All eyes will be on the Federal Communications Commission in the coming months as it deals with a series of spectrum-related issues that will help determine who is a player in the mobile broadband market and who isn't.
The FCC is under pressure to get as much new spectrum on the market as soon as possible. Wireless operators say they face a crisis if they can't get additional wireless spectrum to fuel the growth of mobile data usage. But as wireless spectrum is increasingly viewed as a limited resource, regulators are faced with politically charged debates surrounding topics associated with spectrum.
Over the next year, the agency will be approving license transfers, rewriting rules for spectrum use, approving license uses, and writing rules to spectrum auctions. And in each instance, the agency's actions and policies will shape the future of the industry by helping determine which companies ultimately gain access to the much needed wireless spectrum.
Dish Network: Earlier this month, the Federal Communications Commission delayed its decision on whether to grant Dish Network's request for a waiver that would allow the company to use spectrum that it owns and is designated for satellite use to be able to use it for a ground-only wireless broadband network. The waiver that Dish sought was similar to one that the FCC granted to LightSquared in January 2011.
But instead of granting the waiver as it had previously done for LightSquared, this time the FCC is going through an official formal rule-making process. This process should be concluded by the end of the year, the FCC has said. But the uncertainty has called into question what Dish's next move will be. Still, at least one analyst, Paul Gallant of Guggenheim Partners, thinks the delay will likely result in a better outcome for Dish than what LightSquared has experienced, which is now seeing the FCC pull its conditional waiver.
He said that Dish doesn't have the same interference issues with the GPS industry, because the company uses spectrum that is further away from the block of spectrum that GPS is using. GPS devices use spectrum between 1.5 GHz and 1.6 GHz. And the spectrum Dish intends to use is around 2.0 GHz. Gallant said that because there is much less likelihood for interference, the FCC will likely move through the rule-making process quickly to get the Dish spectrum approved by the end of the year.
"There is a real opportunity for a win-win here for the FCC and Dish," he said. "Dish needs the FCC's authority so that it can monetize the spectrum it has. And the FCC is anxious to put this last bit of low-hanging spectrum to good use."
Once it approves the network, the other big question is how quickly the FCC will require Dish to build its network and if it will restrict it from selling its license to another company. AT&T has asked the FCC to require Dish to stick to a strict build-out requirement, perhaps in the hope that if it has a strict timeline, it may look to someone like AT&T to buy the spectrum licenses to build the network.
Gallant said it's very likely that the FCC will require Dish to build its network quickly, since the FCC's main objective is getting more wireless spectrum into the market. But it's unclear whether the FCC will also prevent Dish turning around and selling its licenses once it gets approval from the agency, thus preventing a sale of the spectrum to AT&T. But Gallant believes the FCC will not address the issue of whether Dish can sell its licenses to another carrier in this initial rule-making procedure.
"The FCC doesn't have to answer this question in the Dish rule-making process," he said. "They don't need to put limits on the transferability of the licenses. There will be a separate proceeding if and when Dish tries to sell that spectrum."
LightSquared: In February the FCC said it planned to revoke LightSquared's conditional waiver to use its spectrum for a terrestrial-only service since there have been complaints that it interferes with GPS receivers. LightSquared says it's still going to fight on. And it's now asking the FCC to come up with an alternative plan. It wants the FCC and National Telecommunications and Information Administration (NTIA) to find spectrum that can be swapped for the troubled spectrum.
But Gallant said it would be hard for the FCC to give up spectrum that it could auction. Still, LightSquared contends the FCC has an obligation to exhaust all possible alternatives before rejecting its network outright. LightSquared has already invested $4 billion in building the network.
"The question is whether the FCC has the responsibility to come up with a solution since they allowed the unusable spectrum to be sold," said Gallant. "Or is the burden on LightSquared, who bought the spectrum? That's the question. But I doubt there will be a spectrum swap."
Verizon Wireless acquiring cable spectrum: The FCC is also reviewing whether Verizon should be allowed to buy spectrum from Spectrum Co., a consortium of cable providers that bought spectrum in the AWS auction. Verizon announced late last year it planned to buy 122 wireless licenses from the cable operators to help it keep up with capacity demands on its 4G LTE network.
The FCC has already made it clear that it doesn't like bigger carriers acquiring competitors for spectrum. That's why last year it put the kibosh on AT&T's $39 billion bid to buy T-Mobile USA. But the question now is whether the FCC will allow Verizon, the largest carrier in the U.S., to buy this unused spectrum, which would add spectrum the market since none of it is already in commercial use.
There have already been a number of companies, including Sprint Nextel, T-Mobile USA, and DirecTV that have written the FCC opposing Verizon's bid for the cable spectrum. These companies said they'd like the FCC to stop the clock on the merger until Verizon files more information.
"Verizon is going to face a tougher fight than a lot a people expected," Gallant said. "Just because Verizon isn't buying another company doesn't mean that the FCC isn't going to look at this very closely."
Rules for upcoming spectrum auctions: Another topic that will likely come up at the FCC over the next several months is rules for upcoming wireless auctions. New legislation signed into law in February granted the FCC authority to conduct a series of spectrum auctions. The first of these auctions are required to be conducted within the next three years. This means that the FCC will have to start developing rules for the auction.
During the debate over the spectrum auction legislation, AT&T and Verizon pushed Congress to put limits on what restrictions the FCC could impose on the new auctions to keep big players out of certain auctions. Sprint fought hard to make sure the FCC kept is authority. Ultimately, Congress didn't impose new restrictions. But as the agency drafts its rules, it will be watched closely.
This an important issue, because carriers, such as Sprint and T-Mobile, would benefit if the FCC writes rules that exclude AT&T and Verizon, the two largest in the nation, from bidding on all some or all of the spectrum in a given auction. Sprint and other smaller competitors are concerned they could be priced out of these auctions by the much bigger and cash-rich competitors.
It's still too early to say how the FCC will treat each policy and regulatory decision it's faced with. But it's very clear that these decisions will have a tremendous effect on the future of mobile broadband.