Today’s Federal Register publication of a summary of the Federal Communications Commission’s (“FCC”) Notice of Proposed Rulemaking (“NPRM”), proposing substantial changes to the existing rules governing the 3550-3700 MHz (“3.5 GHz”) spectrum band kicks off the public comment period in this proceeding.  Because the FCC’s suggested rule changes heavily favor the “Big Four” wireless carriers over smaller carriers, and will likely result in very little, if any, additional wireless broadband coverage for rural areas, it is imperative that interested parties take action now to stop this risky and ill-considered action.  Comments are due by December 28, 2017, and reply comments are due by January 29, 2018.

The contrast between the existing 3.5 GHz rules and the proposed overhaul is striking.  The current rules, which have been in effect for more than two years, created a level playing field wherein carriers of all sizes could implement new and innovative 5G wireless services in all areas of the United States.  Small geographic licensing areas, short licensing terms, and fair spectrum allocation virtually ensured that rural areas would have access to affordable wireless broadband services.

Conversely, the FCC’s proposed rules, if allowed to stand, will surely eviscerate investments made by smaller and rural carriers in reliance on the existing rules, as well as concentrate valuable licenses in the hands of a very few large wireless carriers.  Further, the suggested regulations will encourage spectrum hoarding, and price competitors out of the market.

The CommLaw Group has been following the 3.5 GHz proceeding closely since it began several years ago.  We published a previous article containing information similar to many of the paragraphs below.  Due to the urgency of this proceeding, we feel this information bears repeating for the convenience of stakeholders who may wish to submit comments and other interested parties.  Key rules most affected by the NPRM proposals are summarized herein, along with descriptions of the proposed changes.

Current 3.5 GHz Rules

The FCC’s current rules for commercial shared use of the 3.5 GHz band were written with 5G innovation in mind. This is promoted by the unique and unprecedented three-tiered commercial radio service: Citizens Broadband Radio Service (“CBRS”).

CBRS Spectrum Allocation

The order of priority for interference protection in the CBRS band consists of:  (1) incumbent licensees; (2) Priority Access (“PA”) licensees; and (3) General Authorized Access (“GAA”) operators.

The first and highest tier (“Tier 1”) contains incumbent federal users and fixed satellite service (“FSS”) operators.  These incumbents have complete interference protection from the two lower CBRS tiers.

The second tier is PA. A PA license (“PAL”) is an authorization to use an unpaired 10 MHz channel in the 3550-3650 MHz range in a geographic service area for a single three year period. The PA geographic service areas are census tracts, which typically align with the borders of political boundaries such as cities or counties.  PA licensees can aggregate up to four PA channels in any census tract at any given time, and may obtain licenses in any available census tract.  PA licensees must provide interference protection for Tier 1 incumbent licensees and accept interference from them.  But, PA licensees are entitled to protection interference from GAA operators.

The third tier, GAA, permits access to 80 MHz of the 3.5 GHz band that is not assigned to a higher tier.  GAA will be licensed “by rule,” meaning that entities that qualify to be FCC licensees may  use FCC-authorized telecommunications equipment in the GAA band without having to obtain an individual spectrum license.  GAA operators will receive no interference protection from PA or Tier 1 operators, and must accept interference from them.

PAL Auction Procedures

The auction application process for PALs will commence when the FCC issues a Public Notice delineating the application window and auction/allocation rules.  The FCC will assign seven PALs per geographic area.  When the FCC receives competing applications in a census tract that seek a number of PALs that exceed the available supply, the FCC will assign PALs via auction.  In situations where there is only a single applicant for one or more PALs in a census tract, the license will not be assigned; rather the associated spectrum will be available on a shared GAA basis until the next auction.

Unlike previous auctions, the FCC will not offer bidding credits to small businesses or any other specialized entity in the PAL auctions. Bidding credits are unnecessary because the small census tractlicensing areas will be affordable, thereby obviating the need for credits or other types of financial assistance to the bidders.

PAL applicants will not bid on specific spectrum blocks.  Rather, frequency coordinators will assign frequencies based on the amount of spectrum a licensee is authorized to use in a given license area.

PAL License Terms

PALs will be licensed for one three-year, non-renewable term, but in the first application window PAL applicants will be permitted to apply for two consecutive three-year terms.  PAL auctions will be held every three years.  PA licensees may apply for subsequent auctions to “renew” their existing PALs and/or apply for new ones.  The short PAL license terms will help to ensure that more than one entity will have access to the PALs and that the licensees will be incentivized to commence service in a short period of time.

Proposed Rules

Substantially Increase PA License Terms – Encouraging Spectrum Hoarding

The FCC proposes to increase PA license terms from three years to ten years, with renewal
expectancy for licensees.  This, proposal will likely encourage the large wireless carriers to hoard spectrum and discourage them from providing innovative services, which will surely decrease the need for more workers to develop and to deploy the services that would, under the current rules, be provided by smaller carriers serving small towns and rural areas.

Significantly Enlarge PAL Geographic Areas – Pricing Out Smaller Carriers

The FCC also proposes to do away with census tract PA licensing and replace it with much larger geographic areas, including Partial Economic Areas (“PEAs”).   PEAs are approximately 178 times larger than census tracts.   The likely result would be to price smaller carriers out of the market and discourage the large carriers – the only ones who can afford to successfully bid for these large area licenses – from providing service to small towns and rural areas.

While the FCC suggests allowing partitioning of the PEAs and disaggregation of spectrum in same, there is no guarantee that the big carriers would agree to provide any of their spectrum to smaller carriers, particularly in rural areas.  Even if a large carriers agrees to share its spectrum, its terms could be prohibitively expensive and restrictive for smaller carriers.  Under the existing rules, there is no need for partitioning and disaggregation because the smaller licensing areas made them unnecessary.

PAL Auction Procedures – More Licenses and No Bidding Credits

The FCC further proposes to allow carriers to bid on specific channel blocks and eliminate the number of PALs available in a given PEA.  Moreover, there is no proposed bidding credits for smaller entities.  Hence, the large carriers will be at a huge financial advantage in the PAL auctions if the FCC’s proposals are allowed to go into effect.

Economic Harm Resulting from Proposed Rules

The existing 3.5 GHz rules have been in effect for more than two years.  Many smaller operators have made investments and crafted deployment plans in reliance on the existing rules. These investments include equipment and infrastructure capable of utilizing the 3.5 GHz band under the current rules.  The deployment plans include build-outs that will provided broadband service to unserved small towns and rural areas. One technology company has reported that it plans to deploy over 1,500 3.5 GHz-ready base stations with more 200 predominantly rural broadband providers, intended to serve many thousands of residents in underserved communities.

The proposals in the NPRM would gut those investments and business plans.  The smaller operators will not be able to compete with the Big Four to provide 5G wireless service.  Rural areas will continue to be underserved.

While there will be a large amount of unlicensed spectrum available in the GAA band, operators using that spectrum will still have to operate with a licensed carrier’s anchor channel and utilize carrier aggregation to integrate licensed and unlicensed spectrum, while using coexistence mechanisms to avoid interference and enable flexible spectrum use.  Accordingly, the GAA operators will have work with PA licensees, which under the proposed rules will probably be one of the Big Four, who will control the terms and prices of 5G service in the 3.5 GHz band.

Additional Proposed Rule Changes

The FCC also proposes to remove the rule that requires public disclosure of CBRS device registration.  Due to the complex nature of service provision in the 3.5 GHz band, the FCC imposed strict rules on the authorization of base station and end-user CBRS equipment, including registration with the frequency coordinators by potential PA licensees. Due to concerns about confidentiality, the FCC ruled that the identities of the PA licensees registering their equipment be obfuscated.  This rule benefits potential operators by giving them the opportunity to investigate the feasibility of deploying GAA or PA service before incurring the cost of obtaining spectrum. Moreover, this rule enables entities to hold frequency coordinators accountable for, among other things, ensuring that PA spectrum does not lie fallow.

The FCC further seeks to relax the current emissions and interference limits to allow for wider bandwidth, presumably to enable more powerful operations in the larger PA license areas.

Last Chance to Influence the 3.5 GHz Rules and Preserve Arguments for a Court Challenge

If the FCC adopts the proposals in the NPRM, the 3.5 GHz band will likely become the sole domain of the largest wireless carriers, and rural areas will continue to have substandard or nonexistent wireless broadband coverage.  Moreover, since most small cells are carrier-specific, the larger carriers will have a lock on critical parts of the 5G infrastructure.

It is critical that all CBRS stakeholders such as small wireless carriers, WISPs, municipalities, rural providers, and equipment suppliers submit comments in this proceeding.  If enough entities protest, the FCC may be persuaded to modify its proposed rules.

Moreover, because some of the proposed changes are open to legal challenges as possibly violating portions of the Communications Act, it is entirely possible that this proceeding may end up in federal court. The only entities that will have standing to represent their interests in court are those that submit comments or otherwise participate in this proceeding before the FCC.

For further information, please contact Ronald E. Quirk, Head of The CommLaw Group’s Internet of Things and Connected Devices Practice Group at req@commlawgroup.com or 703-714-1305.