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22 November 2019

C-Band Alliance should take FCC head-on after crushing auction verdict


An already-bloodied C-Band Alliance has been dealt another brutal blow this week as FCC Chairman Ajit Pai declared his intention for a rushed public auction of C-Band spectrum – dismissing the Alliance’s pleas for a private auction to cushion the financial blow.

There is no polite way of putting it – pushing through a public auction is the US government’s way of raking in 5G money as hard and fast as possible. While repurposing this spectrum for 5G – and “doing so quickly” in Pai’s words – will certainly benefit the US video streaming and IoT networking among others, the fact that a public auction would funnel proceeds directly into the government gullet has triggered reservations here at Rethink about how these funds would be reinvested by Pai. After all, this is a man who will be remembered only for his unraveling of net neutrality.

What a public auction of 280 MHz of spectrum from the lower band of the 500 MHz slice means for C-Band members SES, Intelsat and Telesat (a member down after losing Eutelsat around September time), is billions of lost dollars. Pai expects an auction to happen before the end of 2020, clearing spectrum which was valued at $8.8 billion in September by financial services firm Jefferies. That figure will certainly have ballooned since then.

Pai has predictably crumbled under pressure from the big four US wireless operators – AT&T, Verizon and the soon-to-be-merged T-Mobile and Sprint. Verizon is set to prosper most from a public auction given its weaker arsenal of mid-band spectrum. Meanwhile, the likes of Altice USA, Dish Network and Charter Communications have said the opportunity to bid in a public auction would allow them to challenge the big four. This suggests a silver lining from a public auction could be increased competition in 5G services and therefore reduced prices, but it’s much too soon to tell for sure.

Of course, C-Band Alliance members no longer have any need for the full 500 MHz of spectrum in the 3.7 GHz to 4.2 GHz band used to deliver video programming, although settling for a public auction will damage the satellite industry beyond reckoning. This sale was the ultimate get of jail free card and allowing the FCC to pursue a public auction will squander the opportunity to pay off mounting debts and also muddies the future directions of CBA members – which represent approximately 95% of the affected revenues of the US C-band market across 120 million households.

If the satellite fleet operators have a crumb of integrity, they should go down fighting. Although seriously unlikely, they could attempt to drag the FCC through court in a case which could take years. The mere thought of a lengthy litigation battle and the lost 5G $billions could play into the C-band Alliance’s hands, for once.

However, what certainly hasn’t played in the Alliance’s favor are the multiple alterations to its plans for how best to allocate the lucrative slice of mid-band spectrum. The proposal from the C-Band Alliance to the FCC, established over a year ago in September 2018, is to act as facilitator for clearing and repurposing that spectrum to accelerate deployment of next generation 5G services while protecting incumbent users and their content distribution networks in the US from potential interference.

Nevertheless, shares tanked as a result, with Intelsat down 40% and SES suffering a 21% nosedive immediately after Pai tweeted his public auction intentions.

The upper 200 MHz of the 3.7 GHz to 4.2 GHz band will remain untouched for programming and while almost everyone agrees that reallocating C-band spectrum for 5G services is the best option, what remains unclear is how the FCC will achieve the most economical auction. More concerning still is the scale of the damage felt by the satellite fleet operators as it now looks certain they will struggle to recoup their C-band investments.