How can the Federal Communications Commission (FCC) enforce spectrum rights, promote incentives for investment and innovation, and ensure the integrity of its processes? Spectrum management is the art of delivering the economic benefits of connectivity by optimizing the scarce resource of radio frequencies within their physical limitations, the prevailing technologies, and rule of law. These questions are front and center in a FCC proceeding about whether and how to change the rules in the 12 GHz band (12.2-12.7 GHz), initiated at the request of Dish Networks (48% owned by Charlie Ergen) first in 2016. Dish and a coalition of its partners are hoping the FCC will turn their existing licenses for stationary low-power operations to licenses that could be used for 5G.
Many next-generation satellite providers already use the band to provide critical high-speed broadband internet to tribes, students, the health care sector, emergency support, and humanitarian relief efforts. The band is also used to deliver satellite TV to over 14 million Americans. There has been considerable pushback from more than 40 organizations which claim that Dish’s proposed operations would disrupt service. The recent auction for scant 250 MHz in the C-band raising $90 billion demonstrates that companies are willing to pay dearly for 5G transmission rights and relocation of incumbent users. As such, the FCC need not engage in corporate giveaways like those sought by Dish. Moreover, if it hopes to achieve its policy goal that millions of users in the band maintain access to vital services it must adhere to its commitments to existing license holders.
Satellite Industry Transformation
The satellite industry has been undergoing a transformation in recent years. Like other telecommunications providers, it has transitioned from offering standalone services like TV into integrated, interactive services for high-speed broadband. Modern satellite technology offers vastly greater capacity and throughput as well as network architecture based upon a web or mesh of thousands of small satellites close to earth. With download speeds of 100 Mbps or more, these innovations have so drastically reduced latency that satellite technologies are now part of the 5G standards. While providers differ in their evolution and strategies, these advancements allow satellite broadband to play an increasingly important role to close the digital divide and in broadband competition. Over 10 million US households access satellite broadband today and that number is growing quickly.
Different frequency bands have physical properties which are suited for different uses. Policy efforts have attempted to harmonize services with the physical properties of the respective bands, though technology advances allowed providers to increasingly make use of higher bands. In general, higher bands like 12 GHz are already well-suited to long range vertical communications from satellites in space whereas mid-band frequencies (1-6 GHz) facilitate horizontal or terrestrial communications from mobile wireless towers on earth. Traditionally, 12 GHz has been used by satellite TV providers like DirecTV, whose millions of viewers depend on the band. In recent years, the FCC licensed new satellite providers in the band including OneWeb, SpaceX/Starlink, and smaller providers like Kepler. Satellite use of the band will certainly increase as Amazon has applied for satellite licenses as well. SpaceX’s satellite broadband service Starlink has grown to over 400,000 global broadband customers in three years. It provides broadband in 34 countries via the 12 GHz band, notably including Ukraine where its unprecedented wartime deployment has given the Ukrainian military an advantage against Russia and has kept many displaced Ukrainians connected to the rest of the world.
Importantly the FCC reviews and updates rules for new spectrum uses, like with the recent C-band auction (3.7-4 MHz). This was driven by group of satellite providers that agreed to vacate the band for the deployment of 5G, the payment of which was facilitated by auction revenue. The revamp of the C-band was doable because it contained providers with just a few satellites that could coordinate the sale and repacking. In 12 GHz, on the other hand, there are thousands of satellites, making such a repacking extremely difficult, if not impossible.
The Dish Play
Dish succeeded to get the FCC to change spectrum rules in its favor before, so it’s understandable that it would try again. In 2013, it convinced the FCC to change the nature of its license in the AWS-4 band from satellite to terrestrial broadband, effectively gaining market entry and 40 MHz of valuable mid-band spectrum through an administrative order. At this point, DISH’s market valuation (and its owner’s personal wealth) is based primarily based on the value of its spectrum holdings, as opposed to the value of its dying television services.
However, DISH’s transition to become a full-fledged mobile operator is far from complete. It has deployed limited mobile wireless infrastructure and instead operates a virtual network, reselling access to established networks under its own name. It fulfilled the minimal coverage obligations at the very last minute (June 2022), cherry-picking the most lucrative populous urban centers while avoiding underserved rural America. While such mobile virtual network operators (MVNOs) are important to the marketplace, they generally don’t buy spectrum. DISH’s actions to hold spectrum rights without building infrastructure suggests a preference for speculation rather than service.
Another infamous DISH episode appeared during the AWS-3 in 2015 auction in which the publicly-traded DISH registered a daughter company as a small business so that it could bid for frequencies with a 25 percent discount. This exploitation of an FCC loophole allowed DISH pay $7.8 billion instead of $13 billion in what amounted to a $40 billion auction. DISH is still sitting on those licenses today without building a network.
Given the past experience, it is doubtful that DISH will change its ways. Indeed after 18 months of the proceeding, DISH and its partners in the 5G for 12 GHz Coalition have offered no plan to relocate or reimburse incumbents. This suggests that they have a very limited offer of 5G (indeed smartphone makers have no plans to produce devices for the band), only an interest to game the FCC process to artificially inflate the value of their licenses which could be flipped later to bona fide 5G providers.
Other companies in the 5G for 12 GHz Coalition are nearly as problematic as DISH. One group, RS Access, offers no telecom services and consists of a single employee. RS Access is backed by billionaire Michael Dell who deployed a similar strategy in Auction 1001 in 2016. In that auction, Dell’s personal trust fund acquired low-value television stations for $90 million in advance of an FCC spectrum auction. Dell sold those licenses in the auction for $441 million, netting himself over $350 million for the flip.
Such derivative strategies may be acceptable in securities markets where they operate under within a framework of regulatory oversight and disclosure. The FCC’s job, however, is not to offer casino for spectrum speculators but to manage frequencies for the public interest, convenience and necessity. So let’s hope that the FCC is not so gullible to fall for this ploy for a third time from same actor.
Satellite Customers Push Back
Widespread opposition to reallocating the 12 GHz band has emerged from current users of the spectrum, including public interest and consumer rights organizations, Indian Tribes, community groups, school districts, education associations, agricultural organizations, and small business groups. Over 40 organizations from across the political spectrum filed comments opposing pay-to-play efforts to repurpose 12 GHz including Google, Microsoft, US Telecom, the National Rural Education Association, the US Chamber of Commerce, Boeing, the American Consumer Institute, and dozens of others. The many providers in the band coordinate through sharing and low-power operations. Over the proceeding, some 95,000 consumers have reached out to the FCC, telling it not to risk their broadband connections by falling for the ploy constructed by Dish and the 5G for 12 GHz Coalition.
Congress and the FCC have paved the way for global U.S. leadership in 5G, which is revolutionizing mobile wireless technology, powering new fixed wireless broadband competition throughout the country, and paving the way for continued economic and technological benefits with subsequent generations. The 12 GHz band – and any future spectrum band – should not just be given away. The privilege to deliver 5G is a right which companies can and should pay for. This is the bare minimum that taxpayers and citizens must demand.