Economics at the FCC 2019–2020: Spectrum Policy, Universal Service, Inmate Calling Services, and Telehealth

FCC initiatives include Keep Americans Connected, Bridging the Digital Divide for all Americans, and the FCC’s 5G FAST Plan, available at https://​www.​fcc.​gov/​about-fcc/​fcc-initiatives.

Flexible-use spectrum allows the licensee to choose which services and technologies to deploy in a band within specified power and interference limits and relies on the market to shift uses as technology and user tastes change. In contrast, historically the regulator defined the specific permitted services in each band (e.g., broadcasting) and reallocated spectrum through an administrative process as new uses arose (FCC 2018a, n. 882).

For example, Ericsson predicts that total mobile traffic is expected to increase by a factor of five over the next six years, reaching 131 exabytes per month by the end of 2024. Ericsson further predicts that, in 2024, traffic generated by smartphones is projected to be 95% of total mobile data traffic and 5G networks will carry a quarter of all global mobile data traffic. See Ericsson, Mobility Report (2019) https://​www.​ericsson.​com/​49d1d9/​assets/​local/​mobility-report/​documents/​2019/​ericsson-mobility-report-june-2019.​pdf.

“5G is the 5th generation mobile network[]... designed to connect everyone and everything together including machines, objects and devices.” 5G will produce higher speed, lower latency, and greater reliability than have previous technology generations. See Everything you need to know about 5G, available at https://​www.​qualcomm.​com/​invention/​5g/​what-is-5g.

IoT refers to the billions of physical devices that are now connected to the internet: collecting and sharing data. See What is IoT, available at https://​www.​zdnet.​com/​article/​what-is-the-internet-of-things-everything-you-need-to-know-about-the-iot-right-now/​.

See Chairman Pai video, available at https://​www.​fcc.​gov/​5G.

Low-frequency spectrum (below 1 GHz) has better propagation than mid band spectrum (between 1 and 6 GHz) but has lower capacity and therefore will have lower download speeds. Higher band spectrum has higher capacity and therefore higher download speeds, but much shorter propagation distances. Millimeter wave spectrum is defined as frequencies at 24 GHz or higher.

The 3.7–4.2 GHz band is also used for reception of telemetry signals that are transmitted from satellites to earth stations (FCC 2020a, p. 2348). In addition, the C-Band is used for terrestrial fixed point-to-point service, which will be phased out following the clearing process that will be described below.

With overlay licenses, the licensees obtain the rights to geographic area licenses “overlaid” on top of the incumbent licensees, meaning that they may operate anywhere within its geographic area, subject to protecting the operations of incumbent licensees (FCC 2020a, p. 2354) and complying with any other obligations.

These 300 megahertz will be divided into fourteen 20 megahertz blocks for terrestrial flexible use and exclusive rights to use along with a 20-megahertz guard band (FCC 2020a, p. 2377). These blocks would be auctioned in geographic areas known as a partial economic areas (PEAs). There are 416 PEAs in the US. https://​www.​fcc.​gov/​oet/​maps/​areas.

These costs will include the costs that are incurred by satellite operators, such as launching new satellites and reallocating terrestrial earth stations to different satellites, as well as the costs of fitting the earth stations with new compression, modulation and/or passband filter equipment and retuning the satellite dishes (FCC 2020a, pp. 2424–2425).

Operators that represent 80% of U.S. C-band satellite traffic had to commit to accelerated relocation for the timeline to be adopted. See C-Band Spectrum Will be Made Available for 5G Services on an Accelerated Basis, available at https://​docs.​fcc.​gov/​public/​attachments/​DOC-364655A1.​pdf.

The $9.7 billion total is substantially lower than the total amount we estimate that overlay licensees themselves would be willing to spend to clear this spectrum early (FCC 2020a, p. 2438).

The C-Band Alliance had proposed to sell the rights of all five satellite operators in a single block, which would “solve” the problem of licensees not obtaining exclusive rights, but would create a new problem of a monopolist selling spectrum rights, or as the Commission stated, “…vesting private entities with the exclusive ability to allocate new terrestrial rights…” “… lacks…” “…the procompetitive features of a public auction…” (FCC 2020a, p. 2362).

And the licensees must have complied with all obligations to reimburse relocation and accelerated relocation costs (FCC 2020a, p. 2386).

Of course solving the contractual problem does not eliminate the possibility that a satellite owner fails to clear spectrum on time for reasons beyond its control or unforeseen circumstances.

These entities are: (1) accredited public and private education institutions; (2) governmental organizations that are engaged in the formal education of enrolled students; and (3) nonprofit organizations whose purpose is educational.

A Rural Tribal Priority Window was adopted for Tribal entities to obtain 2.5 GHz licenses on Tribal lands in rural areas prior to the commercial auction (FCC 2019, p. 5463).

Auction 101 raised (in gross bids) a total of $702,572,410 with a total of 2,965 licenses won (FCC 2019b). Auction 102 raised a total of $2,022,676,752 in net bids ($2,024,268,941 in gross bids), with 29 bidders’ winning a total of 2,904 licenses (FCC 2019c).

We note that incumbent licensees could also choose to replace existing licenses for new licenses for whole blocks that would be assigned contiguous frequencies within license areas. In addition, if licensees chose not to participate, their licenses would be modified for contiguous 100-megahertz blocks that covered full “partial economic areas” (PEAs) (FCC 2018c).

Auction 103 raised a total of $7,558,703,201 in net bids ($7,569,983,122 in gross bids). Based on these bids, the incentive payments for existing licensees total $3,084,172,898, and the net proceeds for the auction total $4,474,530,303 (FCC 2020g).

For context, the FCC’s spectrum screen, which includes low-band and mid-band spectrum, and is utilized in the FCC’s review of proposed secondary market transactions, currently totals 743 megahertz. In its analysis of proposed secondary market transactions, the FCC uses an initial spectrum screen as an analytical tool to help identify for case-by-case review those local markets where changes in spectrum holdings as a result of the transaction may raise competitive concerns.

FCC News Release, August 27, 2015, https://​www.​fcc.​gov/​document/​carriers-accept-over-15-b-support-expandrural-broadband.

The formula for the annual support amount that is implied at the clock percentage is: \({\min}\left\{ {{\text{R}},\left( {\frac{{C - \left( {T + L} \right)}}{100}} \right)R} \right\}\), where R is the reserve price, C is the clock price, T is the weight assigned to the particular speed tier, and L is the latency tier weight.

See Accenture Strategy, Smart Cities How 5G Can Help Municipalities Become Vibrant Smart Cities, https://​newsroom.​accenture.​com/​content/​1101/​files/​Accenture_​5G-Municipalities-Become-Smart-Cities.​pdf (last visited June 18, 2020).

The FCC noted its concern that “rural areas will remain where there is insufficient financial incentive for mobile wireless carriers to invest in 5G-capable networks, and those communities could be excluded from the technological and economic benefits of 5G for years to come. During this transition to 5G service, we therefore reaffirm our commitment to using Universal Service Fund support to close the digital divide and to make sure that parts of rural America are not left behind.” (FCC 2020d, pp. 2–3).

The overall auction format is one in which a uniform support rate is offered across all eligible areas, and carriers indicate which specific areas they would serve at that rate. If the sum of all of the payments that would be made at a specific rate given carriers’ expressed willingness to serve exceeds the 5G Fund budget, then the rate is lowered and carriers express their willingness to serve at the lower rate. This process continues until the payment is equal to the 5G Fund budget. Under this process, carriers will be willing to serve fewer areas as the rate falls, but if the same rate is offered for all remaining areas, more support than is needed will flow to the less costly-to-serve and more profitable remaining areas. The adjustment factor will, however, for any given support rate, allocate a multiple of the support rate to more costly and less profitable areas, thereby making them more attractive to serve and increasing the support to such areas.

Given the constraints on length, we provide a short summary in this essay. For a more detailed discussion, we refer the reader to the Adjustment Factor Public Notice (FCC 2020e).

As a robustness check, we estimate an alternative binary choice model where the dependent variable is simply a dummy variable for whether an area is covered by any carrier. However, the additional information that is conveyed by the number of entrants is valuable when estimating block group attractiveness.

For certain purposes, the FCC has previously characterized rural markets as having fewer than 100 people per square mile. (FCC 2004).

If site construction, backhaul, and spectrum acquisition costs do vary by terrain, our estimated factors may not fully capture the effect of terrain on deployment costs.

We chose the county as our geographic unit of analysis because we do not observe the actual geographic service area of each site. The choice of county minimizes the number of sites with coverage that crosses the geographic (county) boundary while still maintaining necessary terrain variation.

The predictions set subscribers per megahertz of deployed spectrum at the 5th percentile to remove all potential capacity constraint issues from our estimated site service areas for each terrain category. Since all adjustment factors are calculated relative to the coverage area of a cell site in flat terrain, only the values of the terrain variable and any variables interacted with terrain affect the estimated adjustment factors. The values of all other variables affect only the level of the predicted coverage area of a cell site in each terrain category.

The algorithm considered the lowest bid in an area to be a tentatively winning bid. The algorithm then ranked the areas in ascending order by their tentatively winning bids on a per-road mile basis. As it went through the ranking, the algorithm awarded subsidies—that were equal to the per-road mile bid times the road mile service requirement—if that item had not been previously assigned and the total requested subsidies did not exceed the Mobility Fund Phase I budget (FCC 2012a).

Prison Policy Initiative, https://​www.​prisonpolicy.​org/​blog/​2019/​02/​11/​kickbacks-and-commissions/​.

Variable royalty and concession payments are widespread in several industries (e.g., publishing); however, the variable commission rates in ICS typically are significantly higher than in other industries. Perhaps in recognition of the distortionary effects of variable commissions, several correctional authorities have limited or done away with variable commissions or commissions of any kind (e.g., correction departments in the states of California, Maryland, and South Carolina).

Historically, these types of calls represent only about 20% of the total volume of inmate calling minutes.

The data in the record indicated that individuals who are incarcerated in prisons typically make fewer calls per year, but that calls are on average of greater duration in prisons than in jails. Prisons typically incarcerate individuals for longer periods than is true for jails, which typically confine individuals who await trial and those serving short sentences.

See GlobalTel*Link v. FCC, 866 F.3d 397 (D.C. Cir. 2017).

We note that, because of the confidential nature of the data that were collected, this subsection is limited to a general discussion of the information we collected and the methodologies we used.

An ICS contract may cover more than one facility, but several features of the data that are less meaningful, or are unavailable, at the facility level.

The CARES Act appropriates $200 million to the Commission “to support efforts of health care providers to address coronavirus by providing telecommunications services, information services, and devices necessary to enable the provision of telehealth services” during the pendency of the COVID-19 pandemic.

This study updated and expanded the Whitacre (2011) study to cover all 50 states and demonstrated substantial benefits.