FCC Adopts Final Licensing Rules for 3.5 GHz (CBRS) Shared Spectrum Band

by Davis Wright Tremaine LLP
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On Tuesday, October 23, the FCC adopted a Report and Order modifying licensing and operational rules in the 3.5 GHz band, known as the Citizens Broadband Radio Service (CBRS). The agency’s decision will finally settle the rules for utilizing this important mid-band spectrum, moving industry one step closer to gaining access to 150 MHz of spectrum for a variety of potential use cases, from 5G-capable mobile and fixed wireless applications, to hosted network solutions and industrial IoT applications. Interest in the CBRS band has grown dramatically over the last several years as mobile, cable, fixed wireless and DAS providers all finalize plans to deploy services over this new spectrum.

The FCC’s decision modifies key elements of the CBRS licensing regime established in 2015, including:

  • expanding the size of license areas from census tract to counties,
  • increasing the term of licenses from 3 to 10 years,
  • adding a renewal expectancy for license holders,
  • adopting license performance (build-out) requirements for license holders,
  • incorporating bidding credits for eligible small businesses and rural providers who bid on licenses, and
  • adopting secondary market rules to permit licensees to sell or lease CBRS spectrum licenses.

The Commission’s decision focuses primarily on modifying the licensing regime incorporated in the existing CBRS rules. The decision does not change existing rules governing unlicensed operations in the band. Indeed, of the 150 MHz allocated for use in this band, more than half – 80 MHz – will be available to general authorized access (GAA) users operating without a license in the band, while 70 MHz will be available to entities holding so-called priority access licenses (PALs). Operators in the GAA portion of the band may operate without a license as long as their equipment complies with technical rules in the band –what the FCC calls “license by rule.”

As adopted, the Report and Order makes the following changes to CBRS licensing rules:

PAL License Areas Expanded from Census Tracts to Counties: The question of how to properly define PAL license areas has been the most contentious issue in this proceeding. The original rules adopted very small license areas: census tracts. Mobile providers argued that small license areas would reduce potential investment in the band and urged the FCC to adopt much larger license areas: partial economic areas. Smaller providers and industrial IoT users urged the FCC to retain the census tract framework. Ultimately, the FCC reached a compromise and determined that PAL licenses will be the size of counties, with the potential option of auction participants to bid for all counties in the largest markets as a package.

PAL License Terms Lengthened from 3 Years to 10 Years: Prior rules established three year license terms with no renewal expectancy. Finding that such an approach could curtail investment in the band, the FCC decided to increase PAL license terms from three to ten years, matching the term of most traditional spectrum licenses. The FCC also adopted a renewal expectancy, which would facilitate renewal of the licenses for multiple terms. Notably, these changes are accompanied by specific performance requirements (build-out obligations) for licensees, which are discussed below.

PAL License Performance (Build-out) Requirements: In exchange for permitting longer license terms, larger license areas, renewal expectancies, and the ability to sell or lease spectrum on the secondary market like other spectrum licenses, the FCC will now require PAL licensees to meet specific performance requirements for licenses. In particular, PAL licensees must provide a bona fide communications service that meets a “substantial service” standard of performance. Licensees can meet these performance requirements by satisfying one of two safe harbors:

  • Safe Harbor 1 - Carriers providing mobile or point-to-multipoint service can meet the performance requirements by showing that they provide reliable signal coverage and offer service to customers (or for internal use) over at least 50 percent of the population of the license area by the end of the ten-year license period.
  • Safe Harbor 2 - Carriers providing point-to-point service must show that they have constructed and operate at least four links, either to customers or for internal use, in license areas with a population of 134,000 or less, and in areas with a greater population, a minimum number of links equal to the population of the area divided by 33,500

Importantly, the FCC did not adopt interim performance requirements, but rather will require that these requirements be satisfied at the end of the license term. The FCC reasoned that adoption of these performance requirements will limit the potential that spectrum aggregators may acquire the spectrum without plans to deploy networks and services.

Bidding Credits for Small Businesses and Rural Providers: Concluding that small providers may have less opportunity to obtain spectrum in the 3.5 GHz band under the revised licensing regime, the FCC adopts several types of bidding credits for the band. Notably, the new bidding credits available here are the same small business size standards and bidding credits it previously utilized in the recent 600 MHz and millimeter wave band proceedings. In particular, the Report and Order proposes to provide bidding credits to small business, rural carriers, and tribal entities that seek to bid for PAL licenses, as follows:

  • Small Business – Businesses with average gross revenues not exceeding $55 million for the preceding three years will receive a 15 percent bidding credit.
  • Very Small Business – Businesses with average gross revenues not exceeding $20 million for the preceding three years will receive a 25 percent bidding credit.
  • Rural Carrier – Carriers that predominantly serve rural areas and have fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers are eligible for a 15 percent bidding credit.
  • Qualifying Tribal Lands – Any winning bidder for a given market is eligible to receive a credit for serving “qualifying Tribal lands” if willing to offer service to qualifying tribal lands and comply with competitive bidding procedures.

The FCC rejected proposals to adopt other bidding credits, such as a credit for applicants that seek to use a PAL to meet Connect America Fund obligations.

Bidding on Specific License Blocks: The FCC affirmed its prior decision that PALs will operate over 10 MHz unpaired channels, to be assigned by automated frequency coordinators, known as spectrum access system (SAS) providers, rejecting commenters’ arguments that a predictable, static spectral environment is necessary for deployment. As such, bidders will not bid on specific channel assignments, but will be assigned prioritized access to 10 MHz of spectrum dynamically by the SAS.

PAL Spectrum Aggregation Limit: The FCC plans to auction 70 MHz in each geographic area as PAL licenses in the form of 7 x 10 MHz channels. The current rules limit the total number of available channels at four per licensee or lessee, which the FCC decided to retain.  As such, the PAL licensees will be subject to a spectrum aggregation limit of 40 MHz per license area. The FCC notes that other adopted changes to the licensing regime do not alter the FCC’s rationale for putting the 40 MHz limit in place; namely, that it will promote diversity of users and foster competition and innovation.

Partitioning and Disaggregation: The FCC adopted its proposal to allow partitioning and disaggregation of PALs in the 3.5 GHz band, finding that the proposal is consistent with both the changes the FCC adopts to PAL license terms and geographic areas and also with the licensing paradigm for similarly licensed services. The FCC finds that the flexibility gained by allowing partitioning and disaggregation will help spur a robust secondary market for licenses. The FCC emphasizes that parties must comply with Section 1.950 of the FCC’s rules, which mandates a construction and operation requirement for each license, and that allowing partitioning and disaggregation will not alter the light-touch leasing rules already in place.

Other Auction and Licensing Procedures: The FCC eliminated the so-called N-1 rule that made available one fewer PAL than the total number of PALs for which all applicants applied in a given geographic license area, finding that based on other changes made the PAL licensing structure, it was no longer in the public interest to limit the availability of PALs in a given geographic area. As such, the Commission will now make all PAL licenses available in all counties for auction, regardless of the demand.

The FCC also modified its rules to and decided to assign PALs in a given market, even when there is only one application for a given license area from a qualified applicant. As such, if the FCC does not receive competing applications in a geographic area, the auction will be cancelled for that market. Instead, the FCC will review the sole applicant’s short form and long form applications. Accordingly, the FCC eliminates the single applicant exception for rural areas as it is no longer necessary under the new process. The FCC does not reach the issue of whether an application for a PAL in a geographic area should be considered mutually exclusive with an application for GAA use in the same area.

The Commission will conduct any auction with its general competitive bidding rules, which allow subsequent determination of specific final auction procedures. Accordingly, comment will be sought on issues involving bidding procedures at a later date.

Confidentiality of CBSD Registration Information: Since 2015 the FCC has required that Citizens Broadband Radio Service Devices (CBSDs) register and be authorized SAS providers prior to initial service transmissions. These rules also required SAS administrators to disclose CBSD registration details: to FCC personnel, to other SAS providers (to facilitate spectrum sharing), but only aggregated spectrum usage and availability (such as “heat maps”) to the public.

In response to industry concerns about the potential for public disclosure of confidential business information that could compromise privacy or affect competitive interests, the FCC modified its CBSD disclosure rules. Under the revised rules, SAS Administrators will be required to make aggregated data on spectrum use available to the public. SAS Administrators must also make aggregated spectrum usage data available 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 through graphical depictions. However, the SAS providers may not disclose disaggregated CBSD registration data to the public (unless the disclosure is authorized by the owner of the CBSD equipment). 

Emissions Limits for CBSDs and End User Devices: The existing CBRS rules effectively necessitate a reduction in power when aggregating channels to accommodate wider bandwidths. As such, and in order to accommodate wider bandwidths for 5G technologies, the FCC will relax the emissions mask for uplinks from end-user devices. Notably, however, the agency declined to modify existing interference protections for services operating outside of the CBRS band.

The FCC’s decisions in this Report and Order are expected to open the door for potential GAA use of the spectrum band later this year, or early next. As the FCC finalizes its review of SAS and ESC operators, many potential band participants are finalizing plans for their GAA-based operations. 

The anticipated auction of PAL licenses is not likely to occur until Q4 2019, or later. Between now and then the FCC must adopt auction rules for the band and complete several other auctions already teed up for action before the agency. However, many expect that robust GAA-based operations will begin in early 2019.

 

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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