Cingular Wireless LLC ("Cingular"), by its attorneys, hereby submits these comments in response to NTIA's Notice of Proposed Rule Making in this docket.⁽¹⁾ Cingular generally supports NTIA's efforts to establish a reimbursement mechanism to facilitate the prompt reallocation of spectrum from Federal Government to non-government use, consistent with the Strom Thurmond National Defense Authorization Act for Fiscal Year 1999.⁽²⁾ Rather than devise complex rules governing the relocation and reimbursement of current government licensees, however, NTIA should seek reimbursement directly from revenues generated by auctions to relicense the subject spectrum.

Allocating reimbursement funds directly from auction revenues offers several important benefits:

• Relocation negotiations, including determination of a date certain for vacating the band, could be conducted entirely between government agencies, thereby minimizing the likelihood of disputes and facilitating the prompt deployment of 3G services on the auctioned spectrum;

• Potential and winning bidders would not need information regarding classified or sensitive facilities; and

• Auction revenues would likely be higher. Prospective bidders would be free to value the licenses solely on the basis of the value of cleared spectrum, thereby reducing the risks associated with bidding on the spectrum and decreasing the likelihood of lengthy disputes between government licensees and winning bidders.

While it is possible that the negotiation process could proceed smoothly, it is unlikely given Cingular's experience with relocating 2 GHz microwave licensees to clear Personal Communications Service ("PCS") spectrum that it won at auction. In fact, it was the experience of many PCS licensees that incumbents "abus[ed] the relocation process by demanding large premium payments or refusing to negotiate, and that the deployment of PCS [was] delayed as a result."⁽⁴⁾ In cases where relocation or reimbursement disputes arise, resolution under the proposed rules could take well over a year. Such delays are wholly inconsistent with the need to license 3G services expeditiously. The Federal Communications Commission ("FCC") has specifically recognized that the United States' leadership role is tied to its ability to expeditiously provide the latest innovations to consumers, and that "[t]o maintain this position and remain at the forefront of technological change, the U.S. wireless industry must continue to grow" through the "implement[ation of] policies that continue to foster new developments."⁽⁵⁾ The Cellular Telecommunications and Internet Association ("CTIA"), however, has warned that failure to keep pace with IMT-2000 spectrum requirements will harm U.S. consumers, manufacturers, and service providers.⁽⁶⁾ This warning is well-founded.

The United States is already lagging behind other countries in licensing 3G services. Requiring relocation negotiations would further delay the deployment of these services by an additional year or more. On the other hand, allocating reimbursement funds directly from auction revenues would eliminate the lengthy relocation negotiation and reimbursement process. Instead, NTIA would require the Department of Defense ("DOD") to vacate the band by a date certain and would reimburse the DOD for all relocation expenses directly from auction revenues. This process would minimize the likelihood of disputes and facilitate the prompt deployment of 3G services on the auctioned spectrum.

Another hurdle posed by NTIA's proposed rules is the treatment of classified and sensitive information in the bidding and negotiation processes. The subject spectrum is currently employed by the Federal Government for a variety of uses that, among other things, includes support of U.S. military activities. Information regarding many of the existing government facilities may be classified, and the DOD or other government users may be prohibited from disclosing such information in the course of negotiating relocation and reimbursement terms with new licensees. Discussions regarding the relocation of sensitive military communications facilities, for example, necessarily may include matters about which national security concerns would naturally exist.

NTIA proposes to overcome these hurdles by having each affected federal agency provide a "single, consolidated and unclassified figure . . . for the cost of relocating, retuning, or modifying" all classified or sensitive facilities.⁽⁷⁾ To the extent consistent with national security considerations, that figure may be broken down by license area and spectrum to give those bidding on a geographic basis the "best indication possible of the cost they may have to pay to relocate, retune or modify" the facilities at issue.⁽⁸⁾

Under this procedure, potential bidders may lack crucial information about the relocation costs associated with a given band of spectrum. The significant risk posed by acquiring spectrum that is encumbered by unknown liabilities could serve to depress the prices bidders are willing to pay for auctioned licenses. In addition, such a procedure could exacerbate disputes between federal licensees and winning bidders regarding reimbursement insofar as winning bidders are saddled with a price tag that is significantly higher than what they might have anticipated. Endless litigation and delay would likely result as auction winners attempted to verify these relocation expenses.⁽⁹⁾

Allocating reimbursement funds directly from auction revenues would obviate the need to provide potential and winning bidders with information regarding classified or sensitive facilities, thereby reducing the risks associated with bidding on the spectrum and decreasing the likelihood of lengthy disputes between government licensees and winning bidders. Access to this information could be limited to those government employees with appropriate clearance and with a "need to know" the information for reimbursement purposes, in accordance with relevant executive orders and national security regulations.⁽¹⁰⁾

Allowing relocation costs to be diverted directly from auction revenues would not only accelerate the process of relocating government licensees and ameliorate national security concerns inherent in negotiations between government and industry, it would allow each prospective bidder to value the licenses to be auctioned solely on the basis of the value of the spectrum. In other words, auction participants would not adjust their valuation downward to account for relocation costs and deployment delays associated with lengthy relocation negotiations. Thus, the auction would be more likely to achieve Congress' principal goal for competitive bidding -- that of awarding licenses to the parties who value them most. On the other hand, auctioning encumbered licenses could significantly depress potential auction revenues, even beyond the straight relocation costs, because bidders would face significant unknowns regarding costs and timing of relocation.

In the event that reimbursement costs are not allocated directly from auction revenues, NTIA should revise its proposed rules so that bidders are provided sufficient information on reimbursement costs and other matters prior to auction. Disclosure of specific information is essential so that potential bidders can formulate bidding strategies that take into account likely reimbursement costs or decide whether to participate in the auction.

In addition, the nature, location and use of the affected facilities or frequencies must be disclosed prior to auction so that the industry may evaluate the feasibility and costs -- particularly with unclassified facilities (National security concerns with classified facilities may dictate a limited degree of disclosure, if any.). This information would ensure that bidders understood their obligations thereby decreasing the likelihood of disruption caused by relocation disputes. The informational requirement currently proposed by NTIA is inadequate and must be expanded to provide more detail. For example, the rules do not clarify what data would fall within the disclosure requirement: (i) the general geographical area, (ii) the license area, or (iii) specific geographical coordinates such as latitude and longitude. In addition, more detailed information regarding the amount of equipment to be replaced and the type of equipment being used would be crucial to bidders in determining the difficulty and costs of relocation. Failure to provide adequate information would deter bidder participation and threaten the viability of the auction.

Although Congress would likely have to amend the Communications Act to authorize the reimbursement of relocated government licensees directly from auction revenues, such a solution would be far preferable to having the wireless industry negotiate relocation terms with government agencies, especially given the sensitive nature of information in this band. Thus, Cingular urges NTIA to consider recommending to Congress a proposal along these lines.

Respectfully submitted,

Cingular Wireless llc
 

By:

J. R. Carbonell
Carol L. Tacker
5565 Glenridge Connector
Suite 1700
Atlanta, GA 30342
(404) 236-6030

Its Attorneys
 

March 19, 2001

2. Pub. L. 105-261, 112 Stat. 1920 (1998).

3. See 47 C.F.R. §§ 301.120, 301.130, 301.140 (proposed); 47 U.S.C. § 923(g)(2).

4. Amendment to the Commission's Rules Regarding a Plan for Sharing the Costs of Microwave Relocation, First Report and Order and Further Notice of Proposed Rulemaking, 11 F.C.C.R. 8825, 8833 (1996).

5. FCC Notice of Proposed Rule Rulemaking, FCC 00-455 (rel. Jan. 5, 2001), summarized, 66 Fed. Reg. 7438 (Jan. 23, 2001), at ¶¶ 15, 18.

6. See CTIA, Petition for Rulemaking, RM-9920 (filed July 12, 2000), at 2.

7. 47 C.F.R. § 301.20(c) (proposed).

8. Id.

9. As with relocation of 2 GHz microwave incumbents for the deployment of PCS, auction winners will want to ensure that relocation costs do not include "upgrades."

10. See, e.g., Exec. Order No. 12958, 3 C.F.R. § 333 (1995); Exec. Order No. 12968, 3 C.F.R. § 391 (1995).