Common Ground: Spectrum Allocation–In Need Of Responsible Efficiency

by Richard DalBello

For those of you who may have slept through the entire summer, the FCC put out a Public Notice and set up a special spectrum policy task force to re-examine, among other things, the way the FCC allocates spectrum. To say the task force is focused on market-oriented policies would be a major understatement. Unfortunately for the satellite industry, the Spectrum Task Force seems to think that “market oriented policies” is just another way of saying “auctions.”

Now, there is nothing wrong with efficiency; but somewhere along the way, the public interest seems to be getting lost. The FCC was not chartered to “maximize shareholder value.” The Commission’s purposes are broad and grand: “To make available, so far as possible, to all the people of the United States, a rapid, efficient, nationwide, and worldwide wire and radio communication service with adequate facilities at reasonable charges . . .” for a wide variety of uses, including national defense and public safety (47 USC Section 151). Difficult task? You bet it is. Which is why working at the FCC has always carried with it a certain badge of honor.

Several years ago, the U.S. Congress recognized that auctioning spectrum for international satellite services could cause significant harm to the competitiveness of the U.S. satellite industry. As a result, Congress passed the ORBIT Act in 2000 which states in no uncertain terms that the Commission does not have the authority to assign, by competitive bidding, orbital locations or spectrum used for the provision of international or global satellite communications services. This law has been a particular source of annoyance to the “auctionistas” who have set their sights on dismantling the “no auction” provisions of the Act.

Congress recognized that if the United States were to hold spectrum auctions for international satellite systems, then other nations would follow its lead, as they had in the commercial wireless arena, assisted in part by the U.S. efforts to export its auction policies. Sequential auctions would necessarily follow and would deter investment in satellite systems by raising both the cost and cost uncertainty of such systems. Satellite operations require securing a bundle of rights rather than a single right. Authorization of a spacecraft to orbit at a particular location, through national licensing and ITU coordination of the space segment, is required to control interference and otherwise manage the orbit-spectrum resource. Rights to transmit signals to and receive signals from the satellite in each individual country reachable by the satellite (spectrum assignments, or landing rights) are separate. Procurement of this bundle of rights is an important aspect of the economics of a satellite business plan. There is a potential for individual countries to withhold such rights for strategic reasons or in demand for high auction fees through sequential auctions–i.e., separate financial negotiations with each country covered by the satellite “footprint.” Early auction fees would be jeopardized if later auctions were “lost.” Sequential auctions could yield economic obstacles of such magnitude as to stifle most international satellite enterprises entirely.

Suppose sequential auctions do occur. What is the decision process facing a system operator? How can an operator estimate the total costs of a project until landing rights auctions have been conducted in all countries? If the economic feasibility of a project depends upon the service revenues in other countries, then a satellite operator must wait until all (or at least many) nations have completed the authorization process before the operator can safely forecast the business case. Clearly, five or 15 nations cannot conduct auctions as quickly as one nation. Moreover, because it will be impossible to calculate the costs associated with these sequential auctions, a satellite operator will not be able to forecast the total system cost or whether a system will be profitable, thus making it more difficult for an operator to obtain financing or even resulting in cancellation of the venture entirely.

The satellite industry has not opposed all auctions. In certain domestic satellite services, such as satellite television and radio, auctions have been used successfully to allocate spectrum. The satellite industry also strongly supports spectrum efficiency. By continually introducing new technologies that improve bandwidth use and sharing, today’s satellite systems have made dramatic leaps in spectrum efficiency. But efficiency cannot be the sole measure. In many thinly populated or very remote areas, there are no alternatives to satellite services and the availability of those services is critical to the Commission’s mandate to promote service to all of the people of the United States.

It’s a tough job, but a noble one. Why would a talented and dedicated agency want it any other way?

Richard DalBello is the executive director of the Satellite Industry Association. His e-mail is [email protected].