10/28 FCC CBRS Comments Regarding Proposed Auction Rules

New America's Open Technology Institute submitted comments opposing the Federal Communications Commission's (Commission) proposal to auction Priority Access Licenses (PALs) for the Citizens Broadband Radio Service (CBRS) band by larger groupings in the 172 Metropolitan Statistical Areas (MSAs), rather than the previously agreed upon compromise of county-by-county bidding. The purpose of the CBRS rules in the 3.5 GHz band was to promote a competitive marketplace and empower smaller providers with fewer resources to purchase spectrum to build out rural broadband as well as neutral-host LTE networks. This diversity in the wireless ecosystem is crucial to the coming 5G technologies and services. However, if the Commission implements this proposed approach, it will likely price out smaller entities and transform what was meant to be a ground-breaking experiment in spectrum sharing into yet another traditional mobile band. An introduction and summary of the comments are available below:

The Commission’s Citizens Broadband Radio Service (“CBRS”) rules for the 3.5 GHz band represent a landmark advance in spectrum policy. By opening up largely unused spectrum previously held exclusively by the U.S. Navy for shared commercial use, the Commission’s rules sought to improve spectrum efficiency, promote innovation, and make small cell spectrum available to a wide variety of users and use cases. The Commission adopted small, localized Priority Access Licenses (“PALs”) with short renewal times to encourage small internet service providers (“ISPs”), wireless internet service providers (“WISPs”) operating in rural and other underserved areas, new market entrants and a diversity of enterprises and community institutions seeking to build and deploy their own neutral-host LTE networks to purchase the licenses to serve targeted areas.

The Commission is now seeking comment on a proposal likely to crowd out or diminish deployments by these small ISPs, rural WISPs, and new market entrants that the CBRS framework was meant to empower. The Commission’s proposed bidding system for the nation’s 172 largest Cellular Market Areas (“CMAs”) will create a market distortion that artificially inflates prices for PALs in outlying, less-populated counties and results in crowding out the smaller ISPs and innovative market entrants that were meant to benefit from the CBRS framework. By requiring CMA bidders to remain in the auction in outlying counties of urban areas until the core urban counties have concluded, the prices of the PALs for those “collar” counties within the same CMA will be artificially inflated to a point that is likely to crowd out small ISPs and other localized bidders seeking to bring connectivity to these less densely populated and typically less profitable outer counties.

The proposed CMA bidding mechanism will particularly harm rural and small town consumers and businesses that were – until now – the intended beneficiary of CBRS rules aimed at facilitating access to PAL spectrum by a wide variety of competitive ISPs, enterprise networks and other innovative use cases. Although the Commission’s proposal is premised on making a distinction between urban and rural areas, this proposal would adversely impact wide swaths of rural, exurban and outer suburban areas that neighbor larger city areas and would harm the providers seeking PALs in those areas by increasing the time these entities must spend in the auction, therefore increasing the price drastically. The bidding-by-CMA proposal would not only harm smaller providers, but it would be an inefficient way to auction the spectrum, would fail to bring back the highest possible value for the spectrum, and would not in any way decrease burdens on the Commission compared to county-by-county bidding.

Although OTI opposed county-sized licenses, counties represent the largest-possible PAL size if CBRS is to achieve the Commission’s stated goals of facilitating broadband deployment and 5G innovation by a wide variety of smaller ISPs, enterprises and new innovative new use cases. The Commission agreed that the licenses should be no larger than counties, and wrote at length in its 2018 CBRS Order about why county-sized licenses were the best compromise to ensure this spectrum best serves the public interest and the mobile industry’s desire to build a platform for 5G.

Further, the Commission’s proposal contradicts the goals of the original 2015 and subsequent 2018 CBRS Orders, both of which focused on the Commission’s statutory obligations under Section 309(j) of the Communications Act. Both the census tract and county-sized PAL rules advanced Congressional directives to advance, inter alia, “the development and rapid deployment of new technologies, products, and services for the benefit of the public, including those residing in rural areas,” as well as “promoting economic opportunity and competition and ensuring that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses and by disseminating licenses among a wide variety of applicants . . .”

In contrast, the CMA bidding proposal would directly undermine those statutory goals by pricing out smaller WISPs and new market entrants, further solidifying the concentrated power of the major carriers, stifling alternative business models, and gradually transforming the 3.5 GHz band into a traditional mobile service band, rather than the innovative spectrum sharing framework the Commission intended. It would create a market distortion that encourages the largest incumbent cellular carriers to drive up the price of the less-populated and more rural ‘collar’ counties around core urban areas, thereby crowding out small ISPs and market entrants to the detriment of consumers in many unserved and underserved areas.

The county-sized PALs adopted in 2018 represented a hard-fought compromise and, although opposed by nearly all stakeholders in the wireless ecosystem, nevertheless set the expectation and spurred investments by WISPs, smaller carriers, the cable industry, IoT providers and many other parties over the past year. Smaller ISPs and other market entrants that have been relying on the current rules and investing heavily to prepare for CBRS deployments with the understanding that PALs will be available on a county-by-county basis at a fair and reasonable cost. The Commission should honor its commitments and adopt bidding on a strictly county-by-county basis.