The Federal Communications Commission (“FCC” or “Commission”) has released a draft Report and Order (“Order”),1 which if adopted, would make 100 megahertz of spectrum in the 3.45-3.55 GHz band available for flexible use wireless services. At the same time, the Commission released a draft Public Notice (“PN”)2 which sets out proposals for bidding procedures for an auction of the 3.45-3.55 GHz band, also known as Auction 110.

Potentially disadvantageous to smaller carriers is a proposal to license the 3.45 GHz service on a Partial Economic Area (“PEA”) basis, instead of a county basis. The blocks will be licensed in 20 megahertz blocks on an unpaired basis. Additionally, the FCC would impose a spectrum aggregation limit of a maximum of 40 megahertz in any PEA at any point in time for four years post-auction. Several companies and associations are currently lobbying the FCC to revise these rules to license 10 megahertz blocks on a county basis instead of by PEA. The FCC has proposed a longer 15-year license term to account for incumbent relocation, discussed in more detail below.

As in previous auctions, the FCC proposes that bidding credits will be available to eligible small businesses and rural service providers as follows:

“Small Business” (a business with attributed average annual gross revenues that do not exceed $55M for the preceding 5 years) will be eligible to receive a 15% discount on its winning bids.
“Very Small Business” (a business with attributed average annual gross revenues that do not exceed $20M for the preceding 5 years) will be eligible to receive a 25% discount on its winning bids.
“Rural Service Provider” (an existing communications provider that has fewer than 250,000 attributed subscribers and that serves predominately rural areas) will be eligible to receive a 15% discount on its winning bids.

The FCC proposes the usual bidding credit caps of $10 million for rural service providers and $25 million for small businesses. There would also be a $10 million overall cap on small businesses that win licenses in smaller markets.

If adopted, the Commission will implement accelerated performance requirements, as compared to what was proposed in the Further Notice of Proposed Rulemaking. The first construction benchmark will be at four years after the license issue date and the second benchmark will be by eight years after the license issue date. Licensees using the frequencies for mobile or point-to-multipoint services would be required to show that there is reliable signal coverage and an ability to offer service to at least 45% of the population in each license area by the fourth year of the license term and provide 80% coverage by year eight. The FCC proposes a separate benchmark for licensees providing fixed point-to-point services based on population areas of 268,000 or less.

Because the band is currently used by the Department of Defense (“DoD”), the spectrum in the 3.45-3.55 GHz band falls under the Commercial Spectrum Enhancement Act (“CSEA”) which requires that auction proceeds be used to fund the estimated relocation or sharing costs of incumbent Federal entities. As such, the rules require a reserve price where the total cash proceeds from any auction of eligible frequencies shall equal at least 110% of the total estimated relocation costs provided to the Commission by the National Telecommunications and Information Administration (“NTIA”). NTIA estimates that the relocation costs will be $13,432,140,300 and the Commission proposes the reserve price for Auction 110 will be a whopping $14,775,354,330.

As part of relocation, the Commission proposes that new licensees in the 3.45 GHz Service will reimburse, secondary, non-federal radiolocation licenses for the reasonable costs related to the relocation of those operations. The Commission proposes that all 3.45 GHz Service licensees will be responsible for a pro rata share of the cost of non-federal relocation regardless of location, a departure from the relocation procedures established for C-Band licensees. The estimated reimbursable cost is just over $3 million. This means that if all licenses are issued during the auction, each license held will require an approximate payment of 0.05% of the total reimbursement costs.

If the rules are adopted and implemented as proposed, with limited federal operations that remain in the band indefinitely, the Commission proposes a different approach than it used in the Citizens Broadband Radio Service and declines to manage coordination efforts through an automatic frequency coordination system such as a Spectrum Access System. Before deploying, a licensee would be required to coordinate with DoD to design and plan its use in the band.

These are draft items and will be voted on during the March 17th FCC Open Meeting. If you have any questions regarding the Order or PN or would like to the let the FCC know of any concerns you have with the proposed rules, please contact Dee Herman at [email protected], Clare Andonov at [email protected] or Hilary Rosenthal at [email protected].