In April of this year, the Federal Communications Commission (FCC or Commission) completed the world’s first broadcast incentive auction, making 70 megahertz of 600 MHz spectrum available for licensed mobile use. Auction winners are already “starting their engines” to deploy this low-band spectrum for mobile telephony and broadband services.
The conclusion of the incentive auction marks the incorporation of the 600 MHz spectrum band into the Commission’s “spectrum screen”—a component of the Commission’s review of secondary-market transactions involving licensed spectrum. Using this screen, the Commission identifies for further competitive examination markets in which, post-transaction, an entity would hold approximately one-third or more of the spectrum that is “suitable and available” for the provision of mobile telephony/broadband services. With the new pool of 600 MHz spectrum from the incentive auction, the “denominator” for the screen is now over 600 megahertz, and the “numerator” has increased from 199 megahertz to over 220 megahertz.
Historically, the Commission’s primary tool to prevent anti-competitive spectrum aggregation was a hard spectrum “cap,” which strictly limited the amount of spectrum that any provider could hold in a geographic service area. Beginning in 2003, however, the Commission moved from applying a strict spectrum cap to engaging in case-by-case review of proposed spectrum transactions using the screen to help identify the local markets where proposed spectrum acquisitions raised competitive concerns. In general, the Commission’s competitive spectrum analysis is informed by, but not limited to, the federal government’s antitrust principles.
The Commission revisited its spectrum aggregation policies in 2012. Among other things, the Commission’s examination focused on identifying those new bands of spectrum that had become suitable and available for the provision of mobile telephony and broadband services, and it explored the need for adopting a specific cap or screen for below-1-GHz spectrum holdings as a means to ensure that “multiple providers are able to access [this relatively scarce] spectrum.”
As a result, in 2014, the Commission added several new spectrum bands to its screen. In lieu of adopting a specific limit, the Commission also established that, going forward, it would consider an acquiring entity’s below-1-GHz spectrum holdings as an “enhanced factor” in determining whether the transaction was in the public interest: entities that would, post-transaction, hold one-third or more of such spectrum would need to make a “detailed demonstration” indicating how the public interest benefits outweighed the harms. Entities acquiring below-1-GHz-spectrum, which already held one-third or more of such spectrum in a market, would trigger even further scrutiny requiring them to demonstrate that the public interest benefits of the transaction “clearly outweigh” the public interest harms.
To date, the enhanced factor review and its heightened scrutiny overlay have had little effect on lowband spectrum acquisitions. Either the Commission or the Wireless Telecommunications Bureau has approved all 32 of the licensed spectrum transactions we are aware of since the adoption of the 2014 Order. Twenty-six of those transactions triggered application of enhanced factor review, and four of them triggered the heightened standard of review. The Commission required spectrum divestiture in only one of these 32 transactions, but that transaction did not involve low-band spectrum and was not subject to enhanced factor review.
As the wireless industry moves toward 5G networks and services, the Commission’s focus has now turned to mid-band and high-band spectrum. Indeed, in anticipation of this market shift, the Commission last summer adopted an independent ex ante spectrum aggregation limit of 1250 megahertz for entities acquiring spectrum in the 28 GHz, 37 GHz, and/or 39 GHz bands at auction. It similarly adopted a spectrum screen of 1250 megahertz for proposed secondary market transactions in these three bands. The Commission also has requested comment on its proposal to apply a spectrum aggregation limit to additional millimeter wave (high-frequency) bands.
While it is unclear how the change of administration will shape the Commission’s spectrum aggregation policies moving forward, the evolving availability of, and demand for, low-, mid-, and high-band spectrum suggests that the Commission’s spectrum aggregation analysis may not be fully resolved.