FCC Adopts 3.5 GHz Band PAL Licensing Changes

by Kelley Drye & Warren LLP
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The Federal Communications Commission’s (“FCC’s” or “Commission’s”) vote at its open meeting on October 23, 2018 on a Report and Order regarding the 3550-3700 MHz band (“3.5 GHz Band”) was split along party lines. This was hardly surprising given the criticism of the original order in 2015 by the then-Republican minority. As the now-Republican majority approved changes sought by the commercial mobile industry to the Priority Access License (“PAL”) rules, the lone Democratic Commissioner, Jessica Rosenworcel dissented. Spectrum in and around the 3.5 GHz range is often touted as a lynchpin for initial 5G deployment internationally. The FCC, in response, seeks to promote greater investment in the band, by 5G proponents in particular by making PALs, which are to be auctioned, more attractive to commercial mobile service providers. The Order hopes to accomplish this by, among other things, increasing the size of PAL license areas from census tracts to counties, and extending license terms from three to ten years with a renewal expectancy. Commissioner Rosenworcel casts the action as a missed opportunity for spectrum policy that promotes innovation by favoring instead the same old, same old.

Background

In 2015, the FCC adopted three-tiered licensing framework and other rules for the Citizens Broadband Radio Service (“CBRS”) in the 3.5 GHz Band, which is to be shared with incumbent primary radar and satellite users. These incumbents will retain the highest priority in the band and level of interference protection, while PALs will have second-priority, and third-tier licensed-by-rule General Authorized Access (“GAA”) must accept interference from and may not cause harmful interference to PALs and the top-tier incumbents. Advanced frequency coordinators, known as the Spectrum Access System (“SAS”) administrators supported by Environmental Sensing Capability (“ESC”) operators, will mediate and control access rights between the three tiers of users.

Early in his tenure as FCC Chair, Ajit Pai tasked Commissioner Michael O’Rielly with reexamining the regulatory framework in the 3.5 GHz Band, particularly as it applied to PALs. In response to petitions for rulemaking filed by CTIA and T-Mobile, in October 2017, the FCC adopted a Notice of Proposed Rulemaking (“NPRM”) to seek comment on proposed changes to the PAL licensing regime. See our blog post regarding the NPRM here. Among other things, the NPRM sought comment on the appropriate PAL license size.

Report and Order

The Order adopted on October 23 largely implements the changes proposed in the NPRM, including:

  • PAL Geographic License Areas: In 2015, the FCC licensed PALs by census tract (74,000 nationwide). In their petitions, CTIA and T-Mobile proposed licensing by Partial Economic Areas (“PEAs”) (416 nationwide). In the NPRM, the FCC sought comment on this, including a possible hybrid approach, such as licensing by PEA in urban areas and by census tracts in rural areas. The Commission was persuaded by the record arguments that, among other things, census tract licensing would “cause significant difficulties in deployment of large-scale networks for mobile 5G use” including network deployment coordination issues with the extremely high number of license borders, particularly in urban areas. However, the Commission was, in the end, unpersuaded to license on the basis of PEAs because of concerns that smaller potential bidders might be completely shut out. Accordingly, the FCC decided to license PALs on a county basis (3,200 nationwide) as an “appropriate middle ground.” Licensing by county was largely supported by cable providers, including NCTA.
    • Even though the FCC settled on the “middle ground” geographic license area of counties, the door on larger license areas is not completely shut. Auction participants may yet be able to obtain larger service areas. The Order states that the FCC “will seek comment in the pre-auction process on allowing package bids to facilitate bidding for the counties that comprise a complete MSA in the top 305 markets.” The FCC may allow package bidding for all of the counties in an MSA. We expect that this may be a cause for dispute as part of the pre-auction process and should be watched closely. At the same time, by leaving this issue open and premised on a future request for comment, the Commission leaves open the potential for further delays before auctions can proceed in the United Sates, and some other countries hoping to win the race to 5G will get a significant jump on making spectrum in and around the 3.5 GHz Band available. (Commissioner O’Reilly had hoped, initially, to resolve the further NPRM by the first quarter of this year.)
  • License Terms and Renewals: To further encourage investment in auctions and deployment by commercial mobile carriers, the Order expands PAL license terms from three years to ten years and makes the licenses renewable by including them in the new renewal framework for Wireless Radio Services.
  • Competitive Bidding Changes: The Order eliminates prior restrictions on the number of PALs per license area that are made available at auction depending on the number of PAL applicants for a given license area. The 2015 rules made available one less PAL than the total number of PALs for which all applicants had applied in a given geographic license area, including making no PALs available in areas with only one applicant. Under the new rules, if there is only one applicant seeking a PAL in an area, the applicant can acquire the PAL outside of the auction process. Although it did acknowledge the issue, the FCC did not address whether a PAL application and a GAA application in the same area are “mutually exclusive.”
  • Partitioning and Disaggregation on the Secondary Market: The Order reverses a 2016 FCC decision to prohibit PALs from partitioning or disaggregating their licenses. The FCC determined that the earlier basis for not allowing partitioning and disaggregation was premised on now modified PAL license characteristics (e.g., shorter terms and smaller geographic areas). Therefore, the FCC will allow flexible partitioning and disaggregation to promote investment and ensure that the spectrum is used efficiently.
  • Citizens Broadband Service Device (“CBSD”) Disclosure Registration Information: The Order amends the CBSD rules to “prohibit SAS Administrators from disclosing disaggregated CBSD registration data to the public except where such disclosure is authorized by the registrant.” Further, the Order requires “SAS Administrators to make aggregated spectrum usage data for any particular area of interest available to the public, including the extent of usage and available spectrum in the 3.5 GHz Band throughout that area and the maximum available contiguous spectrum.” This compromise was designed to account for the need for registrant information by potential co-channel operators as well as protecting network security and confidential company information.
  • 3.5 GHz Emissions and Interference Limits: In the NPRM, the Commission sought comment on two alternative proposals (the “Qualcomm Mask” and the “Graduated Mask”) to relax the existing emission masks. See discussion in our October 2017 post. In the Order, the FCC declined to make any changes to the out of band emission (“OOBE”) limits outside the 3.5 GHz Band and declined to change the emission limits for CBSDs. At the same time, the Commission did relax the OOBE limits within the 3.5 GHz Band for End User Devices to accommodate bandwidths wider than ten megahertz. For this purpose, the Commission adopted the Qualcomm Mask and an adjacent channel leakage requirement of -30 dBc for End User Devices.

It remains to be seen whether expanding the scope and duration of PALs will make them especially attractive to large carriers for the auction at some point (presumably next year) and eventual 5G deployment, or whether these same measures may act as a disincentive to participation in the PAL auction by small businesses and rural carriers as many of them have claimed. In addition, the Order makes clear that there are additional details to be addressed, such as potential package bidding in the auction to increase a licensee’s service territory.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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