Select Spectrum to host EBS and BRS Lease Auction in October 2015

EBS license holders can monetize longstanding spectrum holdings and rural/suburban/metropolitan fixed and mobile broadband commercial ventures can be stimulated with this annual Spectrum Lease Auction.

This October, Select Spectrum, LLC will host a clearinghouse style auction to facilitate the matching of EBS and BRS Spectrum holders with interested lessees of this spectrum.  As our nation struggles with lack of spectrum to carry mobile and fixed wireless broadband signals, this auction will attempt to unlock the potential of often unused or little used spectrum in the 2.5 and 2.6 GHz bands.  The auction will be a great opportunity to pair educational and government entities, who are the license holders, with wireless broadband providers who are interested in leasing this spectrum.  This is a great way to use our nation’s finite spectrum resources more efficiently, earn money for our educational institutions and provide more spectrum for broadband delivery.

Historically, in 1963 the FCC authorized the Instructional Television Fixed Service band.  These 20 microwave TV Channels were made available to be licensed to local credit granting educational institutions.  However, in the late 1970’s the FCC recognized that many ITFS licensees lacked the technical expertise and/or financing means to effectively use their spectrum holdings.  Thus the FCC authorized “leasing excess capacity” as a way to more effectively use this spectrum.  EBS leases were often combined with Multichannel Multipoint Distribution Service (MMDS) licenses to provide a service typically known as “wireless cable”.  In 2003, the FCC begin repurposing ITFS and MMDS spectrum for wireless broadband service and subsequently renamed the bands EBS and BRS.  Craig McCaw’s Clearwire became the largest commercial operator to lease EBS spectrum.  Clearwire later sold to Sprint.

Two-way, mobile and fixed data services, including Internet access are allowed uses of EBS and BRS spectrum.  The licenses are subject to FCC Part 27 rules.  4G, LTE and WiMAX products are available by a variety of manufacturers to build wireless broadband networks in these bands.  Although at least 5% of the spectrum capacity must be reserved for educational use, the remaining 95% can be leased to commercial operators.

Spectrum auctions have become popular in recent years to license new allocations of mobile and fixed wireless broadband spectrum.  These auctions have typically been dominated by large mobile commercial operators such as Verizon, AT&T, T-Mobile, Sprint, Dish Networks and others. For the most part, smaller local and regional wireless broadband providers have all but been locked out of these auctions because of price and geographic market size.  This fall’s auction is different than spectrum ownership auctions.  This auction as previously stated, is a clearinghouse auction to bring license holders and commercial operators together, to facilitate “leases” of exclusive “Geographic Service Areas” (“GSA”).  Each GSA is typically a 35 mile radius cell.  In many cases, one or more sides of the resulting circle are lopped off to avoid overlap with neighboring GSA licenses. The relatively small size of each GSA license should attract a larger field of potential bidders.

Below is the Post Transition Band Plan for EBS (red) and BRS (Blue and Green) channels.

Many educational license holders are only vaguely familiar with their spectrum holdings.  Many of these licenses were issued 50 years ago.  Newer employees are either unaware of the holdings or are not knowledgeable or skilled in spectrum leasing procedures.  Therefore, much of this spectrum remains dormant and often requests to lease the spectrum licenses are ignored.  The Spectrum Lease Auction essentially provides a “show me the money” incentive to the educational institutions to stimulate reaction to lease spectrum to commercial operators. In other words, the auction will make it easy for the educational institutions to find the best lease offer for their spectrum assets.

The 2015 Spectrum Lease Auction will offer:

1. EBS licenses not subject to an existing lease
2. EBS licenses where the existing lease will expire soon
3. EBS leases to purchase (from an existing lessee)
4. BRS licenses for lease or sale

Participation in the spectrum lease auction if free of charge.  Only winning bidders and ultimately successful lessees have financial obligations.  Contact one of the agents to apply.

When valuing spectrum, the typical unit of measurement is called MHz-POP.  A MHz-POP is the spectrum bandwidth in Megahertz times the population living in the area covered by the license.  A normal EBS license is 22.5 MHz.  In an example GSA of 100,000 population, the total MHz-POP would be 2,250,000.  Bidders would set the price of the lease during the auction depending on location and demand.  If a historical price of $0.04/MHz-POP is used in this assumption, the term value of the lease will be $108,000.  Offers may be higher or lower.

Once the spectrum lease auction is complete, winning bidders will be matched with license holders.  The two parties will commence to negotiate a lease satisfactory for both parties.  Negotiables of the lease may be term in years, payment terms, inflation correction, initial date of lease, right of first refusal and other variables. Once the lease is consummated, the lessee will make an upfront payment to Select Spectrum from which commissions will be deducted.  The balance will then be paid to the EBS license holder.

Leasing spectrum licenses is another method of obtaining rights to licensed spectrum.  The lease is basically financed by the license holder, who agrees to accept monthly or annual payments from the lessee in return for the rights to use the spectrum license for a period of time.  While most auctions require large amounts of capital to compete for the purchase of large geographical blocks of spectrum, the lease auction will be attractive to competitive local and regional broadband providers.  This may be due to the smaller size of GSA’s, license importance to  local providers versus nationwide providers, lower cost of entry, automatic inherent lease financing, higher power limits and less interference.

Historically, nationwide providers  have deployed first in areas with high population densities. Often times these nationwide providers ignore the rural low density areas of the country, even though they have purchased the licenses.  This EBS lease auction process will attract a large contingent of rural wireless broadband providers called WISPs.  WISP operations cover a major portion of the rural and suburban areas of the United States using primarily unlicensed spectrum.  These operators are normally smaller, local or regional operations.  The oldest WISP operation started in the late 1990’s and the largest operator operates in portions of 16 states.  Therefore, a WISP operator in rural Kansas, may value a local EBS license higher than a nationwide provider.  Either way, the more bidders participating in the auction, the more accurate the spectrum lease valuations will be for the license holder.

For more information, contact a bidder’s agent:

Rick Harnish at rharnish@fibertothefarm.com or call 260-307-4000. 

Liz Creekmore at liz@intelpath.com or call 312-841-9188

EBS License Holders can contact Robert Finch at rfinch@selectspectrum.comor call 703-635-2686.

You're stuck on hold! Waiting and Waiting and Waiting

President Obama gave a speech today in Cedar Falls, Iowa on Broadband Competition. He talked about giving opportunities to entrepreneurs and small businesses throughout America. He talked about getting rid of unnecessary regulations that hinder broadband deployment and clearing the red tape. I found the following quote quite humorous though.

"What happens when there's no competition? Your stuck on hold, you're watching the loading icon spin, you're waiting and waiting and waiting, and meanwhile you're wondering how come your rates keep getting jacked up, when the service doesn't seem to improve."

Although I may be taking this statement a bit out of context, I couldn't help comparing it to the US Government and its lack of competition. As American taxpayers, we are stuck on hold, waiting and waiting and waiting. Watching our political manifestations tug the rope one way or the other, has been like an eternal pendulum lately. Our taxes keep getting jacked up and our services do not improve.

Meanwhile, our nation continues to fall behind many other nations in broadband deployment and speed. The federal government's ability to govern has been stalemated by political parties beholden to the large corporate telecommunication lobbyists, who have effectively prevented competition from blooming. Much of this dilemma can be blamed on the Telecommunication Act of 1996, which enabled a handful of corporations to dominate the airwaves and wireline infrastructure. If President Obama really wants to stimulate competition, a total rewrite of the Telecommunication Act is in order.

On one hand, Mr. President, you are correct to observe how over-regulation and legislative barriers have subdued competition and slowed improvements in broadband deployments, pricing and speed. On the other hand, you conveniently miss a factual point. Lack of competition has been caused by the lack of federal support provided to entrepreneurial and small business broadband providers in the private sector for the last decade.

WAIT A MINUTE, HOLD THE BOAT, didn't you just say and I quote, "I’m on the side of competition, and I’m on the side of small business owners". Now you are ready to give up on the private sector and begin funding government owned and operated municipal networks? You want to create competition for existing privately owned ISPs (large and small) by funding municipal broadband projects with taxpayer revenues? Why not try some of the ideas below.

There are many ways improved broadband infrastructure can be accomplished much more efficiently. We need to provide better tools which private industry can leverage quickly to improve and deploy broadband networks. These tools consist of (1) including broadband providers in pole attachment right legislation, (2) mandating 10-20% of all spectrum auctioned to be designated as unlicensed spectrum, (3) auctioning spectrum by census tracts, (4) removing voice component funding criteria from federal funding programs, (5) creating incentives to speed broadband deployment, foster competition and meet speed criteria and deployment time frames, (6) providing carrier neutral fiber access locations across the country and finally (7) creating tax incentives for capital expenditures spent on privately funded broadband networks.

1. Legislation is badly needed allowing broadband providers easier pole attachment rights and access to public easements and conduits. Historically, access to these facilities has been granted primarily to telephone, cable, and utility companies. Voice and video services are quickly becoming standard apps on broadband networks; therefore all broadband providers should have access to these facilities.
2. The majority of spectrum is auctioned to the highest bidder. While these one-time revenues are substantial, I feel it is philosophically unwise to forfeit control of one of our nation's precious resources to a few corporate giants. Haven't we already learned this lesson? While some unlicensed spectrum has been allocated, it has not been nearly enough to keep up with demand. Dramatic advances in technologies have increased wireless broadband speeds and capacities in the last few years. We are quickly approaching a time when wireless technologies rival fiber like speeds at a much lower cost of deployment. Much of this rapid advancement of wireless technology can be attributed to unlicensed spectrum, which became a low cost testing ground for wireless manufacturers and operators. It is my opinion that 10-20% of all spectrum approved for auction should be reserved as unlicensed and in the public domain. This will foster competition and innovation.
3. Spectrum is normally auctioned in relatively large geographic areas. Because of the size of these areas, smaller broadband providers are prevented from participating in auctions because they cannot financially compete with corporate giants such as AT&T, Verizon and Dish Networks. Proposed FCC rules in the 3.5 GHz spectrum will be a good start if adopted, as the spectrum is slated to be auctioned by census tract. These proposed rules at least, give smaller operators a chance to acquire licensed spectrum.
4. Many federal funding programs have required operators to offer voice services to qualify to be considered. As I said above, voice service is now an application of broadband and this requirement severely limits to potential awardees of these funding programs to telephone companies. Antiquated rules like this unfairly limit competition and thus slow broadband deployment progress.
5. Experimental funding programs should be considered. Funding programs should create incentives for broadband providers to deploy in unserved or underserved areas quickly. One such idea which has gained little traction at the FCC is that of providing vouchers to consumers. These vouchers could be used to buy broadband service from the provider of choice. In the case where no providers exist (unserved areas), it would create a race to deploy to these areas in order to receive the voucher payments. According to President Obama, 98% of America is served. Therefore, a similar program could be created to increase broadband speeds. Additionally a low interest loan program should be set up to fund small broadband providers. Historically, loans for broadband networks have been difficult to acquire through typical funding mechanisms provided by private industry.
6. There is a need for carrier neutral fiber access huts across the entire United States. Too often, access to fiber access facilities is very difficult or cost prohibitive to obtain. If the government wants to facilitate better broadband in the United States, it would be a wise investment to build, operate and maintain facilities such as these. Security concerns would need to be taken into consideration.
7. Tax abatements and incentives are other tools to promote capital expenditures on broadband infrastructure. Broadband technologies are extremely dynamic. In order to keep up with the latest technologies and consumer demand, providers often replace equipment every few years at great expense. It would be prudent to reward continual capital reinvestment.

I am particularly dismayed that President Obama stated, "I'm directing the federal agencies to get rid of unnecessary regulations that slow the expansion of broadband or limit competition". Really Mr. President, how can you say that, when you are planning to impose Title II regulation on the broadband industry. Excessive regulatory burdens such as Title II will decrease investment in broadband infrastructure. Are you saying that federal regulation is ok, but state regulation is not? A bit hypocritical don't you think?

Finally, you stated in closing your speech today, "We are going to clear away red tape, we're going to foster competition, we're going to help communities connect and help communities succeed in our digital economy." I say "Let's clear away the red tape, let's foster fair competition, let's help private industry connect our communities so we can ALL succeed in our digital economy, the American way!"

Meanwhile, we the American people are still waiting and waiting and waiting.​