FCC sets rules for $10.5B AWS-3 auction; T-Mobile, Dish denied request to split spectrum

Tools

The FCC set a total reserve price of $10.587 billion for the airwaves it will auction in the AWS-3 spectrum auction set for this fall.

The commission also set out complex rules and bidding procedures for the auction, and carriers will bid on both paired and unpaired spectrum blocks in the same auction. That position gives a victory to Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T), which had opposed proposals from T-Mobile US (NYSE:TMUS) and Dish Network (NASDAQ: DISH) to effectively split the auction. 

In a public notice put out by the FCC's Wireless Telecommunications Bureau, the FCC set an aggregate reserve price for the 1695-1710 MHz band of around $580 million and a separate aggregate reserve price for the paired 1755-1780 MHz/2155-2180 MHz bands of approximately $10.07 billion.

The auction is scheduled to start on Nov. 13 and will be the most consequential since the 2008 auction of 700 MHz spectrum. The FCC will conduct a mock auction Nov. 10 to test the online and telephone bidding process. Applications will be due Sept. 12 and upfront payments will be due Oct. 15.

The 1695-1710 MHz band will be unpaired spectrum used for low-power uplink operations. The 1755-1780 MHz band will be licensed for low-power uplink operations and will be paired with the 2155-2180 MHz band for downlink operations.

In its rules, the FCC said the auction will "offer paired and unpaired licenses in a single auction subject to one set of procedures and requirements. Particularly where, as here, interested parties are divided on whether licenses being offered may be characterized as substitutes, such information may best be discovered through a competitive bidding process. Offering both the paired and unpaired bands in the same auction will allow market forces to determine the degree to which market participants view the AWS-3 spectrum blocks as substitutable."

The FCC said it is making that ruling based on past auction experience in similar disputes. "Providing for two different sets of bidding eligibility, activity waivers, and stopping rules would disadvantage bidders interested in both paired and unpaired blocks by forcing them to manage two separate pools of eligibility, which would reduce their ability to pursue backup strategies as prices rise," the rules note. "Whether in one auction or two simultaneous auctions, requiring bidders interested in both blocks to deal with separate sets of bidding actions would invite confusion and could lead to mistakes in bidding."

Dish and T-Mobile had told the FCC that the paired and unpaired bands were not substitutes because of different configurations and requirements, as well as dissimilar technical requirements and obligations with respect to coordination with federal users.

Further, T-Mobile had warned of negative consequences if the FCC kept all of the bidding bundled together. "A contrary approach--leaving the entire auction open even when interest in one band diminishes--may prompt insincere bidding by, for example, allowing bidders interested in one band to 'park' bids in another merely to preserve eligibility, artificially prolonging the auction," T-Mobile said in a filing last month urging the FCC not to bundle the spectrum. Dish had allied itself with T-Mobile's arguments.

The FCC said it adopted specific bidding rules to alleviate those concerns. The agency said it will close bidding after more than five consecutive rounds in which no bids have been placed or withdrawn for licenses in the paired or unpaired bands, or if no bidder has placed a proactive waiver, and the associated reserve price has been met. Therefore, the FCC said, bidders will no longer be able to place new bids for licenses in the band, and they won't be able to withdraw any provisional winning bids for licenses in the band.

The AWS-3 auction will have two sub-bands, each with its own band plan:

  • One of the sub-bands consists of one unpaired 5 MHz block (1695-1700 MHz) and one unpaired 10 MHz block (1700-1710 MHz), licensed in Economic Area (EA) geographies.
  • The other sub-band consists of paired spectrum. It includes one 5x5 MHz block (1755-1760 and 2155-2160 MHz) licensed in Cellular Market Area (CMA) geographies, and two 5x5 MHz blocks (1760-1765 and 2160-2165 MHz, and then 1765-1770 and 2165-2170 MHz) licensed in EA geographies. And finally there is one 10x10 MHz block (1770-1780 and 2170-2180 MHz) licensed on an EA basis.

The National Telecommunications and Information Administration, which manages federal use of spectrum, released its AWS-3 transition plan earlier this month and estimated that total relocation and sharing costs for the 1695-1710 MHz band would be $527.1 million and $4.576 billion for the 1755-1780 MHz band. Federal spectrum users, especially the Department of Defense, will either need to move off the band or share it with commercial users. The 2155-2180 MHz band is unencumbered by federal users.

For more:
- see this FCC public notice (PDF)
- see this Broadcasting & Cable article

Related Articles:
Dish signals it will bid in 600 MHz spectrum auction
FCC hopes to raise $10B from AWS-3 auction
T-Mobile, U.S. Cellular and C Spire cheer FCC's AWS-3 band plan
FCC: AWS-3 rules will favor both small and large carriers
Verizon, AT&T blast Dish's AWS-3 interoperability proposal as too little, too late