REMINDER: Comments on C-Band Auction Procedures Due May 1, 2020

Last month, the Federal Communications Commission released a Public Notice seeking comments on procedures for Auction 107, the auction of 5,684 overlay licenses in the 3.7-3.98 GHz band (“Lower C-band”).  Comments on the proposed Auction 107 procedures are due May 1, 2020 and reply comments are due May 15, 2020.  Please see below for Herman & Whiteaker’s summary of the Public Notice, as well as the Report and Order adopted the same day. If you are interested in filing comments in this proceeding, or if you have any questions, please contact Dee Herman at dee@hermanwhiteaker.com, or Clare Andonov at candonov@hermanwhiteaker.com.

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C-Band Auction A Go as FCC Seeks Comment on 
Auction Procedures
(GN Docket No. 18-122; AU Docket No. 20-25)
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At its Open Meeting on February 28, 2020, the Federal Communications Commission (“FCC” or “Commission”) approved a Report and Order and Proposed Order of Modification (“Order”) adopting rules to clear spectrum in the 3.7 to 4.2 GHz band (the “C-band”) in order to conduct an auction (“Auction 107”) of new flexible use licenses in the lower portion of the band (3.7 to 3.98 GHz).[1] Simultaneously, the Commission adopted a separate Public Notice (“Public Notice”) seeking comment on the appropriate competitive bidding procedures for Auction 107.[2] The Order and Public Notice demonstrate a major push by the Commission to quickly free up mid-band spectrum that is considered to be extremely valuable for next-generation wireless services.  The Commission intends to begin bidding in Auction 107 on December 8, 2020 and proposes to use an ascending clock auction format with a subsequent assignment phase, like it did in the recent Auctions 102 and 103.  Moreover, the Commission set a December 2025 deadline for transitioning the incumbent operations out of the lower C-band with incentives to meet earlier accelerated deadlines.  Given the high demand for mid-band spectrum,there is expected to be significant interest in Auction 107 from large and independent carriers.  Below please find a summary of the Order and the proposals in the Public Notice.

C-Band Reform Report and Order

Reform of the C-band. With the goal of making more mid-band spectrum available for 5G deployment, the Commission adopts rules in the Order to repurpose the lower 300 MHz of the C-band (3.7-4.0 GHz).  The Commission designates 280 MHz of C-band spectrum (3.7-3.98 GHz) to be cleared for a Commission-led auction, plus another 20 MHz to serve as a guard band (3.98-4.0 GHz).  All existing satellite operations in the band will be repacked into the upper 200 MHz of the band (4.0-4.2 GHz).  The incumbent satellite operators’ relocation costs (estimated to be between $3.3 and $5.2 billion) will be paid for by winning bidders in Auction 107, who will be responsible for reimbursement of reasonable costs based on their pro rata shares of the gross winning bids.  The Commission establishes an independent clearinghouse to manage and administer relocation costs.  The Commission sets a deadline of December 2025 for clearing the lower C-band but also plans to make $9.7 billion in acceleration payments available to the incumbent satellite operators that clear the lower portion of the band on a faster timeline.

License Term, Performance Requirements & Renewal.  In the Order, the Commission adopts 15-year, renewable license terms to account for the time needed to clear, relocate and repack existing operations. Additionally, the Commission adopts stringent performance requirements for licenses in the 3.7-3.98 GHz band, with 8-year and 12-year benchmarks.  Failure to meet the first performance benchmark will reduce a licensee’s second performance benchmark to 10 years and license term to 13 years.  Failure to meet the final performance benchmark will result in the termination of the license.  The Commission expects licensees to maintain the level of service until the end of the 15-year term and therefore, declines to adopt a performance benchmark at the time of renewal.

Licensees relying on mobile or point-to-multipoint service must show that they are providing reliable signal coverage and service to at least 45% of the population within the service area of the licensee within 8 years of the license issue date, and to at least 80% of the population within 12 years.  Licensees relying on point-to-point service must demonstrate within 8 years that they have four links operating and providing service, either to customers or for internal use, if the population within the license area is equal to or less than 268,000.  If the population within the license area is greater than 268,000, a licensee relying on point-to-point service must demonstrate that it has at least one link in operation and is providing service for each 67,000 population within the license area. Within 12 years, licensees relying on point-to-point service must demonstrate that they have eight links operating and providing service, either to customers or for internal use, if the population is equal to or less than 268,000.  In the alternative, a licensee may make its buildout showing on the basis of geographic area coverage. To satisfy the requirements of using this metric, licensees must show that they are providing reliable signal coverage and service to at least 35% of the geographic area of the license after 8 years and to 65% of the geographic area after 12 years.   

Auction Procedures PN

Description of Licenses.  In Auction 107, there will be 5,684 overlay licenses available in the 3.7-3.98 GHz band throughout the contiguous United States.[3]  The Commission proposes to auction fourteen (14) 20 MHz blocks to be licensed by Partial Economic Areas (“PEAs”).[4] A licensee may provide any services permitted under a fixed or mobile allocation as set forth in Section 2.106 of the Commission’s rules.  In the clock phase of Auction 107, bidders may bid on generic blocks in two categories-Category A that covers 3.7-3.8 GHz (five blocks: A1-A5), and Category BC that covers 3.8-3.98 (nine blocks: B1-B5, C1-C4)-in each PEA.

Prohibition on Certain Communications.  As has been the case in previous spectrum auctions, the Commission proposes applying Section 1.2105(c)(1) of the Commission’s rules, which prohibits the communication of bids or bidding strategies after the short-form application has been filed.  An Auction 107 applicant would therefore be prohibited from discussing bids or bidding procedures with another Auction 107 applicant.  The Commission seeks comments on this proposal.

Bidding Credits.  Consistent with Auction 101 (28 GHz), Auction 102 (24 GHz, and Auction 103 (Upper 37 GHz, 39 GHz, and 47 GHz), bidding credits will be available to eligible small businesses and rural service providers, and the Commission proposes to adopt the same bidding credit caps.  Businesses with average annual gross revenues that do not exceed $55 million for the preceding three years are eligible to receive a small business bidding credit of 15 percent, and businesses with average gross revenues that do not exceed $20 million for the preceding three years are eligible to receive a very small business bidding credit of 25 percent.   To be eligible for a rural service provider bidding credit of 15 percent on its winning bid, an applicant must be a service provider in the business of providing commercial communications services, have fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers, and serve predominantly rural areas.

The Commission proposes a $25 million cap on the total amount of bidding credits that may be awarded to an eligible small business and a $10 million cap on the total amount of bidding credits that may be awarded to an eligible rural service provider.  In addition, to create parity among such bidders in less populated markets, the Commission proposes a $10 million cap on the total amount of bidding credits that any eligible small business may apply to winning licenses in markets with a population of 500,000 or less.  The Commission seeks comments on these proposals and also reminds all applicants of the prohibition against changes in ownership of the applicant that would constitute an assignment or transfer of control.

Proposed Bidding Procedures. The Commission proposes using an ascending clock format with generic blocks for Auction 107, similar to Auctions 102 and 103, in which bidders indicate their demand for categories of generic license blocks in specific PEAs.  The clock phase will determine the winners of generic spectrum blocks and the second phase of Auction 107, the assignment phase, will provide winning bidders with the option to bid for specific frequency blocks.

Consistent with other spectrum auctions, the Commission proposes requiring applicants to submit upfront payments which are refundable to establish eligibility to participate in Auction 107.  The Commission proposes upfront payments based on $0.015 per MHz/pop.  The list of proposed bidding units, upfront payments, and minimum opening bid amounts per PEA can be found here. Additionally, the Commission seeks comment on incorporating an “activity upper limit,” a new proposal in which bidders would be allowed to submit bids that exceed their current bidding eligibility to help mitigate the effect of rules that might otherwise cause participants to lose eligibility.

Auction 107 will come on the heels of Auction 105, the auction of Citizens Broadband Radio Service Priority Access Licenses (“PALs”) which is scheduled to begin in June of this year. We believe that Auction 107 may be extremely attractive to larger wireless carriers because of the larger geographic area size offered and because use of these licenses will not require coordination with a Spectrum Access System.  For carriers looking to utilize spectrum immediately, it is important to note that there will likely be a longer period of time before Auction 107 winners will be able to use spectrum in the C-band, which, due to the transition of incumbent operations, may not be cleared until as late as the end of 2025.  Ultimately, the mid-band spectrum available in Auction 107 is highly anticipated and has the potential to be extremely valuable.

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[1] See generally Expanding Flexible Use of the 3.7 to 4.2 GHz Band, GN Docket No. 18-122, Report and Order and Order of Proposed Modification, FCC 20-22 (Mar. 3, 2020) (C-Band Reform Order).
[2] Auction of Flexible-Use Service Licenses in the 3.7-3.98 GHz Band for Next-Generation Wireless Services; Comment Sought on Competitive Bidding Procedures for Auction 107, AU Docket No. 20-25, Public Notice, FCC 20-23 (Mar. 3, 2020)(Auction 107 Procedures PN).
[3] The Commission plans to retain FSS and Fixed Service operations in the C-Band in areas outside of the contiguous United States and therefore, PEAs in Alaska, Hawaii, and the U.S. territories will be excluded from the repurposing and auction.
[4] A list of counties with the corresponding PEAs can be found here.