But government shutdown, still-pending issues could interpose delays.

Despite some dissension on the 8th floor of the FCC about whether to proceed immediately with the H Block auction, the FCC has adopted a scheduling order and associated rules and procedures to govern the auction. (Blogmeister’s Note: As previously promised, here is a link to the FCC’s original public notice setting the dates and procedures for the H Block auction — but heads up!  Thanks to the government shutdown, the FCC has since adjusted the relevant dates.  Check here for our update.) Commissioner Rosenworcel had argued that the H Block auction should be paired with the auction of AWS-3 spectrum in order to reap a larger pay-out to the FCC from the combination of the two. Despite this objection, the Commission plunged ahead on September 13 to set the auction up for January 14, 2014. The Middle Class Tax Relief and Job Creation Act of 2012 had directed the FCC to auction this spectrum no later than February 23, 2015, so the Commission had a little leeway here on when it had to initiate the auction.

The H Block consists of the 1995-2000 MHz and 1915-1920 MHz bands.   It is therefore adjacent to the PCS G Block held by Sprint on one side and the AWS-4 band held by DISH Network on the other. This geographic setting has unfortunately made it the Alsace-Lorraine of telecommunications – the prize in a tug o’ war between the two giant adjacent licensees who have tried to make it their own.

The rules applicable to this auction follow the procedures typical for auctions these days with a few key exceptions:

  • The Commission set the “reserve price” (the total amount which must be garnered from the auction in order for it to be valid) at 50 cents a MHz/pop, or roughly a billion and a half dollars.  This figure – magnitudes greater than anyone had anticipated – was proposed by DISH Network a few days before the auction procedures were adopted.   It has been reported that as part of the interoperability deal brokered by the FCC (see story on page 3), DISH agreed to bid not less than this 50 cents a MHz/pop amount. In return, it was to be granted the option to reverse the uplink/downlink structure for its adjacent AWS-4 downlink band, as well as extensions of time to construct its licensed facilities.  The fact that this reserve price appears to be part of a backroom arrangement which has not been subject to public scrutiny is likely to be the subject of further pleadings as the auction process moves forward.
  • In keeping with the reported arrangement, DISH has sought a waiver of the rules applicable to its AWS-4 band adjacent to the H Block. The requested waiver would give DISH the option for up to 30 months to make the adjacent band uplink rather than downlink. If granted, that waiver would give DISH a significant leg up in the auction since it would unilaterally control the degree of interference that might be caused or not caused to the H Block. This, too, is likely to come up for further scrutiny.
  • DISH has also conditioned its agreement to bid the $1.5 billion on the FCC granting its waiver request no later than a month before the auction date. The FCC put the waiver request on a very short fuse and seems to be on a track to accede to DISH’s request in the timeframe demanded.
  • The H Block licenses will be issued on an EA (Economic Area) basis. These vast geographic units are too large to be in the financial grasp of most small carriers, thus limiting the potential bidders to a few industry giants. The Rural Wireless Association has petitioned the FCC for reconsideration of this element.

Given all of these factors, it’s hard not to see this auction as having been designed largely to accommodate the needs and desires of Sprint and DISH with very little regard to the needs or desires of anyone else. Nevertheless, for those bold enough to wade into these waters, the current auction schedule calls for short form applications to be filed no later than November 5, 2013 and upfront payments to be made no later than December 11. The auction schedule may be affected by the federal government shutdown since there remain key issues still to be resolved (including the DISH waiver and the interoperability deal) in less than two months. Whether the auction can go on as scheduled therefore remains one of the large questions looming over this process.