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FCC Plan for 5G Spectrum Meets New Hurdle in Cable Lawsuit

Aug. 27, 2020, 5:28 PM

Hundreds of small cable companies filed a lawsuit challenging a Federal Communications Commission push to repurpose a chunk of airwaves crucial for companies like AT&T Inc. and Verizon Communications Inc. to develop 5G networks.

ACA Connects, a trade group representing more than 700 small and medium-sized cable companies, on Thursday filed a petition in the U.S. Court of Appeals for the District of Columbia Circuit challenging the agency’s plan for reimbursing them for moving off the airwaves.

The commission plans to hold a December auction of a swath of spectrum, known as the C-band, currently used by satellite companies including Intelsat S.A. that wireless carriers want to use to provide lightning-fast mobile data speeds across the country.

“Small, rural cable operators have never called for this C-band transition and have asked only that their businesses be treated with dignity and respect,” Ross Lieberman, ACA Connects’ senior vice president of government affairs, said in an email.

The petition asks the court to issue a writ of mandamus to stay a Sept. 14 deadline for cable companies to decide between two reimbursement plans. ACA Connects, whose members include Poplar Bluff, Mo.-based BOYCOM Cablevision Inc. and Nebraska-based Great Plains Communications, filed the petition after the FCC failed to grant a request to indefinitely postpone the deadline.

Such a legal challenge is unlikely to delay the auction, said Blair Levin, who was an FCC official during the Obama administration.

“Courts are really going to be reluctant to stay the order in a way that delays the auction,” Levin said. “Courts tend to give a lot of deference to the FCC, particularly on questions of spectrum and auctions.”

Still, wireless carriers and satellite companies have warned that postponing the Sept. 14 deadline may delay putting the spectrum into the hands of mobile carriers after the auction.

Intelsat and other satellite companies are to receive $9.7 billion if they speed up the spectrum transfer. They’re worried the cable companies’ opposition could slow the transition.

Cable companies are attempting “to throw sand in the gears of the transition at a critical point where satellite operators such as Intelsat are well along in this extremely time sensitive project,” Intelsat said in an FCC filing.

Satellite companies currently use the airwaves to distribute TV and radio shows to more than 100 million U.S. households. The agency plans to move that programming to a smaller part of the band to make room for 5G services and intends to reimburse existing users of the band for the trouble of modifying their operations.

Wireless industry trade group CTIA says ACA Connects just wants to increase compensation for its members, even though it could slow the C-band transition.

“ACA’s sole reason for throwing this monkey wrench into the C-band transition schedule is to add more money to the lump-sum payment available to its members,” CTIA said in an FCC filing.

Lump Sum

Under the first reimbursement option the FCC has proposed, C-band satellite operators like Intelsat would take the lead in moving their programming to a smaller part of the band, and the cable companies would be reimbursed for any modification costs.

The second option, which gives the cable companies more flexibility, would give them a lump-sum payment, determined by a methodology, that would cover the costs for them to modify their systems themselves, instead of leaving the transition up to satellite companies.

The lump-sum payment earlier this year proved appealing to some small cable providers that were looking for funding to build out fiber networks. But that early optimism dissipated July 30, when the FCC’s Wireless Telecommunications Bureau released the methodology for calculating the lump-sum payment amounts.

ACA Connects says the methodology calculates a lump sum far below what small cable operators should be owed because it excludes the cost of replacing equipment capable of receiving higher compressed satellite signals post-transition. Excluding the cost of the equipment, called integrated receiver/decoders, lowers the lump-sum amount per C-band Earth station by about half, or $280,000, according to ACA Connects.

That’s a lot of money for local cable companies that serve rural and smaller markets and could provide faster and more reliable TV and broadband services by deploying fiber. ACA Connects’ members operate in every state and provide TV, internet, and digital telephone services to about 11 million households.

Smaller cable companies “likely will be forced to decline the lump-sum option, and permanently forgo the benefits of potentially more efficient fiber upgrades” without integrated receiver/decoder costs being reimbursed, ACA Connects said in an FCC filing.

Meanwhile, content companies including The Walt Disney Co., ViacomCBS Inc.,and the National Association of Broadcasters, said in an FCC filing that small cable operators shouldn’t be compensated for compression equipment costs because they and satellite operators work together on “virtually every stage of the compression upgrade process"—not cable operators.

Lawsuit Looming

The cable industry group, in FCC filings, argues that the agency’s low lump-sum amount violates the Administrative Procedure Act and effectively undermines the flexibility the FCC sought to give small cable operators to modify their operations as they see fit.

ACA Connects also says the FCC’s wireless bureau improperly denied its requests to meet with a third-party contractor that aided the agency in estimating reimbursement costs, and hasn’t disclosed its methodology for determining the lump- sum payment amount.

“The decision harms these small businesses, and they are left no choice but to seek a cure,” Lieberman said.

To contact the reporter on this story: Jon Reid in Washington at jreid@bloomberglaw.com

To contact the editor responsible for this story: John Hughes at jhughes@bloomberglaw.com; Keith Perine at kperine@bloomberglaw.com

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