FCC awards well above CBA expectations

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FCC Chairman Ajit Pai was generous in his treatment of the C-Band Alliance, and his decision has won approval from the Alliance, the 5G Action Now lobby group and a host of investment analysts.

Chairman Pai’s plan would repurpose most of the C-band for 5G deployment while ensuring current users of the spectrum could continue to provide their services. The proposed rules would clear the lower 280 megahertz of the C-band (3.7-3.98 GHz) and make it available for flexible use, including 5G. The 20 megahertz above that (3.98-4 GHz) would serve as a guard band. And existing satellite operations would be repacked into the upper 200 megahertz of the band (4.0-4.2 GHz). Incumbent satellite operators in the C-band have told the Commission that the upper 200 megahertz of the band would be sufficient for them to continue providing their current services to customers.

Pai said: “It’s only fair that every single reasonable cost should be covered. So, under my draft rules, the winning bidders in the C-band auction would be required to reimburse satellite operators for their reasonable relocation costs.”

Chairman Pai was thanked for his “hard work” by the Alliance on behalf of the satellite industry, which will receive a total of $9.7 billion by way of incentive payments plus another $3.5-$5.2 billion for the actual relocation and conversion work. These payments are well ahead of recent expectations.

The FCC, however, wants its pound of flesh. It wants the first 100 MHz of C-band spectrum cleared and ready for use by September 2021, and the second batch of 180 MHz cleared by September 2024.

Specifically, the FCC says it wants:

(1) clearing 120 megahertz (3.7-3.82 GHz) by September 2021 in 46 of the nation’s top 50 Partial Economic Areas; and

(2) clearing the remaining 180 megahertz (3.82-4.0 GHz) in those areas as well as all 300 megahertz (3.7-4.0 GHz) in the rest of the continental United States by September 2023.

The FCC will open a public auction on December 8th this year.

In a statement, the CBA said: “The imminent issuance of the draft order reflects the tireless efforts of many over the past several years to ensure that this critical spectrum comes to market safely, quickly, and efficiently. Today’s comments by Chairman Pai are a significant development in this important proceeding. We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context.”

Intelsat CEO Steve Spengler said: “The issuance of the draft order represents a significant milestone in a process that we began in 2017. We look forward to reviewing the draft order, once issued, to place Chairman Pai’s comments in full context. We note with appreciation the hard work of all stakeholders to get to this juncture, and the work to come leading up to the Commission’s vote on February 28, 2020.”

The full FCC plan will be released on February 7th, and will be voted on at the Commission’s next full meeting on February 28th.

What is not yet clear is how the FCC will apportion the $9.87 billion incentive payment. Investment bank Exane/BNPP said that overall this was good news for satellite operators: “We update our C-band valuation and see €6.2 per share (vs. €3.2 before) of C band value for SES. We see €2.9ps (vs. €1.5) for Eutelsat. We assume a 21 percent and 25 percent tax charge on the C-band payment for SES and Eutelsat respectively. Our views on the core business have not changed. C-band leads us to raise our target prices on SES to €16 (vs. €14) and on Eutelsat (€14 vs. €13). We continue to believe that SES core business is likely to see better trends than Eutelsat. SES has also more C-band exposure than its peer. It remains our preferred play amongst satellite operators,” said the bank.

 

 


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