Intelsat
In Letter to FCC, C-Band Alliance Suggests $50B in Value for 280 MHz Spectrum; Warns of Failing to Involve CBA in Transition Without Incentivizing Members to Cooperate
Tue 01/14/2020 18:28 PM
Relevant Documents:
Letter
Attachment
Following recent meetings with staff at the Federal Communications Commission, the C-Band Alliance warned in a letter posted today that it would be “legally perilous” to exclude the C-Band Alliance in the transition of C-band spectrum to 5G use. While the letter, written by CBA CEO Bill Tolpegin, says that alliance members are supportive of FCC Chairman Ajit Pai’s decision to conduct a public auction for 280 MHz of C-band spectrum in 2020, it attempts to state the CBA’s case that the CBA deserves incentives on top of the costs to clear the spectrum. Tolpegin says the FCC should work with the CBA, which with “fair incentives” could “quickly and efficiently clear 280 MHz of C-band spectrum for 5G operations.” Clearing the spectrum “is a tremendous undertaking involving significant costs in terms of capital expenditures, time and effort, opportunity costs and business risks,” he states.
“Unilateral authorization of new terrestrial mobile operations in any significant portion of the C-band would constitute an unlawful basic and fundamental change to the authorizations held by the members of the CBA,” the letter asserts.
The letter was posted today to the proceeding’s docket.
According to the CBA, “[T]he Communications Act does not give the FCC authority to impose fundamental, unilateral changes on existing licenses, and the Takings Clause of the U.S. Constitution confirms that the FCC must obtain the cooperation of the members of the CBA through fair and proper incentives before authorizing new terrestrial mobile operations in the C-band.” The CBA argues that while sSection 316 of the U.S. Code authorizes the FCC to “‘modif[y]’” existing licenses, the CBA claims that would not include “fundamental changes.” In supporting their view on “fundamental change,” the CBA says that the reduction of spectrum available to C-Band Alliance members by 300 MHz is so extensive as to be “fundamental” and “authorizing terrestrial mobile operations in the C-band would cause harmful interference to existing FSS service transmissions to CONUS.”
The CBA concedes that the FCC is not barred from making “fundamental changes” if it obtains “the consent of the station licensee.”
In framing the incentive needed, the CBA adds that given the business risks involved, members would be unable to clear spectrum if compensation was limited to or based on clearing costs, claiming that the transition of customers would be a “fundamental change.” “Indeed, the level of effort and potential for capital and business risks makes this transition wholly unlike past proceedings where the FCC has moved incumbents to an equivalent amount of new spectrum where they could ‘provide essentially the same services’ ‘under very similar terms’ without reengineering their content delivery networks from the ground up,” the letter says.
Regarding Pai’s recent decision to opt for a public auction, rather than the private auction the CBA had sought, Tolpegin says the CBA “supports Chairman Pai’s decision, but notes that it does not change the monumental task of transitioning C-band spectrum from satellite transmissions to 5G mobile services quickly and efficiently.”
In framing their argument, the CBA first tries to quantify the value of a fast transition to the consumer and then discusses the costs borne by CBA members to clear the spectrum quickly.
According to the CBA, an analysis of recent international C-band auctions suggests the 280 MHz of U.S. spectrum could be worth $50 billion.
Further, the CBA claims that it can provide more than $600 billion in consumer surplus compared with a transition attempted by the FCC without CBA participation, adding that each year of delay, according to the CBA, would equate to $50 billion or more in lost consumer surplus. The CBA, citing a 2015 paper by Coleman Bazelon and Giulia McHenry, claims that the annual cost of delaying the spectrum approximates the market value of the spectrum.
The costs to clear the 280 MHz of spectrum and maintain “existing FSS used to transmit TV and radio content to nearly 120 million American households ... are uniquely borne by the members of the CBA.”
The CBA provides the following buckets of costs to clear the spectrum:
The CBA does not quantify the costs associated with clearing spectrum nor does it attempt to value the amount of incentive it would need. Eutelsat, a former member that left the CBA in September 2019, attempted to quantify the incentive value for operators to clear spectrum by quantifying the lost value from no longer having access to the cleared spectrum. According to Eutelsat’s notice in December, it “proposed to measure this impact using the value of the potential FSS services that could have been generated, if the reallocated spectrum were fully utilized for FSS by each satellite” operator. Eutelsat estimated that this value would be approximately $3.5 billion.
On Jan. 9, Intelsat US LLC general counsel Michelle Bryan and CFO David Tolley - along with executives from SES SA and the C-Band Alliance - met with Pai’s senior counsel, Nicholas Degani, according to an ex parte notice. That filing said the parties discussed “how the CBA could work cooperatively with the FCC to effectuate expeditious clearing of 280 megahertz of C-band spectrum for terrestrial 5G operations.” The CBA participants “also noted that the CBA is uniquely able to facilitate a speedy transition and should be fairly compensated for its role in opening the C-band for 5G as quickly and efficiently as possible while protecting valuable C-band satellite services,” according to the filing.
Separately, CBA staff met on Jan. 8 with FCC staff to discuss technical points of the 5G transition, according to an ex parte notice.
The FCC did not immediately return a request for comment on the letter.
Letter
Attachment
Following recent meetings with staff at the Federal Communications Commission, the C-Band Alliance warned in a letter posted today that it would be “legally perilous” to exclude the C-Band Alliance in the transition of C-band spectrum to 5G use. While the letter, written by CBA CEO Bill Tolpegin, says that alliance members are supportive of FCC Chairman Ajit Pai’s decision to conduct a public auction for 280 MHz of C-band spectrum in 2020, it attempts to state the CBA’s case that the CBA deserves incentives on top of the costs to clear the spectrum. Tolpegin says the FCC should work with the CBA, which with “fair incentives” could “quickly and efficiently clear 280 MHz of C-band spectrum for 5G operations.” Clearing the spectrum “is a tremendous undertaking involving significant costs in terms of capital expenditures, time and effort, opportunity costs and business risks,” he states.
“Unilateral authorization of new terrestrial mobile operations in any significant portion of the C-band would constitute an unlawful basic and fundamental change to the authorizations held by the members of the CBA,” the letter asserts.
The letter was posted today to the proceeding’s docket.
According to the CBA, “[T]he Communications Act does not give the FCC authority to impose fundamental, unilateral changes on existing licenses, and the Takings Clause of the U.S. Constitution confirms that the FCC must obtain the cooperation of the members of the CBA through fair and proper incentives before authorizing new terrestrial mobile operations in the C-band.” The CBA argues that while sSection 316 of the U.S. Code authorizes the FCC to “‘modif[y]’” existing licenses, the CBA claims that would not include “fundamental changes.” In supporting their view on “fundamental change,” the CBA says that the reduction of spectrum available to C-Band Alliance members by 300 MHz is so extensive as to be “fundamental” and “authorizing terrestrial mobile operations in the C-band would cause harmful interference to existing FSS service transmissions to CONUS.”
The CBA concedes that the FCC is not barred from making “fundamental changes” if it obtains “the consent of the station licensee.”
In framing the incentive needed, the CBA adds that given the business risks involved, members would be unable to clear spectrum if compensation was limited to or based on clearing costs, claiming that the transition of customers would be a “fundamental change.” “Indeed, the level of effort and potential for capital and business risks makes this transition wholly unlike past proceedings where the FCC has moved incumbents to an equivalent amount of new spectrum where they could ‘provide essentially the same services’ ‘under very similar terms’ without reengineering their content delivery networks from the ground up,” the letter says.
Regarding Pai’s recent decision to opt for a public auction, rather than the private auction the CBA had sought, Tolpegin says the CBA “supports Chairman Pai’s decision, but notes that it does not change the monumental task of transitioning C-band spectrum from satellite transmissions to 5G mobile services quickly and efficiently.”
In framing their argument, the CBA first tries to quantify the value of a fast transition to the consumer and then discusses the costs borne by CBA members to clear the spectrum quickly.
According to the CBA, an analysis of recent international C-band auctions suggests the 280 MHz of U.S. spectrum could be worth $50 billion.
Further, the CBA claims that it can provide more than $600 billion in consumer surplus compared with a transition attempted by the FCC without CBA participation, adding that each year of delay, according to the CBA, would equate to $50 billion or more in lost consumer surplus. The CBA, citing a 2015 paper by Coleman Bazelon and Giulia McHenry, claims that the annual cost of delaying the spectrum approximates the market value of the spectrum.
The costs to clear the 280 MHz of spectrum and maintain “existing FSS used to transmit TV and radio content to nearly 120 million American households ... are uniquely borne by the members of the CBA.”
The CBA provides the following buckets of costs to clear the spectrum:
- “Make multi-billion-dollar investments to manufacture and launch eight new satellites and accelerate procurement of a ninth satellite to ensure enough on-orbit capacity exists for current customers to continue distributing content or operating their networks within the context of existing contracts”;
- “Ask more than 60% of their customers to move from their existing transponder(s) to a new one, either on the same satellite or a different one. Each move must then be supported at all relevant receive ground stations, impacting anywhere from a handful to thousands of antennas”;
- “Develop a highly orchestrated plan to execute a sequence of migrations in a manner that utilizes limited free satellite capacity efficiently while supporting contractual migration notifications among customers”;
- “Provide dual illumination capacity free of charge to customers to support these moves, including to allow for equipment migrations”;
- “Procure, make available, and potentially deploy the interference mitigation solution developed by the CBA member companies, including a specific radio frequency filter configuration with a 20 MHz guard band on approximately 35,000 antennas in the continental United States (‘CONUS’)”;
- “Engage, contract with, and potentially deploy hundreds of technicians throughout CONUS to gather site and antenna information from approximately 13,500 receive sites registered with the FCC and to schedule site visits to perform installation services or ship equipment to the earth station operators”;
- “In some cases, moving a customer to a different satellite will require the satellite operators to provide and install or pay for installation of new antennas at every earth station location that is currently receiving the customer’s services”;
- “Fund certain customers’ technology upgrades to reduce their current contracted satellite capacity to free more spectrum for 5G”;
- “Renegotiate and amend existing customer contracts to reflect new commitments and reduce the overall contracted backlog for each contract relative to the amount of spectrum each customer will no longer be using”;
- “Forego significant backlog revenues from the start of the clearing due to the compression of services, which will result in certain customers requiring less satellite bandwidth”;
- “Move 30-50 very large antennas from existing, fully functional teleports to four new locations at a cost of hundreds of millions of dollars to minimize the effect on 5G network deployments of exclusion zones for the protection of vital telemetry, tracking, and control (‘TT&C’) sites. Without these migrations, existing fully licensed teleports owned and operated by the CBA member companies could impair spectrum for 5G use in at least 14 CONUS Partial Economic Areas (‘PEAs’) (and potentially adjacent PEAs as well), including Los Angeles, San Francisco, Baltimore/Washington, Atlanta, and Denver”; and
- “Cover the costs of downlinking non-CONUS services intended to land in CONUS at TT&C/Gateway sites and backhaul such traffic to the originally intended destinations for customers free of charge.”
The CBA does not quantify the costs associated with clearing spectrum nor does it attempt to value the amount of incentive it would need. Eutelsat, a former member that left the CBA in September 2019, attempted to quantify the incentive value for operators to clear spectrum by quantifying the lost value from no longer having access to the cleared spectrum. According to Eutelsat’s notice in December, it “proposed to measure this impact using the value of the potential FSS services that could have been generated, if the reallocated spectrum were fully utilized for FSS by each satellite” operator. Eutelsat estimated that this value would be approximately $3.5 billion.
On Jan. 9, Intelsat US LLC general counsel Michelle Bryan and CFO David Tolley - along with executives from SES SA and the C-Band Alliance - met with Pai’s senior counsel, Nicholas Degani, according to an ex parte notice. That filing said the parties discussed “how the CBA could work cooperatively with the FCC to effectuate expeditious clearing of 280 megahertz of C-band spectrum for terrestrial 5G operations.” The CBA participants “also noted that the CBA is uniquely able to facilitate a speedy transition and should be fairly compensated for its role in opening the C-band for 5G as quickly and efficiently as possible while protecting valuable C-band satellite services,” according to the filing.
Separately, CBA staff met on Jan. 8 with FCC staff to discuss technical points of the 5G transition, according to an ex parte notice.
The FCC did not immediately return a request for comment on the letter.
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