| Re: | Service Rules for the 746-764 and 776-794 MHz Bands, and Revisions to Part 27 of the Commission's Rules, WT Docket No. 99-168, Second Report and Order (rel. March 9, 2000) |
Although I am pleased that we have brought the guard band licensing debate to an end, I am disappointed that the majority has taken such a restrictive and regulatory approach to these bands. As I stated in my Separate Statement in the First Report and Order, I would have taken a different tack.(1)
I have concerns about two portions of today's decision: (1) prohibiting cellular architecture in the guard bands, and (2) restricting licensees to "guard band managers." In my view, both of these measures will have the effect of limiting competition and innovation - with few, if any, corresponding public benefits.
Congress mandated that the Commission adopt policies that protect adjacent public safety licensees.(2) However, interference protection is, by its nature, a balancing act. Barring any licensees from the guard bands would be the most definitive way to ensure Congress' goal of protecting public safety licensees. Yet, even if we took that sweeping step, the public safety licensees are still likely to experience some interference from the "main bands" - the licensees in the 30 MHz of spectrum addressed in the First Report and Order. Thus, the real challenge presented here is to protect public safety in the most reasonable way possible, consistent with our other policies.
In this Order, we have adopted detailed interference limits to achieve this goal. In my view, such interference protections coupled with vigorous enforcement and harsh penalties for noncompliance is generally sufficient to protect adjoining licensees. This Order supplements that protection with a frequency coordination requirement. Without passing on its ultimate necessity, it is clear that frequency coordination provides another layer of protection for public safety. In addition to interference limits and frequency coordination, the majority has also adopted a ban on cellular-style architecture in the guard bands.
In my view, the cellular architecture bar is intrusive, unnecessary and needlessly limits the range of services available to the American people. The ban creates Commission obligations to define and enforce this policy. I certainly do not look forward to resource-consuming Commission debates over which architectures are sufficiently "cellular" to be barred.
Apparently it is the majority's view that cellular architecture makes it too difficult to protect public safety. Yet this view fails to account for technological innovation that may indeed produce sufficient protection for public safety licensees. Perversely, today's Order discourages interference improvements by cellular systems by barring them completely from the guard bands. The cellular prohibition also effectively limits the types of services that can be provided in these bands. In the end, I would have set strict interference limits and enforced them - without any of the limitation on the system's architecture.
I also must dissent from the majority's decision to limit guard band license eligibility to new government-conceived entities known as "guard band managers." As I have stated before, I have no inherent objection to the band manager concept. In my view, if someone makes a business decision to create such an operation, the Commission should not stand in the way. However, I am disturbed by the majority's mandate that anyone interested in participating in the guard band auction must be a "guard band manager."
A true "test" of the band manager concept would have permitted band managers to bid against other business models.(3) The market would have subsequently sorted out the winners and losers. Then we might have had some legitimate data to access what the FCC can do to allow the markets to function more freely. Instead of that potentially useful test, we have fixed the result - band managers will win because they are only ones permitted to play. Limiting an auction to one type of licensee shortchanges the public and the marketplace.
The guard band manager set-aside also places the FCC in the role of dictating a business plan. "Guard band managers" must, among other requirements, lease all of their spectrum to third parties, must set up a separate affiliate in order to provide service directly to the public, and must limit their affiliates' use of the spectrum.(4) This is not a free market or even a test. It is government implicitly asserting that it knows better than the marketplace. I cannot join such an "old school" regulatory approach.
The intrusiveness of this decision is readily demonstrated by an example. XYZ Corp. wishes to participate in the auction in order to offer a commercial radio service directly to the public. XYZ believes it needs an entire 2 MHz license throughout its service area to do so. In my view, a pro-market, deregulatory FCC should not stand in the way. The majority, however, has decided that XYZ Corp. needs a little government "help" with its business plan. So, under today's decision, XYZ Corp. must become a guard band manager to participate in the auction - thus being forced to enter the business of leasing spectrum to third parties in order to use this spectrum commercially. However, as a guard band manager it cannot offer service directly to the public; nor can it use all of a 2 MHz license throughout the service area for its own operations. Instead, XYZ Corp. must set up an affiliate, ABC Corp., which is permitted to provide service directly to the public. However, in order to comply with our 50% affiliate use restriction, ABC can only use 1 MHz of the 2 MHz won by XYZ at auction.(5)
The affiliate requirement makes no sense to me. Other than an employment program for corporate lawyers, there is no public benefit that I can discern from requiring a band manager to set up an affiliate in order to provide service to the public. As a "commercial" band under the statute, I see no reason why guard band licensees should be limited in their ability to offer services directly to the public.
Similarly the 50% affiliate use restriction seems unnecessary. The majority seems to believe that businesses will not use their spectrum resources in the most efficient way possible in order to maximize profits. This suspicion has led the majority to adopt rules designed to mandate efficiency by forcing guard band licensees to make a certain percentage of their purchased spectrum available to unaffiliated third parties. Unlike the majority, I trust the market to create the most efficient outcome. In my view, if a licensee makes the most profit by leasing all of its spectrum to third parties, they will do so. If, alternatively, a company can make the greatest profits by using the spectrum in its own business endeavors, then so be it. I place no normative judgment on either outcome. Therefore I would have eliminated the 50% affiliate use restriction as well.
Some have argued that the set aside for "guard band managers" is warranted by our spectrum management obligations and the need to protect public safety. I cannot agree. Guard band managers are not inherently more effective at protecting public safety. Public safety protection is afforded by our interference rules, not by the nature of the licensee's business plan. Any licensee willing to adhere to our rules would create at least the same level of interference protection to public safety.(6) As for spectral efficiency, band managers do not have any unique advantage that I can discern. Any licensee (band manager or not) can engage in site-by-site licensing. Similarly licensees are free to aggregate and disaggregate as they wish. Regardless of the majority's aspirations, there is no guarantee that a band manager will make spectrum available to a critical mass of third parties.(7) For example, the majority's rules would allow a band manager to lease 100% of its spectrum to one unaffiliated entity. Yet the same rules would bar one guard band licensee from using the spectrum entirely for its own business. Thus, it's hard to see how the "guard band licensee" restriction can be viewed as more effective at getting spectrum into multiple entities' hands. It is my expectation that licensees, like all businesses, will manage their resources efficiently and obey our interference rules. It is not clear to me that a government-mandated business model is necessary or helpful in creating those results.
Based on the foregoing, I respectfully dissent from those portions of the order barring cellular-style architecture and restricting licensees to guard band managers.
2. 47 U.S.C. § 337 (d)(1).
3. The majority invokes the "test" rationale as a basis for limiting affiliated use to less than 50% and prohibiting each guard band licensee from obtaining both licenses in one region during the first bidding cycle. See ¶¶ 59, 62.
4. See Order at ¶¶ 29, 59.
5. The majority has mandated that a guard band manager licensee lease a "predominant" amount of its spectrum to unaffiliated third parties. Order at ¶ 59. It is difficult to discern the exact parameters of such a requirement. As a proxy for the purposes of this statement, I have simplified this requirement into a 50% cap on affiliated uses. Presumably that represents at least one viable interpretation of this requirement.
6. For example, our frequency coordinators provide many of the same interference protections as guard band managers.
7. See Order ¶¶ 32-34