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DOC-316480A6

STATEMENT OF COMMISSIONER AJIT PAI, CONCURRING

Re:
Policies Regarding Mobile Spectrum Holdings, WT Docket No. 12-269, Notice of
Proposed Rulemaking
I share the concerns of my colleagues and many stakeholders that today’s process for
evaluating carriers’ spectrum holdings is flawed. In my view, our framework has failed to keep
pace with the evolving marketplace and is simply unpredictable.
On the first point: Our spectrum screen currently fails to account for all spectrum
suitable for mobile broadband. This includes spectrum in the Broadband Radio Service (BRS)
and Educational Broadband Service (EBS) that companies like Clearwire are using today to
provide 4G service across America. And our approach to spectrum attribution assumes that one
company gains de facto control of another even if it holds no more than 10% equity. Together,
these factors ensure that our current process for evaluating spectrum holdings consistently
understates competition in the marketplace.
On the second point: Our approach to evaluating carriers’ spectrum holdings creates
needless regulatory uncertainty. As carriers plan their investments to meet consumer demand,
they need to know the rules of the road, namely, which purchases will trigger the spectrum
screen and which won’t. Unfortunately, that is not the case today. Instead, we only consider
whether to adjust the screen on an ad hoc, transaction-by-transaction basis.
Although there is substantial room for improvement when it comes to the spectrum
screen, there is little consensus when it comes to identifying particular problems, let alone
specific solutions. Some think that the screen includes too little spectrum; others, too much.
Some favor the imposition of a hard cap; others support a more flexible case-by-case approach.
Some want to weigh different spectrum bands differently; others believe taking that step would
be counterproductive. I could go on, but you get the point.
It is for this reason that I find it odd that outside of the attribution issue, today’s Notice of
Proposed Rulemaking contains no notice of proposed rules. In fact, the word “propose” does not
appear in the document. Nor do we reach any tentative conclusions. We simply ask a lot of
questions about where things stand, which is typically what we would do in a Notice of Inquiry.
While I of course support soliciting comment as we begin this journey, I think the better
approach here would have been to ask for input on where we intend to go. The public is better
served if attention can be focused on proposed rules, and the FCC’s ultimate decisions are better
informed by direct, as opposed to general, public engagement.
But since this remains a Notice of Proposed Rulemaking and since we may well adopt
rules for mobile spectrum holdings around the same time that we adopt rules for the broadcast
incentive auction, I want to highlight the linkage between these two proceedings. It is critical
that the incentive auction be a success, and that, in turn, requires vigorous participation and
competition for spectrum in the forward auction. I am thus skeptical of any steps that would
depress participation in the auction, such as tightening the spectrum screen, adopting a hard cap
on spectrum holdings, or imposing requirements that would enable the Commission to second-
guess how wireless operators run their networks and thus reduce the value of spectrum.1


1 See, e.g., Notice of Proposed Rulemaking at paras. 20–21, 39, 46.

I am particularly concerned about two consequences that would likely result. First,
constricting the spectrum screen will be bad for public safety. By law, the net revenues of a
successful incentive auction must be deposited into the Public Safety Trust Fund. In other
words, the more money we raise through that auction, the more money that will become
available for the First Responder Network Authority, or FirstNet. And given the high costs of
rural deployment, raising substantial funds is especially critical if states like Kansas and West
Virginia are going to become a part of the nationwide public safety broadband network. On the
other hand, artificially depressing demand in the auction will lower net revenues and thus reduce
the amount of money received by public safety.
Second, narrowing the spectrum screen will aggravate the spectrum crunch. Unlike in
normal auctions, there is a direct relationship in an incentive auction between aggregate auction
demand and the amount of spectrum that will be made available for mobile broadband: The
more demand for spectrum in the auction, the more spectrum that will be sold. On the other
hand, a stricter spectrum screen will lower overall auction demand, and thus less spectrum will
be made available for mobile broadband.
In conclusion, we have the opportunity to make some real improvements in our spectrum
screen. I look forward to reviewing the record that will be developed in the coming months and
working through the issues with my colleagues. And I hope that we will make the right
decisions. Considering the stakes associated with the incentive auction, we should, at a
minimum, do no harm.

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