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FCC plans high-band spectrum auction in 2018 to enable 5G rollout

In an effort to move the U.S. forward on the deployment of next-generation 5G technology, the Federal Communications Commission plans to hold a high-band spectrum auction before the end of 2018, provided that details about auction procedures can be resolved in time.

During a keynote address at Mobile World Congress, FCC Chairman Ajit Pai said he intends to hold an auction in November for spectrum in the 28 GHz band, followed immediately by a second auction for spectrum in the 24 GHz band. This millimeter wave spectrum is expected to play a significant role in the rollout of 5G given that it offers wider bands. While most spectrum today in lower bands is available in 5 MHz to 10 MHz blocks, high-band spectrum will be available in 200 MHz or more blocks, enabling operators to carry significantly more traffic at higher speeds.

According to senior FCC officials, the first auction will include spectrum in the 27.5 GHz to 28.35 GHz band, totaling 850 MHz of spectrum. The second auction will be comprised of spectrum in the 24.25 GHz to 24.45 GHz band and the 27.75 GHz to 25.25 GHz band, totaling 700 MHz of spectrum. All told, between the two auctions, the FCC will be selling a total of 1,550 MHz of spectrum.

In terms of timing, the FCC plans to collect comment on the auction procedures sometime this spring and then finalize the rules in the months before the auction begins. However, as Pai noted during his speech, this timeline has one major caveat: "In order for us to start an auction in November, we need the U.S. Congress to pass legislation by May 13 addressing the handling of upfront payments," Pai said.

As the chairman has previously explained, the Communications Act requires the FCC to deposit any upfront payments from bidders in spectrum auctions in "an interest bearing account at a financial institution." But private banks have told the FCC they do not want to hold these upfront payments, and public institutions have declined to set up the special purpose accounts necessary to offer such services. Pai urged Congress to change the law so that deposits from spectrum auctions bidders can be sent to the Treasury Department.

"If we don't get the problem fixed by May 13, our efforts to realize America's 5G future will be delayed," the Republican chairman said.

Commissioner Jessica Rosenworcel, a Democrat, suggested during a Feb. 22 press conference that the FCC does not necessarily need to wait for a legislative solution, however. Rosenworcel suggested reaching out to the banks that worked with the FCC on the recent 600 MHz broadcast incentive auction and placing deposits in multiple banks rather than just one as potential strategies.

"We just need to be creative here, and our unwillingness to be creative is a choice to cede our leadership to the rest of the world," Rosenworcel said.

But senior FCC officials said Feb. 26 that the commission has been exploring options "for the better part of a year." The problem with using multiple banks, they explained, has to do with the federal insurance limit, which stands at $250,000. Based on this limit, officials said the FCC would have to use "a very, very large number of banks," which would create other problems.

"The multiple bank option is not a viable option," the FCC officials said.

As for using the same bank that held deposits in the 600 MHz auction, the Federal Reserve Bank of New York, officials said the FCC has spoken to the bank. "They said that was a one-time deal and they won't do it again," the officials said.

As such, the officials stressed a legislative solution on the handling of upfront payments is critical. "We need this fix or else we can't go forward," they said.

Earlier this month, the House Energy and Commerce Committee passed the Repack Airwaves Yielding Better Access for Users of Modern Services Act, or RAY BAUM'S Act, which includes a spectrum auction deposit fix allowing the FCC to deposit upfront payments from spectrum bidders directly with the U.S. Treasury. The bill still needs to be passed by the full House and Senate before it can be signed into law by President Donald Trump.

After Pai announced his intent to hold a high-band spectrum auction later this year, House Energy and Commerce Committee Chairman Greg Walden, R-Ore., and Subcommittee on Communications and Technology Chairman Marsha Blackburn, R-Tenn., said in a joint statement that the news "is yet another reason to enact the bipartisan RAY BAUM'S Act," adding, "We are continuing to work with all parties to get this important legislation to the finish line."

CTIA, the U.S. wireless association, applauded the planned auction and pledged to work with the FCC, Congress and other stakeholders to ensure the auction timeline is met. "The wireless industry needs the certainty of a spectrum pipeline, and Chairman Pai's commitment is a critical next step to meeting the United States' 5G ambitions," CTIA President and CEO Meredith Attwell Baker said in a statement.