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The Public Notice addresses the pre-bidding procedures for Auction 103, which will allocate upper microwave flexible use service (“UMFUS”) licenses in the bands referenced above. The spectrum in each of the three bands will offer 100 megahertz blocks of spectrum to be licensed in 416 Partial Economic Area (“PEA”) service area nationwide. The number of licenses that will be available for auction in the upper 37 and 39 GHz blocks in any given PEA will depend on commitments made by incumbent licensees in an initial phase to accept a reconfigured assignment or relinquish their license altogether in exchange for a portion of the auction proceeds.

The FCC seeks input on its proposal for Auction 103 to use an ascending clock auction format in both auction phases for licenses held by the FCC as well as those given up by incumbent licensees. The first phase will involve successive clock bidding rounds in which bidders request categories of generic license blocks in specific PEAs while in the subsequent round, bidders will bid on frequency-specific license assignments. During the clock phase, the FCC auction bidding system will announce prices for blocks in each category in each PEA, and qualified bidders will submit quantity bids for the number of blocks they seek. Simultaneously with the Public Notice, the FCC also published a technical guide with mathematical details about the proposed auction procedure and algorithms for the clock and assignment phases.

In addition, the auction procedures would include an aggregate net revenue requirement that must be met to ensure that the auction’s proceeds will be able to cover the cost of payments to incumbents that relinquish their spectrum. Bidders will be provided with an estimate of the shortfall to meeting the net revenue requirement after each round of bidding until the requirement has been met. If the revenue requirement has been met by the end of the clock phase bidding, the system will determine the winning bidders of generic blocks, and the auction will proceed to the assignment phase. If the net revenue requirement has not been satisfied at the time bidding stops in the clock phase, the auction will end, no new licenses will be assigned, and incumbents will retain their licenses while the FCC reassesses the matter.

After the winning bidders for the generic blocks have been determined, the FCC also proposes to conduct separate assignment rounds for each of the top 20 PEAs. The PEAs will be assigned sequentially, beginning with the largest PEAs. Assigning the PEAs sequentially will make it easier for bidders to incorporate frequency assignments from previously assigned areas into their bid preferences for other areas and acquire contiguous blocks of spectrum within PEAs and common spectrum among contiguous PEAs. Of note, the FCC proposes to implement a cap on bidding credits for winning bidders in the amounts of $25 million for small businesses and a $10 million for rural service providers.

In the Notice, the FCC sets out its plan to operate two separate and consecutive auctions, with different application and bidding processes, for licenses of available spectrum in the 28 GHz (27.5 – 28.35 GHz) band – which was designated for UMFUS in July 2016 – and 24 GHz (24.25-24.45 and 24.75-25.25 GHz) band – which was a subject of the Second Report and Order in Spectrum Frontiers in November 2017. The window during which individuals can apply to bid in each auction, as outlined in the draft Notice, will run concurrently. Since both auctions involve UMFUS licenses, applicants will be subject to the same application requirements, certifications, prohibited communications rule, and procedures regarding information available during the auction process. The 28 GHz band auction is set to start on November 14, 2018 and the 24 GHz band one will commence after bidding in the 28 GHz closes.

It remains to be seen what the level of interest in the auctions will be because portions of both spectrum bands are already encumbered. Thanks to relatively recent secondary market acquisitions of Nextlink and StraightPath, Verizon already has significant portions of the 28 GHz band in some key markets. Under the Spectrum Frontiers 2016 decision, the existing licenses will be converted to UMFUS licenses without competitive bidding. For the 24 GHz band, AT&T was initially set to acquire a large set of licenses in that band through its purchase transaction with FiberTower which would have resulted in significant encumbrances there as well. However, as part of a settlement agreement with the FCC to get the transaction approved, AT&T was required to return the 24 GHz licenses to the Commission. The 24 GHz band still has some active licenses but the encumbrance is less and the current licensee has filed applications seeking to reconfigure its licenses in a way the FCC has indicated would increase the number of unencumbered blocks available for auction.

At the August Commission Meeting, the FCC is also set to take vote on a Fourth Further Notice of Proposed Rulemaking (“FNPRM”) in the Spectrum Frontiers proceeding that would consider rules to set the stage for a separate, single auction of three other mmW bands, 37 GHz (37.6-38.6 GHz), 39 GHz (38.6 GHz-40 GHz), and 47 GHz (47.2-48.2 GHz). The Commission hopes that the auction will occur in the second half of 2019, after rules are adopted to tweak the current band structure. To facilitate the auctioning of these bands, the FCC proposes changes to the current service rules for the 39 GHz band. Specifically, the FCC seeks comment on the following changes which would be designed to make the bands more attractive to potential high-stakes bidders, the large carriers and providers, and maximize auction revenues:

• Create fourteen 100 MHz channels instead of seven 200 MHz ones in the 39 GHz block to facilitate repacking of incumbent licensees;
• Modify upper 37 GHz band channels to also have 100 MHz instead of 200 MHz to align the licensing scheme with the adjacent 39 GHz; and
• Modify the plan for the portion of the 47 GHz band licensed under UMFUS rules to also have 100 MHz channels.

As we reported in a blog post earlier this month, the NPRM is the result of a 2014 Notice of Inquiry (NOI) which generated considerable input from virtually every segment of the communications industry on issues and possibilities surrounding wireless operations in the millimeter wave bands. The NPRM targets four specific spectrum bands for potential wireless broadband operations: at 28 GHz, 37 GHz, 39 GHz and 64-71 GHz. The Commission envisions these bands may be licensed through a variety of methods– geographic wide-area and local licenses, unlicensed operations subject to Part 15 of the FCC’s rules, and a hybrid licensing mechanism that can accommodate both private and traditional commercial communications operations, including cable and broadcast.

In adopting this NPRM, the FCC reiterated its intention to remain “technology neutral” when writing rules for millimeter wave bands. The Commission describes the NPRM as soliciting “extensive comment” on service, licensing, and technical rules for a “variety of platforms and uses” coexisting and expanding through market-based mechanisms.

Despite these optimistic assessments by the Commission of this action, Commissioners Pai and O’Rielly issued separate statements with some criticisms of the action. The Republican Commissioners argued that the NPRM did not go far enough and that more of the spectrum bands contemplated in the NOI should have been included in the item. However, the NPRM invites commenters to identify additional millimeter wave bands that might be made available through such flexible mechanisms. While the Commission moves forward to examine these millimeter wave bands, its efforts will proceed simultaneously with planning toward further consideration of these frequencies by the global community in preparation for the next ITU World Radiocommunication Conference (WRC-19). The FCC’s new proceeding presents an opportunity for the United States to take the lead in these preparations.

The FCC has not released the text of the NPRM but is expected to in the near term. Manufacturers, service providers, and potential users of millimeter-wave technologies should watch for the release and Federal Register publication to determine the comment deadlines for participating in the proceeding.

The NPRM will build on a Notice of Inquiry (NOI) released one year ago. The NOI received over fifty comments on the potential benefits and challenges of operating mobile radio services in bands above 24 GHz (also known as the millimeter wave bands) and whether these bands can support next-generation mobile wireless services such as 5G deployment. The NOI examined the following millimeter wave bands: the 24 GHz bands; the LMDS (local multipoint distribution service) bands in the 27.5-28.35 GHz, 29.1-29.25 GHz, and 31-31.3 GHz bands; the 39 GHz band; the 37/42 GHz bands; the 60 GHz bands; and the 70/80 GHz bands. The NPRM is expected to address the broad range of issues raised in response to the NOI. Commenters advocated for a variety of approaches to make millimeter wave spectrum available, including licensed, unlicensed, and hybrid schemes. Some commenters said the agency should seek to reserve as many of the channels as possible for licensed use, while incumbents in these bands – satellite, fixed wireless, amateur, and radio astronomy operators, among others – stressed the importance of protecting existing systems. Many of the commercial mobile broadband industry continued to advocate for more allocations below 6 GHz for mobile broadband without delay while explaining that the spectrum above 24 GHz held some promise to support certain broadband related applications. Now, a year later, it will be of particular interest, especially as Congress is expected to consider new spectrum legislation shortly, how the commercial mobile broadband industry will respond to the potential allocations in the context of their overall strategy to secure access to large amounts of additional spectrum to meet their evolving demand.

Chairman Wheeler also noted in his blog post, the second on the subject in the past few months, that the millimeter wave band proposals are consistent with the U.S. position in the upcoming World Radiocommunication Conference (WRC) taking place in Geneva throughout the month of November (WRC-15) regarding bands that should be studied for the future WRC conference in 2019 (WRC-19). The U.S. hopes to coordinate with international partners to develop rules for these bands and conducting technical sharing and compatibility studies for global use of these frequencies.