FCC C-band decision update

In a recent blog, we outlined the FCC’s (Federal Communications Commission) deliberation over whether to complete a private or public auction of the C-band spectrum. Chairman Ajit Pai’s recent decision in favor of a public approach has been met with skepticism and has led the share price of some leading satellite operators to nosedive, but could there be a silver lining?

CBA for a private C-band auction

The C-Band Alliance (CBA) campaigned for a private auction. They argued that the proceeds of the sale should go to those who have invested billions developing infrastructure on which the entire country now depends. But on 29 October, the FCC filed a guide for auctioning off 280Mhz, over half of the C-band frequency bandwidth, in a public auction.

The Chairman of the FCC, Ajit Pai, initially appeared to support a market-based approach, meeting CBA lobbying for a private auction with approval. But in recent months he has felt immense political pressure from the Senate and the White House, to hold a public auction.

In mid-November, however, Ajit Pai announced that the FCC would hold a public auction. There is considerable evidence to suggest the decision was made, in light of the significant political pressure.

Impact of the FCC’s decision

Following the FCC’s chairman’s decision, leading satellite operator Intelsat’s stock price dropped nearly 40%. The severity of this fall brought to light how significant the impacts could be on US satellite operators. This highlighted how the FCC must find a way to deal with this transaction equitably.

Now, the Senate is moving forward with the bipartisan legislation for an authorization bill that will allow the FCC to proceed, directing them to begin the auction by the end of 2020 and complete it by the end of 2021. Fortunately, there has been some positive news for satellite companies.

The authorization bill will commit part of the proceeds of the sale to the C-band operators, setting benchmarks for the divide and passing legislation accordingly, although the majority will go to the US treasury. These benchmarks specify that of the first $40billion, the US treasury will get up to 50% and of the next $10billion 75% will go to the treasury.

Initially, negative reports are now looking more positive. The future financial stability of satellite companies has improved thanks to the congressional legislation to compensate them for relinquishing the C-band frequencies. The FCC has also acknowledged that action needs to be taken as quickly as possible, lest the US fall behind in the global 5G market.

Up in the air

On the surface, it appears that some degree of compromise has been reached. While moving in favor of a public auction, the FCC has guaranteed that some of the proceeds will be used to insure against the satellite operators’ financial losses. But there are more than purely financial implications.

Satellite companies that have been occupying the frequency, providing US services, will be forced to reconfigure and transfer their networks. They are working to avoid disruptions, but it is possible that the FCC’s choice to have a public auction, may end up costing the public their service quality, at least for some time.

While a little of the uncertainty that surrounds the issue has been addressed, there is still a lot that remains to be clarified. There is some comfort in the FCC’s recognition of the negative impact on organizations and public acknowledgment of the need to speed up the process, but we are still concerned by the long-term impact on customers and the USA’s ability to compete on the global market.

This decision is an important step in the right direction for the communications industry, but there is still a long way to go.

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