FCC Schedules Spectrum Auction for New Multichannel Video Distribution and Data Service (“MVDDS”); Sets November 12 Application Deadline

After numerous delays, the FCC again has scheduled an auction of Multichannel Video Distribution and Data Service (“MVDDS”) licenses, this time to begin on January 14, 2004. Although the FCC initiated the MVDDS proceeding in 1998, the controversial nature of the shared spectrum allocation and questions about the FCC’s ability to auction these licenses have led to many delays.

MVDDS is a new terrestrial video and data wireless service that the FCC hopes will spur competition to the cable and DBS industries. In the MVDDS proceeding, the FCC allocated 500 MHz of unpaired spectrum in the 12.2 to 12.7 GHz band to provide one-way digital fixed video programming and data services. MVDDS licensees may provide two-way video and/or data services by using other spectrum or media for the return or upstream path. Mobile and aeronautical services may not be provided on this spectrum.

The FCC will issue one 500 MHz MVDDS license in each of 214 markets – one license in each of the 210 Nielsen Designated Market Areas (“DMAs”), and one in each of four DMAlike license areas that the FCC has created: all areas not included in Alaska’s existing DMAs, Guam/Northern Mariana Islands, Puerto Rico/US Virgin Islands and American Samoa.

The FCC has been quite clear that it hopes this spectrum will be used to “effectively compete with local cable and DBS.”¹ Consequently, the FCC essentially has adopted a “cable- MVDDS cross-ownership” restriction, which it refers to as an “in-region” eligibility restriction. This restriction precludes cable operators from obtaining an attributable interest in MVDDS licenses in any area in which the cable operator’s subscribers constitute 35% or more of the Multichannel Video Programming Distributor (“MVPD”) households in the DMA. In general, a 20% or greater interest in an MVDDS licensee is considered to be an attributable interest. The FCC chose not to adopt a DBS-MVDDS cross-ownership rule, so DBS operators will be allowed to acquire MVDDS licenses without restriction. As a practical matter, as a result of the large geographic area of most DMAs, and the presence of multiple cable operators in many DMAs, the eligibility restriction may not have much effect. Many cable operators may be eligible to obtain MVDDS licenses both within and outside of their franchise areas.

The FCC also determined that it would not impose must-carry obligations on MVDDS licensees, although retransmission consent requirements would apply if the MVDDS licensee meets the statutory definition of an MVPD. In addition, other requirements typically applicable to cable operators, such as network-nonduplication, syndicated exclusivity, and leased access rules, will not be applied to MVDDS providers.

MVDDS licensees will not have exclusive use of the 12.2 to 12.7 GHz spectrum band, but will be required to share the band with several other services. MVDDS is authorized on a co-primary basis with both the broadcast satellite service (“BSS”) and DBS, and MVDDS providers must protect both BBS and DBS from harmful interference. MVDDS licensees will be also be co-primary with non-geostationary fixed satellite service stations that are authorized to operate in this band.

The technological underpinnings of the MVDDS service were developed by Northpoint Technology, Ltd., and Northpoint engaged in a lengthy campaign to have the FCC grant the majority of new MVDDS spectrum licenses to it without its participation in the upcoming auction. The FCC has consistently rejected Northpoint’s attempts to obtain these licenses without participating in the auction. Consequently, Northpoint began an intensive lobbying campaign in Congress, which has been relatively successful. At present, Northpoint has been able to add amendments to both the current House and Senate Commerce-Justice-State Departments appropriations bills (which include the FCC’s budget) that would prohibit the FCC from holding the MVDDS auction. However, Senator John McCain and Congressman Tauzin oppose those amendments (and the grant of licenses to Northpoint outside the auction process) as a congressional “give-away.” It is unclear whether the amendments prohibiting the auction will survive through the appropriations process.

Despite Northpoint’s congressional lobbying successes, the FCC recently established the key dates associated with this auction, which are listed below. Given the history of this proceeding, and the current legislative activity, it is possible that these dates will again change.

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Footnotes:

1 First Report and Order and Further Notice of Proposed Rule Making in ET Docket No. 98-205, 16 FCC Rcd 4096, 4204, ¶ 288 (2000).