How the FCC lost a year in “the race to 5G”

“The race to 5G is on and we must win,” President Trump exhorted in April. As the chairman of the Federal Communications Commission stood next to him, the president announced, “my administration is freeing up as much wireless spectrum as is needed.” The president did not give a promise that the FCC “is working to free up” the necessary spectrum, but a fait accompli that the agency “is freeing up as much wireless spectrum as needed” [emphasis added].

But it is not.

The Trump FCC has continued the work of the Obama FCC in making available for 5G so-called high-band spectrum (above 6 GHz). Recent auction prices for this spectrum, however, reinforce that there is ample high-band available. What is needed is spectrum in the mid-band (2 GHz-6 GHz), like that being used in other countries. Of particular interest is the C-band spectrum, currently licensed to satellite companies that have indicated they no longer need all of it.

A year ago, the Trump FCC announced a proposal to reallocate such C-band spectrum for 5G. With much fanfare, the FCC trumpeted a plan to outsource to the satellite companies the process of auctioning these airwaves. Rather than the kind of open and transparent auction process the agency has followed since the first spectrum auction in 1994, the Trump FCC declared it would be “faster” to embrace what they called a “marketplace approach” in which the licensees took over the job traditionally done by the FCC.

The tradeoff for moving “faster” was that the licensees—rather than the American taxpayer—would keep the money the auction generated. By thus outsourcing its responsibilities, the Trump FCC explained, they would be adhering to Republican marketplace orthodoxy, but more importantly, getting the spectrum in the hands of 5G networks “faster.”

“Faster” ended up wasting time

It has been a year since that announcement and the “faster” process has yet to bear fruit. The current goal of the Commission is to decide whether to proceed with the outsourcing, or adopt another solution, by the end of 2019. Over a year and a half will have been wasted as the Trump FCC tried to find a way to pass off its essential public interest determinations to private interests.

It’s hard to win a “5G race” when you’re stuck in the starting blocks. The UK auctioned 5G spectrum last spring. Italy held its 5G auction in October. Germany’s 5G auction ended this week. France’s 5G auction starts this fall. All the while, the Trump FCC has been considering a “faster” solution for a year.

So what has happened in the lost year? Not surprisingly, the FCC’s outsourcing proposal raised great concerns about protecting the public interest if the agency’s statutory authority was delegated to a private entity. Many affected parties raised worries about an investment bank-like auction process as opposed to an open and transparent public transaction. Even the wireless industry that stands to benefit from the availability of the new spectrum could not sign off. AT&T, for instance, told the Commission the issues “are too complex and important to trust entirely to a limited set of private parties.” The FCC implicitly acknowledged that for the last year they had ignored the legal and public interest questions raised by their proposal when it put out a Public Notice in May finally asking about the rights of different parties.

What happens to the proceeds from the sale of the public’s airwaves was also of concern. Thirteen free market taxpayer protection groups told the FCC the claim that

“this is a market-based approach…could not be further from the truth. In reality, the CBA [the satellite licensees] wants the FCC to allow foreign interests to monetize taxpayer-owned C-band spectrum through private sales that won’t benefit taxpayers. Not only would the CBA’s scheme deny billions—perhaps tens of billions of dollars—in proceeds owed to the U.S. Treasury, but it would also inevitably result in years of litigation and endless delays in 5G deployment.”

Then there was the matter of the auction process itself. The satellite companies have been promoting this “faster” solution since October 2017, but it wasn’t until June 2019 that they came forth with a plan for how to do it. AT&T, belying how speed should trump everything, told the Commission that even if it delays the process, “CBA’s proposed Transition Plan and Auction Plan [should be] out for notice and comment, and then rule on those Plans based on the resulting record.”

We’re at a restart

And the mechanics of an auction is the easy part! The most difficult part of a spectrum auction is deciding what to auction. The power levels, out-of-band emission levels, geographic license size, spectrum license size, and consideration of the marketplace effects of these decisions—along with multiple other mind-numbing details, all of which can have effects running to the billions of dollars—all must be resolved. Traditionally, the FCC’s professional staff of engineers and economists has wrestled with these problems. It is hard to imagine these decisions being made either by the satellite licensees or through a negotiation with the potential buyers, because these decisions seldom lend themselves to consensus. Indeed, AT&T has suggested the satellite companies are now relying on problematic interference standards and has asked for a Public Notice on how to improve the standards and recapture more spectrum.

Last month, the FCC asked for comments on other proposals. T-Mobile, for instance, suggested an authentic marketplace solution: a FCC-run forward auction where wireless companies bid  on the spectrum, followed by a reverse auction where satellite licensees or earth station operators bid on how much they would require to vacate their use of  the spectrum. The difference between the auction prices would then go to the U.S. Treasury.

The new comments will close in early July. Just as that process closes, presumably, the FCC will heed AT&T’s suggestion and seek comments on the satellite licensees’ proposals. That should push things toward September. A year after the Trump FCC announced its “faster” way to 5G spectrum, we are behind where we would have been if the FCC had stepped up and done their public interest job in the first place. A year is a terrible thing to waste when you are in a “race.”

AT&T and T-Mobile are unrestricted donors to the Brookings Institution. The findings, interpretations, and conclusions posted in this piece are solely those of the author and not influenced by any donation.