Industry Voices — Padden: Private secondary markets in spectrum are essential for U.S. leadership in wireless

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The FCC’s decision in early 2020 regarding C-Band spectrum represented a departure from the long line of precedents approving private sales. (Getty Images)
Preston Padden Industry Voices

What is the Federal Communications Policy regarding private secondary market sales of spectrum usage rights?

For decades, the FCC routinely approved private sales of spectrum usage rights in secondary market transactions, often after granting the licensee/seller expanded rights authorizing new uses. Private sales provide the incentive for spectrum licensees to relinquish some or all of their usage rights to allow spectrum to migrate to its highest and best use for society and for our economy. Economists estimate that the value to society of higher uses often exceeds the seller’s proceeds by 10 times or more.

Private sales have been a particularly important source of new spectrum inputs for the U.S. wireless industry. For example, in 2016 the FCC granted new flexible use rights to licensees of 24 GHz and higher spectrum bands. The Commission acknowledged the potential for “windfall” to incumbent licensees but concluded that the benefit to society was far more important. Subsequently, the FCC approved private sales of spectrum from Straight Path to Verizon, from XO Holdings to Verizon and from Fiber Tower to AT&T. These spectrum bands helped the wireless carriers lead the way in the deployment of new 5G networks.
But then the FCC took a sharp u-turn. The FCC’s decision in early 2020 regarding C-Band spectrum represented a departure from the long line of precedents approving private sales. The FCC announced that the government would sell the spectrum with the proceeds going to the Federal Treasury instead of to the incumbent licensees – destroying the incentive for any licensee to relinquish voluntarily some or all of their usage rights to enable higher and better uses.

RELATED: Amid heated debate, FCC votes 3-2 to free up 280 MHz of C-band for 5G

How/why did this happen? First, the C-Band licensees faced a firestorm of opposition from private sector parties. Some of this opposition was motivated by a desire to protect monopoly wired broadband services from competition from new wireless services using C-Band spectrum. Other opponents simply wanted a piece of the perceived “windfall” from private sales. The intensity of the opposition made it hard for the FCC to act consistent with the many private sales precedents.

But an even larger factor driving the FCC C-Band decision was unprecedented political pressure. In hearings and statements on the Senate floor, Senator John Kennedy of Louisiana railed against permitting private sales of C-Band spectrum arguing “[t]his spectrum belongs to the American people.” He ignored the FCC precedents and the well established public policy advantages of private sales arguing that “[t]here were swamp creatures in government who were trying to help their telecommunication buddies put all four feet and their snout into the trough.”

Senator Kennedy vowed to share his concerns with President Trump and to urge the President to intervene. On or about October 30, 2019, after speaking with Senator Kennedy, the President called the Chairman of the FCC – an independent regulatory agency – to discuss C-Band. Shortly after that call the FCC reversed its widely reported previous support for a private sale and instead moved toward a government sale. There is, after all, only so much private sector and political pressure that independent regulators can take.

RELATED: C-band hearing ignites fire from left, right

Fortunately, there is evidence that the C-Band decision may have been a discriminatory “one-off” rather than a broad policy change. For example, the government recently pre-approved the private sale of a block of 800 MHz spectrum from T-Mobile to Dish. And just last week the FCC granted expanded usage rights to Ligado for 35 MHz of spectrum. In sharp contrast to the “spectrum belongs to the American people” rhetoric in the C-Band proceeding, the FCC characterized the spectrum licensed to Ligado as “its own licensed spectrum.”

No one expects Ligado to build its own wireless network. In fact analysts predict that already Ligado is “thinking about the timing of and process for monetizing their holdings” – in other words, a private sale.

The longstanding policy of approving private secondary market sales has been an important engine in driving spectrum to its highest and best use for our society and for our economy. But recent FCC decisions provide no clear policy guidance to licensees.

RELATED: Ligado finally gets a light – and it’s green

In the interest of American technology leadership and National Security the FCC should reaffirm its continued commitment to private secondary market transactions. And then, in the interest of fairness and equity, it should revisit and reverse the politically driven C-Band decision.

Preston Padden is the Principal of Boulder Thinking, LLC, a consulting firm. He served as the head of Government Relations for NewsCorp, The Walt Disney Company and The C-Band Alliance.

Industry Voices are opinion columns written by outside contributors—often industry experts or analysts—who are invited to the conversation by FierceWireless staff. They do not represent the opinions of FierceWireless.