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.

Rounding out the major actions that will be voted on later this month at the Open Meeting, the FCC released a draft item that would offer regulatory relief to rate-of-return carriers providing Business Data Services (“BDS”). The proposed items are sure to impact every sector of the communications industry, from the largest wireless carriers to the smallest broadband providers and device manufacturers to business, industrial, and public safety radio users, while potentially transforming large-scale data transport services.

Enabling Unlicensed Use of the 6 GHz Band: The FCC has long been pressed to expand unlicensed use of the 6 GHz Band. It now seems poised to commence a rulemaking to consider just that, while ensuring incumbent licensees are protected. The draft proposed rulemaking would allow unlicensed devices to operate in the 6 GHz Band, subject to certain restrictions that vary depending on the specific frequencies used. The FCC proposes that devices using the 5.925-6.425 GHz and 6.525-6.875 GHz sub-bands would only be allowed to transmit if an automated frequency control (“AFC”) system determines that such use will not cause harmful interference. The FCC noted that these sub-bands currently are occupied by licensees operating point-to-point microwave links and some satellite systems. Meanwhile, devices using the 6.425-6.525 GHz and 6.875-7.125 GHz sub-bands would only be allowed to operate indoors and at lower power levels, but use of these frequencies would not depend on an AFC system. The FCC asserted that these sub-bands are used for mobile and satellite services whose itinerant operations make the use of an AFC system impracticable, while the proposed operating restrictions would seem to offer sufficient protection to incumbents.

Reforming the 3.5 GHz Band Rules: Major wireless carriers have peppered the FCC for almost two years with proposed changes to the geographic license areas for PALs, favoring auctions over larger geographic areas, with longer license periods and expectations of renewal. Smaller providers have supported retaining the smaller census tract licenses adopted in the original PAL framework several years ago. The FCC draft order contains a compromise approach that would issue PALs across the country at the county level. The FCC also would increase the license term for PALs from three years to ten years and make PALs renewable in order to foster long-term investment. Moreover, the FCC would seek to promote greater spectrum utilization through the enhancement of secondary markets in PALs by permitting partitioning and disaggregation of the licenses.

Expanding PLMR Operations in the 800 MHz Band: The FCC has worked for years to increase the efficiency of PLMR operations in the 800 MHz Band. A draft order would, among other things, add 318 new “interstitial” PLMR channels in the 800 MHz Band and terminate a freeze put in place in 1995 that prevented PLMR licensees from gaining access to other license category pool frequencies the 800 MHz Band without a waiver. The FCC also would extend conditional licensing authority above 470 MHz to PLMR stations that operate in the 800 MHz Band and the 700 MHz narrowband, allowing entities to operate for up to 180 days while their applications remain pending. In addition, other changes included in the draft include making new channels available in the 450-470 MHz band for industrial/business radio use in gaps located between PLMR spectrum and other services.

Restructuring Rate-of-Return BDS: The FCC took action in 2017 to deregulate most BDS, which provide dedicated point-to-point transmissions at guaranteed speeds over high-capacity data connections for major businesses, governments, and other large institutions. Under the draft order and proposed rulemaking, certain small rural carriers would be allowed to move from longstanding rate-of-return regulation to “incentive” price cap regulation for some of their BDS offerings. Critically, the FCC would not require these carriers to comply with tariffing, cost assignment, and jurisdictional separations requirements. The draft item would also seek comment on the appropriate regulatory treatment for these carriers’ other transport services, including the need for price controls.