Satellite companies suffer setback in C-band plan

While a lot of details have yet to be hammered out at the Federal Communications Commission (FCC), wireless carriers both big and small expressed optimism about the prospects for a public auction of C-band spectrum for 5G. It’s unknown, however, how cooperative satellite companies will be under the new plan.

AT&T said it supports the approach outlined on Monday by FCC Chairman Ajit Pia.

“The C-Band represents an important 5G opportunity for the U.S., but to unlock its potential a series of objectives must be met. As we have previously said, any path forward must chart a course toward a fair, open and transparent auction; compensation to C-Band licensees for relinquishing rights and relocating services; proceeds for the U.S. Treasury; and a clear and reasonable transition plan that ensures broadcasters, programmers and earth station operators that their services will not be interrupted and that their relocation costs will be reimbursed,” said Joan Marsh, AT&T executive vice president of Regulatory & State External Affairs, in a statement.

The same day Pai announced his plans for a public auction of 280 megahertz of C-band spectrum, Senators Roger Wicker, R-Miss., chairman of the Senate Committee on Commerce, Science, and Transportation, and John Thune, R-S.D., chairman of the Subcommittee on Communications, Technology, Innovation, and the Internet, introduced the 5G Spectrum Act, which also would require a public auction process. The bill specifically would require that at least 50% of the value of auction revenues be reserved for the U.S. Treasury. 

Competitive Carrier Association (CCA) President and CEO Steve Berry released a statement supporting the legislation. “CCA has long supported an FCC-led auction for this valuable swath of spectrum, and it is good news all around that the experts at the FCC will conduct a public auction,” he said. “The 5G Spectrum Act clearly has the public interest in mind by ensuring at least fifty percent of the auction proceeds are reserved for American taxpayers.”

RELATED: Pai chooses public auction of C-band spectrum

Meanwhile, shares of the satellite companies suffered big declines, with Intelsat down 40% on Monday and SES down 20% today.

In a note for investors, New Street Research analyst Vivek Stalam noted that the legislation drafted by Thune and Wicker would yield the CBA less than 50% of net proceeds, which is lower than the 50-70% that the CBA’s recent private auction proposal would have yielded for the CBA. In addition, he said, the proposal introduces a risk of CBA non-participation and a potential multi-year delay.

The CBA is comprised of satellite operators Intelsat, SES and Telesat, which use the C-band to serve radio and video distributors of content across the country. The satellite operators were willing to release up to 300 megahertz of spectrum in the 500 MHz band, but they wanted to be in control of how it was done. With this week’s revelation that the FCC plans to do it, their plan has gone sideways, but their cooperation presumably will be necessary to get the job done.

“The FCC Chairman’s indication that he intends to pursue a public auction of C-band spectrum is a significant departure from the CBA’s market-based proposal,” the CBA said in a statement. “The announcement does not address the critical involvement of the incumbent satellite operators in executing the complex task of reconfiguring and transitioning their networks. Nor does the announcement address the fundamental modification of the rights afforded by the existing FCC licenses held by the CBA members which would be required under a public auction approach.”

“To ensure U.S. national security interests, U.S. leadership in 5G innovation and the expected accompanying GDP and job growth, the full cooperation of the satellite operators will be required to ensure the successful clearing of the C-band while protecting the incumbent broadcast services enjoyed by millions of U.S. households,” the alliance added. “We will continue to work cooperatively with the FCC to develop an effective alternative plan and achieve the best outcome for the American public while protecting the interests of our users and the rights of our companies.”

Among opponents to the CBA’s proposal was the Public Interest Spectrum Coalition, which includes a diverse set of stakeholders (PDF), including Consumers Union, New America and Public Knowledge.

“Our Public Interest Spectrum Coalition has argued from the start that only a public auction is permitted by the Communications Act and avoids the dangerous precedent of paying incumbents a massive windfall for spectrum they do not own and never paid for,” according to a statement. “There is ample FCC and court precedent for a public auction that requires winning bidders to pay transition costs and also allows them to negotiate incentive payments to incumbents to clear all or part of the band more quickly than required. In the meantime we will be urging Congress to pass legislation that designates the net revenue to close the broadband gap in rural and other underserved areas.”