At its February 28 Open Meeting, the Federal Communications Commission (FCC or Commission) adopted application and competitive bidding procedures for spectrum Auction 105, to be held on June 25, 2020. The public notice establishes the structure, deadlines, and due diligence considerations for the auction of new licenses in the 3.5 GHz Citizens Broadband Radio Service (CBRS) band.
This action comes shortly after the Commission’s final authorization of full commercial deployment by four Spectrum Access System Administrators (SAS providers) who will provide frequency coordination necessary for spectrum sharing (discussed in our prior advisory).
The CBRS auction is remarkable, not just for making a massive number of mid-band spectrum licenses available (more than 22,000), but also because this marks an important step towards incorporating active licensed use into the unique sharing framework that is the hallmark for all licensees operating in the band.
In adopting specific application and competitive bidding procedures as well as auction mechanics, the Commission also reaffirms that license areas are defined at the county level and rejects the earlier proposal to aggregate bidding to Cellular Market Area levels upon which it sought comment in its September 26, 2019 Public Notice.
CBRS "PAL" Licenses
In Auction 105, there will be a total of 22,631 Priority Access Licenses (often referred to as "PALs") available for assignment. Each PAL will grant the licensee the right to use a generic 10-megahertz unpaired channel block within each county.
- Unlike previous licensing regimes, these licenses are not static assignments. Instead, the SAS providers will assign each PAL spectrum on a dynamic basis, providing these PAL licensees with priority treatment over General Authorized Access (GAA) users of the spectrum.
Though having priority over GAA users, PAL licensees are nonetheless limited by their secondary status to the incumbent tier users (including federal radiolocation users, Fixed Satellite Service (FSS) earth stations, some grandfathered terrestrial wireless licensees, and previously authorized non-federal users), who will enjoy the highest priority treatment over both GAA users and PALs in the CBRS band.
PAL License Caps
Because the generic channel blocks will be unpaired blocks that are dynamically assigned by the SAS providers, there is no need for an assignment phase in Auction 105. Notably, there is a cap on the total amount of CBRS spectrum that can be acquired. No PAL licensee can hold more than 40 MHz (or four 10 MHz PALs) in any one county.
Therefore, the system will not permit bidders to bid for more than four generic blocks of spectrum per county. The Commission declined to adopt procedures that would permit bidders to bid at a Cellular Market Area level, so all bidding will be conducted on a county-level only.
To become an eligible bidder, applicants must submit a short-form application (FCC Form 175) online. The Commission will make this form available on March 26, 2020. As in other auctions, this form requires an applicant to certify that it is qualified to participate in the auction and make certain important disclosures.
These short-form applications must be filed no later than April 9, 2020.
Bidders must indicate how many generic license blocks it intends to pursue in a county and make upfront payments in advance of the beginning of the auction. The payments will be based on a formula of $0.01 per MHz-pop, with a minimum of $500 per county.
Once the auction begins, the Commission will set a reserve price for purposes of initiating bidding (which differs from the upfront payment) based on a formula of $0.02 per MHz-pop with a minimum of $1,000 per license block.
After the auction is concluded, in the second phase of the application process, winning bidders must file a comprehensive long-form application (FCC Form 601). Winning bidders must also have an ownership disclosure information report (FCC Form 602) on file or submit one at that time.
The FCC will permit certain qualified small business or rural providers to utilize bidding credits in the auction. Specifically:
- An entity with average annual gross revenues for the preceding three years not exceeding $55 million will be eligible to qualify as a “small business” for a bidding credit of 15 percent.
- An entity with average annual gross revenues for the preceding three years not exceeding $20 million will be eligible to qualify as a “very small business” for a bidding credit of 25 percent.
- An entity providing commercial communication services to a customer base of fewer than 250,000 combined wireless, wireline, broadband, and cable subscribers in primarily rural areas will be eligible for an additional 15 percent rural service provider bidding credit.
Caps on Bidding Credit Discounts
The FCC also adopted caps on the total amount of bidding credit discounts that any eligible applicant may receive to preserve parity between the various classes of providers while preventing abuse by entities that are not legitimately eligible for bidding credits. Small businesses’ bidding credit discounts will be capped at $25 million. For rural service providers, the bidding credit discount will be capped at $10 million.
There is also a small markets cap of $10 million that will apply in counties located within any Partial Economic Area with a population of 500,000 or less.
Entities considering participation in this auction should be aware of the following deadlines:
- (by) March 9: Auction Application Tutorial Available Online
- March 26: Short-form applications available and filing window opens
- April 9: All Short-form applications due by 6:00 p.m. ET; quiet period begins immediately afterward.
- May 21: Upfront wire transfer payments due by 6:00 p.m. ET.
- (by) June 11: Bidding Tutorial Available Online
- June 22: Mock auction scheduled.
- June 25: Live auction bidding begins.
The spectrum licenses available in Auction 105 can be used for a variety of important 5G wireless services, such as the Internet of Things and other advanced spectrum-based services including enhanced connectivity for mobile and fixed wireless networks and deployment of private LTE networks for large venues.
Interested entities not able to participate in this auction on the above timeline may be able to take advantage of the Commission’s procedures that streamline secondary market leasing and acquisition transactions after the winning bidders have received their licenses, which are subject to performance requirements. Licensees must either demonstrate "substantial service" or demonstrate that they meet one of the available safe harbors for mobile service, point-to-multipoint service, or fixed point-to-point service.