WASHINGTON--The FCC approved draft rules for the auction of the 1900 MHz PCS H Block, which could have implications for both Sprint Nextel (NYSE:S) and Dish Network (NASDAQ: DISH). According to the FCC, the auction will take place in late 2013 or early 2014.
At the first commission meeting chaired by Acting Chairwoman Mignon Clyburn, the FCC voted 3-0 to set draft auction rules for the spectrum, which can be used for mobile broadband. Although the technical rules were not immediately detailed, the FCC said the rules will ensure that the use of the H Block will not cause interference to adjacent operations in the PCS band and other spectrum bands, notably Dish's. The spectrum will be licensed on basis of economic areas around the country.
The H Block is a 10 MHz block of paired airwaves that runs from 1915-1920 MHz (for the uplink) and from 1995-2000 MHz (for the downlink). The H Block is part of the 65 MHz of spectrum Congress mandated for the FCC to auction by February 2015. As Democratic Commissioner Jessica Rosenworcel noted, of the 65 MHz that has been identified, the H Block is the only block that is paired and not in use by government agencies, so revenue generated from the auction will not have to be used to pay government users to move off the spectrum. Therefore, she said, the rules should be designed to promote the most competition for the spectrum as possible.
Sprint has repeatedly expressed its interest in bidding for the H Block and using the spectrum to enhance its LTE service. Getting H Block spectrum would give Sprint a 10x10 MHz block for LTE service in the 1900 MHz band and allow it greater capacity plus the ability to provide faster speeds. Sprint would seek to combine the two 5x5 MHz blocks of the H Block with its PCS G Block spectrum to create the 10x10 MHz block. Sprint currently has deployed LTE on the G Block.
Dish, which controls spectrum adjacent to a portion of the H Block, could also bid on the spectrum.
In its December 2012 order on Dish's AWS-4 spectrum, the FCC provided some insight into how the H Block licensing and service rules would be defined. In that order, the FCC specified the power limits placed on a portion of Dish's uplink spectrum that sits next to the upper portion of the H Block. Dish's 40 MHz of spectrum specifically runs from 2000-2020 MHz (for the uplink) and 2180-2200 MHz (for downlink). Dish had tussled extensively with Sprint about power limits and interference protections for the 1995-2000 MHz band.
In its order on the AWS-4 spectrum, the FCC said that it was imposing stronger interference protections for the 1995-2000 MHz band, as well as reduced power limits for Dish's operations in the 2000-2005 MHz portion of the spectrum. The FCC rejected what Dish had proposed in terms of power levels and interference protections, and said that while this "may have a negative impact on the usability of a portion of the AWS-4 uplink band, this is more than offset by the public interest benefits of increasing the usability of the 1995-2000 MHz band." Essentially, the FCC said that the benefits of full, flexible use of the H Block outweighed Dish's arguments.
Dish argued last year that the stronger power limitations and interference protections will render the 2000-2005 MHz portion of its uplink spectrum unusable, a position the FCC rejected. The FCC said Dish would still have more usable terrestrial spectrum than it otherwise had before. "Further, even if our actions do in fact create only 15 MHz of usable uplink for terrestrial use," the order "still creates a large increase in the overall utility of this spectrum. That is, 15 MHz of full usable terrestrial uplink can be put to more productive use than 20 megahertz of MSS/ATC uplink spectrum."
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Article updated June 27 at 1:30 p.m. EST to add additional information about Sprint's spectrum plans.