FCC Chairman Pai wants a public auction of mid-band spectrum

A bit more than a couple of weeks ago, we told you that a group of carriers sent an electronic letter to the FCC requesting that the regulatory agency auction off some mid-band spectrum. Executives from U.S. Cellular, Verizon, AT&T, Bluegrass Cellular, Pine Belt Wireless, and the C-Band Alliance signed the missive which specifically called for the FCC to free-up spectrum in the 3.7GHz to 4.2GHz range.

U.S. carriers looking to build-out 5G networks require some mid-band airwaves. U.S. Cellular President and CEO Ken Meyers says that it is "critical" that U.S. carriers grab as much mid-band spectrum as they can find. The executive says that action needs to be taken immediately to ensure that there is enough mid-band spectrum to go around. And T-Mobile's pursuit of Sprint has always been about the latter's 2.5GHz spectrum. T-Mobile, which will launch its nationwide 5G network on December 6th, hopes to add the mid-band airwaves to its 600MHz low-band and ultra-high mmWave spectrum. Low-band spectrum travels long distances and penetrates buildings. The ultra-high mmWave spectrum travels shorter distances and doesn't penetrate structures well. But what it does have is a large capacity for traffic and (more importantly) it delivers faster download data speeds. Combining low and mid-band airwaves results in larger capacity and a more efficient network.

Bloomberg reports today that after talking last month with U.S. President Donald Trump, FCC Chairman Ajit Pai is leaning toward holding a public auction of mid-band spectrum. Two satellite companies, Intelsat SA and SES SA, proposed a private sale of the airwaves so that they could collect the proceeds. Both firms use the spectrum to transmit content to television viewers in the states. A vote on the plan could be held by the FCC early next year. In a tweet, Pai wrote, "I’ve concluded that the best way to advance these principles is through a public auction." The satellite firms were not impressed and in a joint statement they said that the auction is "a significant departure" that "does not address the critical involvement of the incumbent satellite operators."

Pai's comments were deadly to the valuation of one of the satellite firms as Intelsat's shares dropped over 40% on Monday after word of the FCC chairman's comments became public. Both satellite companies will keep some of the mid-band airwaves following the auction, and it isn't clear whether they will receive any money from their sale. Stephen Flynn, a telecom analyst at Bloomberg Intelligence explained why Intelsat SA is pushing for a private sale. "Intelsat is significantly over-levered, they need a major spectrum windfall to right-size their balance sheet and end up with a capital structure that’s tenable," Flynn said. "The more uncertainty and the longer it takes, it adds more risk." Intelsat SA has over $14 billion in debt.

Lawmakers led by Senator John Kennedy (R-La) were concerned about the European satellite firms profiting from the sale of the mid-band spectrum. Kennedy spoke with Trump and the president then spoke with Pai on October 30th. An anonymous FCC official said that Trump did not tell Pai what to do. Today, Republicans brought forward legislation that requires the sale of mid-band spectrum in the C-Band. The sale would take place before the end of next year and U.S. taxpayers would receive at least 50% of the spectrum's market value. "This legislation would get crucial mid-band spectrum into the market to benefit the American people and secure our position as the leaders in the race to 5G," said Senator Roger Wicker, chairman of the Senate Commerce Committee.

5G is the next generation of wireless connectivity and delivers download data speeds 10 times faster than 4G LTE. Both the U.S. and China are in a race to be first to take advantage of these faster data speeds and the satellite firms say that their plan for a private sale would put mid-range spectrum in the hands of U.S. carriers faster than an FCC auction would.