CBA proposes FUEL auction process for C-band

The C-Band Alliance, a group of four satellite companies, submitted to the FCC a framework for a private auction of spectrum in the 3.7-4.2 GHz band, one it says will suit the needs of both large and small players using best practices established by regulators over the past 20 years.

Using the acronym FUEL, for Flexible Use and Efficient Licensing, the alliance developed the plan with the expertise of Paul Milgrom and his firm Auctionomics. Milgrom is an expert in auction theory and has worked with the FCC in the past.

The CBA met with FCC staff last week to describe its proposed design (PDF) for the C-band auction. The auction, as proposed by the satellite companies, would offer nine blocks of 20 MHz across 406 Partial Economic Areas (PEAs).

The CBA said its auction design is based on the FCC’s “extremely successful” secondary market policies and draws from the most effective auction policies used by the FCC and other countries. It’s proposing a sealed bid, second-price auction that allows participants to bid on packages of spectrum that best suit their needs. The FCC would have oversight, approving the winning bidders and awarding them licenses.

In a note to investors, New Street Research policy analyst Blair Levin and team said the plan as submitted to the FCC is a big step in moving the debate forward. They are particularly interested in how Verizon and AT&T respond, but it appears the auction design would be favorable for them, as well as for regional and rural telcos and wireless providers.

They noted there are issues the plan does not address, such as how to distribute the proceeds, but it gives the FCC some details to consider rather than having a desire to proceed but no mechanism that holds out the promise of doing so.

RELATED: T-Mobile, CBA exchange C-band arguments

The CBA plan was designed by the experts who assisted in designing the 2016 incentive auction. An Auctionomics representative said the reason the C-band can’t be auctioned like the 600 MHz incentive auction is that one relied on competition among individual TV stations. In the C-band, the spectrum is shared by the satellite operators and divvying it up requires the cooperation of all of them; an auction can’t be done if one of them decides to hold out.

Asked if any proceeds from their plan would go to the U.S. government, a CBA spokeswoman said that’s not addressed in these documents. Right now, there are a lot of things that haven’t been opined by the commission. “Until we have a clear line of sight on whether our proposal is going to be adopted in its totality, it’s difficult for us to address other issues. But we won’t let something that’s resolvable stand in the way of getting our proposal adopted,” she said.

In order to clear the 200 MHz, new satellites are required, and they aren’t going to start building those satellites until they know they have enough proceeds from an auction to proceed. A lot of the design work has been done, but it will take somewhere on the order of 24-30 months to get the satellites built. (The 60 MHz that is released earlier uses a separate filtering process, so that piece could be done within 18 months from final FCC sign-off.)

Critics of the CBA’s proposal once again raised the proposition that any auction led by the CBA will be subject to litigation.

“CBA’s auction plan should be dead on arrival for at least two reasons,” said Michael Calabrese, director of the Wireless Future Project at Open Technology Institute (OTI), in a statement. “First, it’s obviously designed to ensure that the national mobile carriers end up with virtually all of the licenses. Gigantic licensing areas and combinatorial, sealed price bidding will clearly exclude small ISPs and even cable companies and other potential market entrants. Second, and more critically, a private FCC-like auction subject to FCC oversight proposed here clearly violates Section 309(j) of the Communications Act. Only a public auction with the lion’s share of revenue returned to the public is within the FCC’s authority to authorize.”

Story updated to include commentary from OTI.