Tales of the Sausage Factory

Auto Industry Crosses The Line on 5.9 GHz By Using Dead Pedestrians To Justify Spectrum Squatting.

For the last 3 years, the auto industry and the Department of Transportation (DoT) have been at war with the open spectrum community of 75 MHz of spectrum up at 5.9 GHz. I will save the longer history for an upcoming “Insanely Long Field Guide To the 5.9 GHz Proceeding” post.  For now, it is enough to know that, as we enter the last few months of the Obama Administration, the auto industry and DoT have been doing everything they can to run out the clock and wait for this FCC to go away, hoping the next FCC will not be as interested in opening spectrum for sharing. You can read the history of 3 years of bad faith and bait and switch in this filing here. You can read the auto industries most recent insistence on testing that will take us well past the end of the Obama Administration here.

 

So far so normal. This is how spectrum politics works. Incumbents pay lip service to the idea of spectrum sharing, stress the awful terrible things that will happen if the FCC allows the new entrant to operate and cause interference, and insists on an endless series of tests while dragging their feet on anything that would make testing possible. The new entrant, meanwhile, complains bitterly about how the other side are stalling, the interference claims are baseless, and hundreds of billions of dollars in economic benefits are lost as the delay continues.  With the final months ticking down, both sides are now ratcheting up their efforts. Last week, PK, a number of our other spectrum public interest allies (OTI, PK, SHLB) and industry folks (Intel, MS, NCTA, WISPA) sent a letter to the President asking the White House to weigh in at DoT and tell them to stop helping the auto industry stall testing so we can open the spectrum to more unlicensed goodness. Yesterday, the auto industry sent its response.

 

And yesterday, the auto industry finally crossed a line on common decency that just pisses me off.

 

It is one thing to claim that your technology saves lives and that if the FCC doesn’t do what you want, people will die. It is another thing to knowingly and deliberately invoke actual, real dead pedestrians and dead cyclists you know damned well your proposed technology could not conceivably save  in an effort to support your own spectrum squatting. It is even worse when the technology you are pushing, “dedicated short-range communication” (DSRC), would replace the actual existing collision avoidance system you are deploying today that would save cyclists and pedestrians — car radar and sensing systems that use unlicensed spectrum and LIDAR.

 

 

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Tales of the Sausage Factory

DISH DE Debacle Part 3: What Happens Now?

In Part 1, I explained at considerable length what happened with the whole DISH DE Debacle and Why DISH owes the FCC $3.3 billion despite not having actually violated any rules. In Part 2, I explained how the FCC came to the conclusions it came to in the Order denying SNR and Northstar their DE credits but granting them their licenses.

 

Here, I will explain why (as readers have no doubt noticed) I have sympathy for DISH and why I would have done things differently – although I can’t say Wheeler was wrong. Heck, as I’ve noted many times before, I have the luxury of being neither a Commissioner nor a party with skin in the game. So take my Monday morning quarterbacking for what it’s worth.

 

More below . . .

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Tales of the Sausage Factory

So What’s This “Designated Entity” Thing, and Why Does DISH Owe The FCC $3 bn When They Didn’t Break The Rules?

Generally, I loath the cliche “be careful what you wish for.” But I can think of no better way to describe the vast consternation in the spectrum world over the licenses won by SNR and Northstar in the AWS-3 Auction. If you don’t recognize the names off-hand, that’s because most of the time people just refer to them as the “DISH Designated Entities” or the “DISH DEs.” As detailed in many articles and petitions to deny SNR and Northstar their DE credits (totaling $3.3 billion), most people regard SNR and Northstar as “sham” or “fake” DEs, owned and controlled by DISH.

But here’s the funny thing. As far as anyone can tell from the filings, DISH, SNR and Northstar followed the precise letter of the law. And, what’s even more surprising, if you look at the results, this was the most successful auction ever for DEs. Both SNR and Northstar are minority owned (as defined by the FCC’s rules). All the “loopholes” DISH used with regard to ownership interest and bidding coordination were designed to make it easier for DE’s to get capital, win licenses, and benefit from partnering with a larger telecommunications company — which SNR and Northstar certainly did.

As a result, as noted by my usual frenemies at Phoenix Center, as measured by every traditional metric, the AWS-3 auction was the single most successful auction in awarding licenses not merely to small businesses, but to minority owned firms specifically. By every past criteria ever used, the AWS-3 auction results ought to be celebrated as a ginormous success for the DE program. Every aspect worked exactly as intended, and the result was exactly what people claimed to want. Indeed, as noted by Phoenix Center, even the $3.3 bn in bidding credits was in line with other spectrum auctions as a percentage of revenue.

Except, in classic “be careful what you wish for” fashion, when you scaled these results up to their logical outcome, no one was really happy with the result (except for DISH). Which has now prompted FCC Chairman Tom Wheeler to circulate an order denying SNR and Northstar their designated entity credits. As a result, SNR and Northstar (meaning their financial backer DISH) must cough up $3.3 bn within 30 days of issuance of the Order or — unless granted a stay or extension — the licenses will revert back to the FCC. Oh yes, and the FCC might need to deduct an additional $10 bn from the auction revenue. And there might be default charges (the FCC charges a penalty for defaulting on payments so people don’t bid and hope they find the money later). Or it might get more complicated, since there has never been a clawback of this magnitude before.

 

In Part 1, I will explain what exactly happened, why DISH did not violate the rules as written and why SNR and Northstar are technically “minority owned.” Along the way, we will consider some delightful ironies about the whole business.

In Part 2, I’ll tackle why the FCC decided that it could yank the DE discount anyway, and try to figure out what happens next.

More below . . . .

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Tales of the Sausage Factory

Welcome To The 2015 Spectrum Season!

Happy New Year faithful readers! Following in the footsteps of Congress, The Daily Show, and just about everyone else here in D.C., I’ve been on hiatus for the last month or so getting rested and rejuvenated for the exciting new year of 2015. In particular, I am extremely excited about this year’s roll out of the “Spectrum Wars” series.  To make life easier for everyone (and more entertaining for myself), I will provide some summaries of the major regulatory issues currently on the table — including what TV series they resemble. As this is primarily intended for people trying to catch up on existing proceedings, I’m not going to speculate on new things that might happen.

Enjoy below . . . .

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Tales of the Sausage Factory

My Handy Guide To The May 15 FCC Meeting: What The Heck Is An Open FCC Mtg And How Does It Work?

Even before Chairman Tom Wheeler proposed to issue a Notice of Proposed Rulemaking (NPRM) on possible new net neutrality rules to replace the ones vacated by the D.C. Cir. the May 15 Open Meeting of the Federal Communications Commission (FCC) promised to be one of the more important meetings in recent memory.  As a result, it has become one of the more contentious in recent memory as well.

 

In addition to the net neutrality NPRM, we have an Order deciding key issues for the upcoming incentive auction (aka the 600 MHz auction, aka that really complicated thing where we pay broadcasters to get off spectrum they got for free by simultaneously selling it to wireless companies for mobile broadband). This mega item has two fairly important side pieces from my perspective: the future of unlicensed use in the TV broadcast bands (aka the TV white spaces (TVWS) aka “super wifi” aka “engineers will never be allowed to name anything ever again”) and possible limits on how much spectrum any one company can acquire (aka the “no piggies rule” aka spectrum aggregation policies aka “lawyers are not allowed to name anything ever again either”). The TVWS item has its own satellite proceeding about wireless microphones and coexistence between wireless mics and unlicensed use in an ever shrinking broadcast band.

 

So for those of you first timers, and those of you who have gone so long without a contentious FCC meeting you’ve forgotten how it’s done, I’ve prepared this helpful guide on “what is an open FCC meeting and how does it work.”

 

Mechanics of the meeting below . . .

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Tales of the Sausage Factory

Commissioner Pai: A ‘Consensus’ Of Incumbents Without Consumers Is No Consensus And means Disaster For 600 MHz.

Last week, the Federal Communications Commission (FCC) Wireless Bureau issued what should have been a fairly routine and highly technical Public Notice about possible alternative band plans for the 600 MHz Auction aka the Incentive Auction aka “that incredibly crazy, complicated deal Congress came up with last year where broadcasters sell back licenses to the FCC so the FCC can sell them to wireless companies.” Since public comment makes it clear that the various proposals present a lot of challenges (see my incredibly long and wonky explanation here), it shouldn’t surprise anyone that the Wireless Bureau asked for further comment after holding a band plan workshop a few weeks ago.

 

But Commissioner Pai issued a separate statement blasting the Wireless Bureau. In particular, Pai berated the Bureau for departing from what he called the “consensus framework” for one particular band plan – the band plan favored by AT&T, Verizon, the National Association of Broadcasters (NAB) and the largest equipment manufacturers. Pai ignored objections to the AT&/VZ/NAB plan and support from consumer groups (including Public Knowledge), competitors such as Sprint, or tech companies such as Microsoft. Over and over in his statement, Pai cited to the comments of AT&T, Verizon and NAB as proof of a “broad consensus” as if none of these objections existed.

As someone fairly active in this proceeding, who actually participated in the Band Plan Workshop, I am more than a little peeved. Yoo hoo! Commissioner Paaaaiiiiii!!! What am I, chopped liver? I am also more than a little irked at the allegations that the Bureau somehow behaved improperly in issuing the Public Notice. Pai’s accusation that the PN violates the Bureau’s delegated authority by soliciting comment on alternatives to the AT&T/VZ/NAB “consensus plan” appears designed to bully the Bureau into submission.

Setting my personal pique aside, as I keep trying to explain, letting the broadcasters and the largest wireless incumbents write the rules for the auction spells absolute disaster. If Pai genuinely wants to see a successful Incentive Auction, that means looking past industry “consensus” and getting into the very nasty and complicated details to figure out the right set of tradeoffs that will (a) get the broadcasters and wireless guys to the auction, but (b) not let them short the U.S. Treasury out of the cash it expects to collect in the process.

I vent and take one more shot at explaining this below . . . .

 

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Tales of the Sausage Factory

Is Fear of Wireless Foreclosure “Speculative?” Depends. Is this About Intent Or Effect?

Recently, the Antitrust Division of the Department of Justice  (DOJ) filed these comments with the Federal Communications Commission (FCC) in the proceeding on spectrum aggregation limits (aka spectrum screen v. spectrum cap). The DOJ comments have some good stuff about the economics of the wireless industry and competition (in a theoretical way), and about why it is important to make sure potential competitors have spectrum, particularly low-band spectrum. Mostly, DOJ’s argument rests on the idea of “foreclosure,” that a wireless firm will bid on licenses at auction just to keep them out of the hands of competitors.

Asked about this on a recent earnings call, VZ CFO Fran Shammo basically said that there is no evidence that Verizon is bidding on licenses just to keep them out of the hands of rivals, so DOJ’s argument is “theoretical” and the FCC should not adopt any limits.

VZ basically argues that we should not worry about possible foreclosure unless there is evidence of an actual intent to foreclose. This treats a spectrum screen (and concern about foreclosure) as a precaution against bad actors. As long as bidding on licenses at auction makes sense for reasons other than foreclosure, and there is no evidence of any intent to foreclose, then everything should be just fine even if the outcome has the same effect as a foreclosure strategy (e.g., competitors don’t have enough spectrum to offer viable competing services.)

But the Communications Act does not work this way. Specifically, Section 309(j)(3)(B). Whether Verizon (or any other carrier’s) intent is as pure as the driven snow, or black as any comic opera villain, does not matter one iota. What matters is whether we avoid a “concentration of licenses” and “disseminate licenses among a wide variety of applicants” so that we “promot[e] economic opportunity and competition and ensur[e] that new and innovative technologies are readily accessible to the American people.”

As I will discuss below, the evidence from the 700 MHz auction and subsequent transactions demonstrates that we are feeling the effects of foreclosure, regardless of whether there was an actual intent to foreclose. As a result, the DOJ concern is not “theoretical,” but very real.

 

More below . . .

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Tales of the Sausage Factory

AT&T to FCC: “I double dare you to show you’re serious about wireless competition.”

Rarely do you see companies double-dare the FCC to back up their brave talk about promoting competition. That is, however, what AT&T has just decided to do – with a little help from Verizon. After gobbling a ton of spectrum last year in a series of small transactions, AT&T announced earlier this week it would buy up ATNI, which holds the last shreds of the old Alltel Spectrum. To top this off, Verizon just announced it has selected the purchaser for the 700 MHz spectrum it promised to sell off to get permission to buy the SpectrumCo spectrum. And guess what? The purchaser of the bulk of Verizon’s 700 MHz licenses, which Verizon promised to divest to promote competition – is AT&T!

 

In the last few months, we have seen billions of dollars in new investment as a result of the FCC’s decision to deny AT&T/T-Mo, force Verizon to divest in VZ/SpectrumCo, and otherwise draw some lines in the sand against further consolidation and to promote competition. For reasons I explain below, this transaction crosses just about every single red line the FCC (and Department of Justice (DoJ)) have ever indicated they had about wireless spectrum concentration. The question is — will the FCC (or DoJ) actually do anything about it?

 

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Tales of the Sausage Factory

Crest’s Moronic Petition To Deny In Sprint/CLWR Symptom of Broader Idiocy That Actually Matters.

OK, I suppose I should really wait until they file, but this story detailing Crest Financial’s planned Petition to Deny in Sprint/Softbank/CLWR appears to be, in my humble opinion, the single dumbest grounds for a Petition to Deny. EVAR. For those just tuning in, Sprint, backed by Softbank, has offered approximately $3/share for the outstanding shares of Clearwire (CLWR). Because some analysts with no understanding of the actual spectrum market think CLWR is sitting on a spectrum pot ‘o gold, Crest is pissed and wants more money. It has already filed a shareholder derivative suit claiming that Sprint leveraged its insider position to buy out Clearwire below fair market value. Given how corporate law has crapped all over minority shareholder rights in recent decades, I am not giving this much hope. Apparently, Crest feels the same way, because they are now taking the fight to the FCC.

According to the story: “In going to the FCC, Crest will argue that the Clearwire deal artificially undervalues the company’s spectrum holdings, Schumacher said. That in turn potentially devalues future revenue for the U.S. government when it auctions off spectrum licenses.” Crest apparently thinks CLWR’s spectrum holdings are worth $30 billion, prompting me to wonder what planet they live on and whether they share it with House Republicans who keep thinking spectrum auctions are automatic pots of gold.

What makes this utterly dumb is the combination of a false factual premise combined with an utter lack of legal grounds, on top of a near zero chance of holding things up politically (unless AT&T or possibly DISH file, which might introduce greater political uncertainty). I would normally confine myself to simply snickering but there is a rather important point to be made here — especially for all those listening to analysts telling broadcasters they can make gajillions in the upcoming incentive auction –about spectrum valuations.

More below . . . .

 

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Tales of the Sausage Factory

AT&T, Anger Management and Spectrum Legislation

Based on recent statements, it’s hard to tell whose angrier at the Federal Communications Commission (FCC) and its Chair, Julius Genachowski: AT&T’s Upper Management or the House Commerce Committee Republicans. Mere mention of Genachowski’s name converts House Commerce Committee Republicans, such as Telecom Subcommittee Chair Greg Walden (R-OR), from urbane sophisticated legislators into sputtering mad parodies of Elmer Fudd.  “Oooh that wascally Chaiwman! Always wegulating the fwee market! I’ll fix his wagon!” Meanwhile, AT&T CEO Randal Stephenson devoted the main part of his recent earnings call to repeating variations on “Juliuth, you’re desthpicable.”

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