)

On October 24, 2018, the Federal Communications Commission (the “Commission” or “FCC”) released a Report and Order (“Order“) modifying licensing and technical rules governing the Priority Access Licenses (“PALs”) in the 3.5 GHz band.  With the goals of advancing the public interest and promoting development and deployment of mobile 5G services, the Commission adopted changes to the PAL rules such as larger license areas, longer license terms, license renewability, performance requirements at the end of term and changes to the competitive bidding rules for the issuance of PALs.

In the Order, the Commission increased the size of PAL license areas from census tracts to counties, which it concluded will allow the band to more effectively support next generation mobile network deployments while still supporting targeted uses.  The Commission intends to seek comment on an option for package bidding in the top 305 markets for applicants to be able to bid on all counties that comprise a larger Metropolitan Statistical Area (“MSA”), which it believes will reduce transaction costs and promote development in the secondary market.  Additionally, the Commission extended the PAL license term from three years to ten years and makes the licenses renewable at the end of the license term. The Commission further established end of term performance requirements. Specifically, a PAL licensee must provide substantial service by demonstrating one of two safe harbors: (1) a licensee providing a mobile service or point-to-multipoint service must show it provides reliable coverage and service to 50 percent of the population in the license area; or (2) a licensee providing point to point service must show that they have constructed and operated, using Category B CBSDs, at least four links in license areas with 134,000 population or less, and at least one link per 33,500 population (rounded up) in license areas with a greater population.  Alternatively, a licensee may make an individualized showing of substantial service by relying on a combination of different services for which there is a safe harbor or on services for which there is no defined safe harbor.

The Commission also made changes to the competitive bidding procedures for PALs. The Commission eliminated its previous rule of making one less PAL available than the total number of PALs in a license area for which all applicants had applied and ensures that PALs will operate over 10 megahertz unpaired channels, utilizing SAS-controlled assignments to guarantee prioritized access to the band.  Additionally, the Commission adopted the bidding credits for eligible small businesses and rural providers that it did in the 600 MHz incentive auction and the Spectrum Frontiers Auctions (24 and 28 GHz band) proceedings.  Entities with average gross revenues not exceeding $55 million for the preceding three years will receive a 15 percent “Small Business” bidding credit. Entities with average gross revenues not exceeding $20 million for the preceding three years will receive a 25 percent “Very Small Business” bidding credit.  Carriers that predominantly serve rural areas and have fewer than 250,000 subscribers are eligible for a 15 percent “Rural Service Provider” bidding credit. The Commission will also offer tribal land bidding credits. The Commission will allow partitioning and disaggregation of PALs in the band on the secondary market to ensure efficient use of the band.  Furthermore, the Commission retains its PAL aggregation limit of 40 megahertz (four PALs) of the possible 70 megahertz per license area.

The Commission’s changes solely affect PALs; the rules governing General Authorized Access and unlicensed use of the 3.5 GHz band remain unchanged. The FCC’s action now paves the way for the 3.5 GHz band PAL auction, which may take place mid-2019.

If you have any questions, please contact Dee Herman at dee@hermanwhiteaker.com, Clare Liedquist at cliedquist@hermanwhiteaker.com, or Molly O’Conor at moconor@hermanwhiteaker.com.