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[July 12, 2014]
FCC Updates Policies Regarding Mobile Spectrum Holdings
(Targeted News Service Via Acquire Media NewsEdge) Targeted News Service WASHINGTON, July 11 -- The Federal Communications Commission published the following rule in the Federal Register: Policies Regarding Mobile Spectrum Holdings; Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions A Rule by the Federal Communications Commission on 07/11/2014 Publication Date: Friday, July 11, 2014 Agency: Federal Communications Commission Dates: Effective September 9, 2014.
Effective Date: 09/09/2014 Entry Type: Rule Action: Final rule.
Document Citation: 79 FR 39977 Page: 39977 -40003 (27 pages) CFR: 47 CFR 20 Agency/Docket Numbers: WT Docket No. 12-269 Docket No. 12-268 FCC 14-63 Document Number: 2014-15769 Shorter URL:
Action Final Rule.
Summary In this document, the Federal Communications Commission (Commission) updates its initial screen for review of spectrum acquisitions through secondary markets and makes determinations regarding whether to establish mobile spectrum holding limits for its upcoming auctions of high- and low-band spectrum, in light of the growing demand for spectrum, the differences between spectrum bands, and in accordance with its desire to preserve and promote competition.
DATES: Effective September 9, 2014.
FOR FURTHER INFORMATION CONTACT: Daniel Ball, Wireless Telecommunications Bureau, (202) 418-1577, email Daniel.Ball@fcc.gov; Amy Brett, Wireless Telecommunications Bureau (202) 418-2703, email Amy.Brett@fcc.gov.
SUPPLEMENTARY INFORMATION: This is a summary of the Commission's Report and Order (R&O), WT Docket No. 12-269; Docket No. 12-268; FCC 14-63, adopted May 15, 2014 and released June 2, 2014. The full text of this document is available for inspection and copying during business hours in the FCC Reference Information Center, Portals II, 445 12th Street SW., Room CY-A257, Washington, DC 20554. Also, it may be purchased from the Commission's duplicating contractor at Portals II, 445 12th Street SW., Room CY-B402, Washington, DC 20554; the contractor's Web site,
or by calling (800) 378-3160, facsimile (202) 488-5563, or email FCC@BCPIWEB.com. Copies of the R&O also may be obtained via the Commission's Electronic Comment Filing System (ECFS) by entering the docket number WT Docket No. 12-269. Additionally, the complete item is available on the Federal Communications Commission's Web site at
1. In the R&O the Commission updates its spectrum screen for its competitive review of proposed secondary market transactions to reflect current suitability and availability of spectrum for mobile wireless services. It adds to its spectrum screen: 40 megahertz of AWS-4; 10 megahertz of H Block; 65 megahertz of AWS-3 (when it becomes available on a market-by-market basis); 12 megahertz of BRS; 89 megahertz of EBS; and the total amount of 600 MHz spectrum auctioned in the Incentive Auction. It subtract from its spectrum screen: 12.5 megahertz of SMR; and 10 megahertz that was the Upper 700 MHz D Block. The Commission establishes a market-based spectrum reserve of up to 30 megahertz in the Incentive Auction in each license area to ensure against excessive concentration in holdings of low-band spectrum and ensuring that all bidders bear a fair share of the cost of the Incentive Auction. It adopts limits on secondary market transactions of 600 MHz spectrum licenses for six years post-auction. It declines to adopt auction-specific limits for AWS-3. It treats certain further concentrations of below-1-GHz spectrum as an enhanced factor in its case-by-case analysis of the potential competitive harms posed by individual transactions.
I. Preserving and Promoting Competition in the Mobile Wireless Marketplace 2. The Commission has long recognized that "spectrum is an input in CMRS markets," and that "the state of control over the spectrum input is a relevant factor" in its competitive analysis. Ensuring that sufficient spectrum is available for multiple existing mobile service providers as well as potential entrants is crucial to promoting consumer choice and competition throughout the country, including in rural areas, and is similarly crucial to fostering innovation in the marketplace. For these reasons, Congress directed the Commission to proactively "include safeguards to protect the public interest" when specifying the classes and characteristics of licenses and permits to be issued by competitive bidding, and to "promot[e] economic opportunity and competition and ensur[e] that new and innovative technologies are readily accessible to the American people by avoiding excessive concentration of licenses[.]" In order for there to be robust competition, multiple competing service providers must have access to or hold sufficient spectrum to be able to enter a marketplace or expand output rapidly in response to any price increase or reduction in quality, or other change that would harm consumer welfare. Consistent with the Commission's statutory mandate, the fundamental goal that has guided its policies regarding mobile spectrum holdings has been the preservation and promotion of competition, which in turn, enables consumers to make choices among numerous service providers and leads to lower prices, improved quality, and increased innovation.
3. Since the Commission's last comprehensive review of its mobile spectrum holdings policies more than a decade ago, the marketplace for mobile wireless services has evolved significantly--both in consumer demand for services and market structure--as has the role of low-band spectrum for coverage purposes and high-band spectrum for capacity purposes in the deployment of providers' networks. As providers deploy next-generation mobile networks, the engineering properties and deployment capabilities of the mix of particular spectrum bands in providers' holdings have become increasingly important, particularly as multi-band phones allow users to take advantage of the different properties of different spectrum bands. Moreover, while the mobile wireless marketplace a decade ago consisted of six near-nationwide providers and a substantial number of regional and small providers, since then, there has been a significant degree of consolidation resulting in a market with four nationwide providers and a smaller number of regional and more local service providers.
4. Reflecting this evolution in the mobile wireless marketplace, the Commission, in recent years, has considered in more detail the technical distinctions among spectrum bands used to deploy next-generation mobile networks. The Commission adopted mobile spectrum holdings policies in this rulemaking that address how the differences among spectrum bands may affect its overall competitive analysis of spectrum acquisitions and therefore its decision making for both auctions and secondary market transactions.
5. In adopting these policies, the Commission is mindful that the statutory framework established by Congress for mobile wireless services and implemented by the Commission, with its reliance on competition as the primary driver of consumer benefits, has fostered substantial economic growth and consumer benefits for its nation. Among other goals, Congress has directed us as well to promote the "efficient and intensive use of the electromagnetic spectrum" and avoid an "excessive concentration of licenses" in the design of systems of competitive bidding, as well as to review transactions to ensure that they serve the public interest.
6. Consistent with the evolution of the marketplace and the Commission's statutory directives and policy goals, and in light of the evolution of wireless services demanded by consumers, the Commission must ensure that multiple service providers have access to spectrum in the foreseeable future. Existing marketplace conditions, including concerns about the potential for anticompetitive behavior, inform its predictive judgment but are not determinative as to whether the Commission needs to act. The mobile spectrum holdings policies the Commission adopted are necessary to preserve and promote consumer choice and competition among multiple service providers, promote the efficient and intensive use of spectrum, maximize economic opportunity, and foster the deployment of innovative technologies.
A. Evolution of the Mobile Wireless Marketplace 7. During the past decade, provider supply and consumer demand for wireless services has exploded, moving from the provision of mobile voice services to the provision of mobile broadband services. The rapid adoption of smartphones, tablet computers, mobile applications, and increasing deployment of high-speed 3G and now 4G technologies, is driving significantly more intensive use of mobile networks. In 2013, a single smartphone generated 48 times more mobile data traffic than a feature phone, and average smartphone usage grew 50 percent in 2013. The adoption of smartphones increased from 27 percent to 54 percent of U.S. subscribers from December 2010 to December 2012. Consequently, service providers generally need access to more spectrum to meet the increasing demand for mobile broadband, which consumes far greater amounts of bandwidth than did mobile phones just a short time ago.
8. The wireless industry has also undergone significant consolidation during the past decade. In 2003, there were six nationwide facilities-based wireless service providers: AT&T Wireless, Sprint PCS, Verizon Wireless, T-Mobile, Cingular Wireless, and Nextel. Now there are four--Verizon Wireless, AT&T, Sprint, and T-Mobile. In addition, there have been several significant spectrum-only transactions, such as AT&T-Qualcomm (2011), Verizon Wireless-SpectrumCo (2012), and AT&T WCS (2012) that have resulted in increased spectrum aggregation among the remaining providers.
9. Concentration in the market share of the major providers has also increased during that time period. As of December 2003, the top six facilities-based nationwide providers accounted for approximately 79 percent of total mobile wireless subscribers in the country. By December 2013, the top four facilities-based nationwide providers had increased their combined market share to 97 percent of all subscribers. Verizon Wireless and AT&T together accounted for 68 percent of the nation's subscribers as of year-end 2013, compared to 51 percent in 2004. Some regional and local service providers have achieved significant market shares within particular local markets, often the most rural markets, but they typically rely on roaming agreements with nationwide facilities-based providers to extend the geographic reach of their networks.
10. The Commission has "ample latitude to adapt its rules and policies to the demands of changing circumstances." In light of these trends and current spectrum aggregations, the Commission must examine whether changes in its mobile spectrum holdings policies are necessary to facilitate the robust competition that leads to lower prices, improved quality, and greater innovation. The following are some of the benefits of competition: Service providers have offered various pricing plans, ranging from tiered usage-based data pricing with overage charges (Verizon Wireless, AT&T) to unlimited data pricing (Sprint), and in 2012, both Verizon Wireless and AT&T launched shared data plans for smartphones and other mobile data devices, and T-Mobile reintroduced an unlimited smartphone data pricing option.
B. Ensuring That All Americans Benefit From Mobile Wireless Competition 11. Based upon the record before us, the Commission finds that the spectrum aggregation limits the Commission adopted is needed to advance its statutory objectives under section 309(j), to promote competition, and to avoid competitive harms. The Commission's competition-related decision making is designed to advance the public interest by preserving and promoting competition that benefits consumers and the Commission must consider the totality of the circumstances and choose policies that are most likely to allow competition to flourish for the public benefit. Accordingly, the Commission recognizes the important tradeoffs in the policy decision at hand. Policies that would limit the ability of major providers to acquire additional spectrum licenses may limit their ability to provide new services or serve new customers. At the same time, policies that would allow these service providers to acquire all or substantially all of the spectrum licenses to be auctioned in the near future, particularly spectrum licenses being auctioned in the Incentive Auction, or that would allow further concentration in below-1-GHz spectrum in secondary market transactions without enhanced scrutiny, would raise significant competitive issues.
12. Raising Rivals' Costs and Foreclosure. In 2001, the Commission recognized that "it is at least a threshold possibility that because the supply of suitable spectrum is limited, firms in CMRS markets might choose to overinvest in spectrum in order to deter entry, depending on the costs of doing so." In certain situations, a dominant firm may raise rivals' costs by a variety of means, including input monopolization. As rivals' costs are raised, the competiveness of the marketplace is likely to diminish. Foreclosure can occur when competitors have an incentive and ability to acquire an input not only to put it to their own use, but also to withhold it from their rivals.
13. Discussion. In its review of the evolution of the mobile wireless marketplace, its current state, and the potential future effects on consumers, the Commission is required to consider a number of concerns to advance the public interest. Section 309(j) requires the Commission to balance a number of specific statutory objectives including competition, diversity and the avoidance of excessive concentration in designing its rules regarding spectrum licenses and the competitive bidding assignment process. The Commission finds that, under the totality of circumstances, the public interest will be advanced by: Reaffirming the current case-by-case review of proposed transactions, with continued use of a spectrum screen triggered at aggregations of approximately one third or more of the spectrum suitable and available for mobile telephony/broadband; updating the spectrum screen to include spectrum currently suitable and available for mobile telephony/broadband; treating certain levels of increased aggregations of below-1-GHz spectrum as an enhanced factor during case-by-case review of secondary market transactions involving below-1-GHz spectrum; and establishing a market-based spectrum reserve in the upcoming 600 MHz auction.
14. There are three independent bases for its conclusion, each of which the Commission finds warrants the policies the Commission adopted: (1) The importance of access to low-band spectrum to promote variety in licensees and the advancement of rural deployment as directed by Section 309(j), (2) the benefits to consumers associated with robust competition among multiple providers having access to low-band spectrum, and (3) the potential for competitive harm if the Commission does not provide safeguards to mitigate against the possibility of providers raising rivals' costs or foreclosing competition by denying competitors access to low-band spectrum.
15. Its findings are compelled by the changing circumstances posed by the marketplace today: Increased consolidation, the growth in demand for mobile broadband, and the significance of the upcoming 600 MHz auction. First, the Commission recognizes that the mobile wireless marketplace has undergone considerable consolidation, both in terms of number of firms and relative market shares, as well as increased concentration of low-band spectrum. Recent acquisitions have exacerbated this concentration. While limited amounts of low-band spectrum might theoretically be acquired in secondary market transactions, the vast bulk of that spectrum has already been acquired. There is also significantly less low-band spectrum than there is high-band spectrum: after its decisions, there will be 134 megahertz of spectrum below 1 GHz suitable and available for the provision of mobile broadband services and 446.5 megahertz of suitable and available spectrum above 1 GHz. Concentration in spectrum holdings by service providers of low-band spectrum has become particularly pronounced, with Verizon Wireless and AT&T together having aggregated more than 90 percent of all cellular spectrum. In addition, these two service providers together currently hold approximately 72 percent of 700 MHz spectrum. By comparison, variation in spectrum holdings of higher-frequency spectrum in the range of 1 to 2 GHz is more evenly distributed: Of the PCS spectrum, Verizon Wireless holds 16 percent, AT&T holds 29 percent, Sprint holds 28 percent and T-Mobile holds 22 percent; of the AWS-1 spectrum, Verizon Wireless holds 37 percent, AT&T holds 13 percent, and T-Mobile holds 42 percent.
16. Second, its findings are informed by the skyrocketing consumer demand for mobile broadband. Today, consumers are demanding more data at higher speeds, while at home, at work, and in transit. The Commission finds that to provide sufficient level of service in the marketplace to the benefit of consumers, providers will need to deploy more spectrum that can provide both coverage and in-building penetration, as well as spectrum that can provide the increased throughput for mobile broadband applications 17. Third, its findings are based on the recognition that the 600 MHz spectrum that will be made available in the Incentive Auction will be the last offering of a significant amount of nationwide greenfield low-band spectrum for the foreseeable future. This is particularly important because of the very different characteristics of low-band spectrum. There is a large frequency gap between the below-1-GHz spectrum (in the 700 and 800 MHz bands now largely held by the leading providers and the 600 MHz Incentive Auction spectrum) and the remaining spectrum currently suitable and available for mobile broadband use, beginning with the AWS-1 band at 1710 MHz. Low-band spectrum possesses distinct propagation advantages for network deployment, particularly in rural areas and indoors. As a result, the auction of spectrum below 1 GHz presents a once-in-a-generation opportunity to promote competition as specifically required by section 309(j). Based upon current trends in consumer demand for mobile broadband services, the Commission concludes that the decisions the Commission makes here will have a significant impact on the extent to which competition may flourish for years to come.
18. Though there is substantial support in the record for distinguishing between low-band and high-band spectrum based on propagation characteristics, as discussed above, the Commission finds that the record does not support such categorical distinctions between three different spectrum groupings--below-1-GHz, 1-2.2 GHz, and 2.3-2.7 GHz--as recently advocated by Sprint.
19. Variety of Licensees and Rural Deployment. Under Section 309(j), Congress mandated that the Commission designs auctions to "include safeguards to protect the public interest in the use of the spectrum," including the objectives to disseminate licenses "among a wide variety of applicants" and to promote deployment of new technologies, products, and services to "those residing in rural areas." The limited restrictions the Commission imposes on spectrum holdings will promote both of these statutory policies. A variety of licensees is particularly important in light of the lack of competitive offerings in rural America today.
20. Increasing the number of providers who have access to low-band spectrum can increase the competitive offerings of mobile wireless service for consumers, particularly in rural areas. Two nationwide providers control the vast majority of low-band spectrum, and this disparity makes it difficult for rural consumers to have access to the competition and choice that would be available if more wireless competitors also had access to low-band spectrum. Low-band spectrum, given its unique propagation characteristics, can serve as a foundation for expansion of an existing network or a new or upcoming service providers' network deployment as it builds a customer base to support further growth. The Commission finds that its spectrum holdings policies will promote variety in licensees and deployment of new technologies to those residing in rural areas.
21. The Commission believes that holding a mix of spectrum bands is advantageous to providers and that consumer's benefit when multiple providers have access to a mix of spectrum bands which in turn can increase competition, drive down prices, and ensure continued innovation and investment. Accordingly, the Commission finds its public interest goal of promoting consumer welfare would be advanced by the policies the Commission adopted.
22. Potential for Competitive Harm From Increased Aggregation of Spectrum. The Commission also finds that in the absence of additional below-1-GHz spectrum on a nationwide basis, there is a substantial likelihood of competitive harm if providers that currently lack sufficient access to such spectrum cannot acquire it. Under section 309(j), the Commission has mandates to promote competition, promote efficient use of spectrum, and avoid the excessive concentration of licenses. Low-band spectrum is less costly to deploy and provides higher coverage quality and the leading providers have most of the low-band spectrum available today. If they were to acquire all or substantially all of the remaining low-band spectrum, they would benefit independently of any deployment of this newly acquired spectrum to the extent that their rivals are denied its use. Without access to this low-band spectrum, their rivals would be less able to provide a competitive alternative.
23. Along with an attenuated ability to increase output or service quality in response to price increases, providers that lack access to low-band spectrum may lack the ability quickly to expand coverage or provide new or innovative services, which would have a significant impact on competition in the mobile wireless marketplace. The Commission agrees that a service provider that is limited to high-band spectrum holdings would face challenges to provide services as robust as those offered by providers holding a mix of low- and high-band spectrum. The consumer harms from the raising of rivals' costs from increased concentration of low-band spectrum outweigh the potential benefits of unlimited spectrum aggregation. Accordingly, the Commission finds that the limited restrictions the Commission adopted will reasonably balance its goals of promoting competition, ensuring the efficient use of spectrum, and avoiding an excessive concentration of licenses in accord with section 309(j).
24. Foreclosure. The Commission agrees with DOJ, today's mobile wireless marketplace is characterized by factors that, according to DOJ, increase the potential for anticompetitive conduct, including high market concentration, highly concentrated holdings of low-band spectrum, high margins, and high barriers to entry. These risk factors increase the incentive and ability for a provider with low-band spectrum to bid for the spectrum in an attempt to stifle competition that may arise if multiple licensees were to hold low frequency spectrum. As a result, such a provider might be the highest bidder in a spectrum auction, not because it will put the spectrum to its highest use, but because it is motivated to engage in a foreclosure strategy. In light of this risk and balancing the inherent tradeoffs, the Commission finds that the limited restrictions the Commission enacted is a reasonable balance of the Section 309(j) and public interest factors that form its statutory mandate, including the goals to promote competition, disseminate licenses among a wide variety of applicants, ensure high quality service to those in rural areas and avoid the excessive concentration of licenses, while also promoting the efficient and intensive use of the spectrum.
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