Two Think Minimum Podcast Transcript
Episode 019: “What’s the Answer to the C-Band Conundrum?”
Recorded on: June 5, 2019
Panel event recorded on Wednesday, June 5, 2019, 12:00 PM to 2:00 PM, at TPI Conference Center, 409 12th Street, SW, Second Floor, Washington, DC 20024. To maximize spectrum’s value, it must be able to transition to new uses as technologies emerge. The C-Band includes 500 MHz of particularly desirable spectrum between 3.7 and 4.2 GHz that is currently allocated for satellite use. Given fast-growing wireless use and emerging 5G technologies, there is widespread agreement that at least some C-Band spectrum should be available for terrestrial uses instead of satellite uses, and that the reallocation should happen as quickly as possible. But there is less agreement on how much to reallocate and how to do it. The largest satellite companies that currently use the band have proposed a private sale. T-Mobile has proposed an incentive auction similar to the one the FCC recently completed for broadcast spectrum. Broadcasters and cable companies, meanwhile, are wary of reallocations that may disrupt the airwaves that they use to distribute programming. This panel will discuss the economic, policy, and practical implications of the competing proposals as well as whether and how the FCC will respond to these options for C-Band reallocation. Panelists included Tim Brennan, Professor, Public Policy and Economics, University of Maryland, Baltimore County; Colleen King, Vice President, Regulatory Affairs, Charter Communications; Patrick McFadden, National Association of Broadcasters, Peter Pitsch, Head of Advocacy & Government Relations, C-Band Alliance; Steve Sharkey, Vice President, Government Affairs, Engineering and Technology Policy, T-Mobile; Scott Wallsten (moderator), President and Senior Fellow, Technology Policy Institute
Peter Pitsch: [The satellite companies are] going to build and deploy as many as a 100,000 filters, so in effect create the same amount of capacity in 300 megahertz that we currently have in 500 megahertz and they can do all that in 36 months. Now, think long and hard about how long it’s likely to take to do any of these other things. So, we have a market test, the companies that have the information and face the opportunity costs of not making the spectrum available, have said, “In 36 months we can make this spectrum available.” That’s why 36 months makes sense.
Scott Wallsten: Steve, the disadvantage of your plan potentially is the delay where the advantage is more spectrum, except I know T-Mobile has also argued that it wouldn’t be a trade off.
Steve Sharkey: So I think that’s exactly right. We don’t have to trade off time to short change ourselves on an inferior outcome. We think the FCC has done incentive auctions now, they know how to do it, they know how to run them. FCC can create an incentive auction structure quickly and run it quickly and that there’ll be some additional time to set that up and to run it. But the backend relocation of our plan will actually ended up clearing that spectrum faster than CBA’s plan.
Because moving to fiber is fast, right? There is abundant fiber out there. If you look at the licensing database, the vast majority of these earth stations are in urban areas, are very close to fiber, if they don’t already have fiber to those facilities now. There’s a lot more rural fiber out there than people give credit for.
Scott Wallsten: Actually just for a second, I think that we haven’t defined “earth stations” for people who don’t know what it does. Tell us what the earth stations are and what the fiber issue is?
Steve Sharkey: The earth stations are the facilities or the stations that actually receive the satellite signal, right? So there’s two parts to this equation: (1) the satellite that is transmitting to earth that’s owned by the satellite companies. Then on the other end, (2) the earth stations are licensed to or registered to the actual users receiving that spectrum. So what we’re talking about then is the earth stations being able to sell their rights, because from our point of view as a wireless carrier, all we care is whether or not we can use that spectrum in an area. The interference is from us [wireless carriers] using it into the earth stations, not into the satellites or even the satellites in the atmosphere.
The satellites can transmit and it doesn’t interfere with that. We just need to clear out the earth stations in that area. If the earth stations in an area agree to sell and move to fiber, we’re free to use that spectrum in that area and that solves that problem with fiber, people are familiar with that, right? So pretty much everybody gets their broadband services.
Scott Wallsten: Does anybody have an estimate of how much it would cost to add fiber to the earth stations?
Steve Sharkey: We’re just completing a study of that, we’ve done some initial, we hope to go to the FCC in the next probably two weeks. But it looks to us like, it’s in the range of $1 billion for all the earth stations. That includes looking at (1) the earth stations that are registered with all the rights are protected, (2) the earth stations that are pending, whether or not they’ve got status. I think people would agree that 33,000 is kind of an outside number of the number of earth stations out there. So looking at getting fiber to all of those earth stations, we think we’d run at about a billion dollars.
Before I yield, I just want to touch on this monopoly point too, because I totally agree with Tim that the C-Band Alliance approach is a monopoly approach, right? It is not a market-based approach.
Peter Pitsch: I really hope we have more than a moment to talk about that.
Scott Wallsten: We’ll all come back to that. Okay. Before we move off of the earth stations and fiber, to Patrick and Colleen, both of your organizations rely on these earth stations. What is your reaction to the fiber cost estimates, how feasible it is, and so on?
Colleen King: I understand when you initially look at this as a video programmer and you say, “we’ve been using C-band forever, why would we want to switch to anything else?” But we’ve been looking at it within Charter much more carefully. If you look at the benefits of fiber and sidewalk capacity, 4k and 8k that are coming, that are really high bandwidth in requirements, fiber is great for that. When we look at this proceeding again, at first the reaction was “no, we don’t want to do anything that disrupts our existing services.” But if you look at the future and where we’re going, it seems like fiber is something that we’re going to want and so this seems like a good opportunity for us to figure out how to make that fiber work. So we need both 5G and to see how fiber can be used within our system to create better services for our customers. And that seems like a good thing for the FCC to be considering right now as part of this proceeding.
Patrick McFadden: So very quickly, if fiber could provide the ubiquitous reliable coverage that the C-band does, we’d already be using it. That’s the answer. It’s not viewed as a viable alternative by our industry.
With respect to the availability of fiber, Steve’s a very smart guy, works with a lot of smart people, I’ll look forward to reviewing his study and we may respond to it. I think it’s interesting that we just broke news that there’s no rural broadband problem because there’s so much rural fiber out there, but the bottom line from our perspective is that we don’t use fiber as a viable alternative to the C-band.
Peter Pitsch: I want to chime in, first off, Patrick’s not alone. The major content owners, Charter initially too, all threw shade on doing fiber. The content companies Disney’s, Fox’s and so on that I mentioned before said there’s not nearly extensive enough fiber deployment to replace nationwide C-band usage especially, but not exclusively in rural areas. This earth station point – I realize TPI may not be the place for a real deep dive on the legal issue, but I just want to have a little bit of time to talk about that – because without that, none of the auction alternatives solve the holdup problem. Therefore are pretty much guaranteed to take a really long time.
Scott Wallsten: Actually can you define the holdup problem?
Peter Pitsch: It’s pretty simple, in the voluntary incentive auction at 600 megahertz, there was actually competition among broadcasters. The Commission had the ability to move folks. An individual broadcaster bidding in the reverse auction faced a certain amount of competition. In this case, as I pointed out, each of the fixed satellite service companies have a non-exclusive right to use the full 500 megahertz.
Anyone of them can holdup a voluntary solution. Intelsat, for example, in an incentive auction could say, “we’re not participating,” and then unless the FCC were proposing to forcibly mandate and move them, there would be no voluntary incentive auction by any stretch of those words.
The only way it gets solved and I already mentioned this is, Steve proposing, “that, oh wait a second, maybe we can pit the earth station folks against the satellite folks.” Because that’s so crucial to this holdout problem, I wanted to just address that very briefly and maybe humorously at the end.
First off, the FCC unequivocally has looked at this and said, “Earth station rights, ie. user rights, are ancillary, not incidental. This is not a surprise because the Act authorizes the FCC to license radio transmissions. Nearly all of the earth station users are not licensed. The reason they were ever registered was to give them some legal status for the existing fixed service folks. From a policy sense, this makes perfect sense.
Think about TV broadcasting. In many markets I imagine, 80% of the viewers in those markets get their broadcasting content through cable or satellite. Now, could an entrepreneurial cable company come into that market and say to the FCC, “we have brought out the remaining 20% of the households, we are going to move them to either satellite or cable and therefore we can now do terrestrial mobile and the broadcaster in that space has no legal rights.” Now, even if a new viewer came on a year later, which by the way, could happen under the incentive auction that Steve is talking about. The answer I think and I’ll go out on a limb here is, I think many of Patrick’s members would like askance on the idea that they could lose their legal status as the licensee, that they would not suffer interference, if 20%, in my hypothetical, of the viewers, no longer care. I think it’s a total nonstarter.
Scott Wallsten: How did you solve the holdup problem?
Peter Pitsch: Aha! We use a market process and you alluded to the fact that I was previously at Intel. As I’m looking at my dear friend Preston Padden in the audience, I first got involved in this when I was at Intel. Intel could care less about the satellite guys. My CBA members won’t like to hear that but that’s true. They wanted spectrum available for 5G as soon as possible, Tim, like yesterday.
They came to us and said, “we need this spectrum” and we said, “it isn’t going happen, look at this: they’ve got influential customers, they have strong legal rights. We had a hard time getting the 28 gigahertz away from them.” Okay. We thought long and hard about it and we said, “wait a second. If we give them flexibility, just as the Wheeler Commission did to XO Communications at 28 gigahertz, by the way, and a Straight Path to 39 gigahertz, we believe that there’s enough win-win opportunity here that they’ll solved the holdup problem. Indeed that’s what’s happened, when Intel went to Intelsat, we persuaded them to do this, then Intelsat that persuaded SES, SES persuaded Utilsat and then Utilsat persuaded Telesat. I think I got that last order right.
But in any event, the win-win opportunity created by the market process because it internalized the importance of speed, lead those companies to solve the holdup problem. None of the other proposals do that with the exception of T-Mobile’s. And as I say, it’s fraught with legal political problems.
Scott Wallsten: Tim, there’s a lot to comment there.
Tim Brennan: Let me just throw in three things; one just skimming the stuff it seemed like one side was claiming monopoly and one side was claiming delay. If there was no dispute about one of those things or the other, we wouldn’t be here. But that’s not to say that I know whether delay is there, or if monopoly is there, I’ll come back to that. It sure would be nice if there was some sort of actual market test is toknow how valuable the spectrum is to know whether it’s 180 megahertz or 500 megahertz or something in between.
I will say that the idea of getting everybody into a room and acehive agreement calling that a market process is something that may come as a surprise to my friends in the Antitrust Division. But be that as it may want to be a little bit fast and loose with the term. But that said, I’m just curious whether in fact this particular spectrum of 3.7-4.2 GHz is a relevant market. I don’t know that, I don’t know what it is. I will say that when I was at the FCC and they issued the Mobile Spectrum Holdings Order, they went to trouble to say that spectrum below one gigahertz needed to be treated differently. I kept saying that must mean it’s a separate market and they refused to call it a separate market for reasons which we remain a mystery to me.
So I’m not exactly sure what the story is here. It is quite possible in principle that that the C-Band Alliance has no incentive to withhold anything because they’re only part of a relevant market or maybe all of them are a relevant market. I simply don’t know. I would be very curious as to whether there’s actual evidence on that in one or the other.
Scott Wallsten: Steve could take that question.
Steve Sharkey: The C-Band Alliance process is non-market process, it is a windfall process. They’ve looked at it, they have been underutilizing this spectrum for many years and can free up unused spectrum and sell it at an immense profit that’s worth many times the value of all of those companies put together. That’s what they’re going for. At the same time, they see the opportunity to just keep their service completely intact while reaping this windfall.
There is no market test as a result of this. To Tim’s point, the only way you’re going to have a market test is to have something like the incentive auction that we’ve proposed where you’ve got competing interests using the market to figure out the value of that spectrum and looking at alternatives for delivery of services. Yes, a lot of the interests have said cheap fiber is not a great alternative for us because right now they have access to an underpriced service because of excess capacity. We’re subsidizing these satellite companies and the provision of those services by giving them and allowing them to hang on to that spectrum. Whether or not we can continue to allow that to happen or we have a true market process for freeing up and figuring out how much of the spectrum should be used for terrestrial services, how much should be used for satellite services.
We’re talking a lot about market process, I think that Colleen’s point earlier, the FCC’s processes, particularly incentive auction are new mechanisms for the FCC. In the past when we’ve looked at it, the FCC has made decisions about freeing up spectrum and alternative ways for delivering services and whether or not those services can be delivered while freeing up spectrum. That’s certainly the case here. The FCC would be well within their rights to take a look at this and make those judgments. We do it with the Department of Defense services, we’ve done it before with broadcasters where broadcaster sused to have 12 megahertz of spectrum, right? It was reduced down to 6 megahertz as a more efficient technology came along.
The FCC certainly has the tools to look at it and take that kind of approach as well. I do want to touch on Peter’s point that as he phrases it, the FCC has unequivocally ruled on the rights of those earth station licensees. That is not true at all. The FCC just put out a public notice that’s out for comment now to relook at this. They raised in the original NPRM, the prospect of the earth station licensees being part of this process.
They’re registered now, not for the convenience of the satellite industry but more the convenience of the FCC. It wasn’t that long ago that they were full licensees and the FCC has gradually over the years reduced the regulatory burden on those earth stations, so that they could more efficiently and easily get the protection rights, without having to go through the full licensing process. I think it’s clear that the process that we’ve put out is actually the legal process and one that is the true market test.
Patrick McFadden: If I can just jump in really quickly on one of the many issues that we’ve now teed up – the amount of spectrum to be repurposed. I think from our perspective, we just want to emphasize that this is not a negotiation like buying a new car, where I say 400, you say 200 and how about we settle on $300 and I’ll throw in the underbody treatment.
The amount of spectrum is reallocated from our perspective should be no more than the amount that allows the C-band to continue to serve its irreplaceable role as part of the content distribution architecture that hundreds of millions of Americans rely on whenever they watch television or listen to the radio.
Colleen King: We agree with almost all of that. We think that this is a very important spectrum, right? Our customers value the service they get. So we agree that there should be nothing done to disrupt any of that. I think that the FCC needs to take a look at it based on importance of 5G and importance of these video services.
What is the right test? We don’t think that that the satellite companies should be deciding that. We think that they would need to look at what is the best use of spectrum. As part of that, obviously they need to protect existing services and find the best transition method and make sure it’s reliable. We don’t disagree with that. We don’t want to receive calls from our customers that there’s a problem either.
We agree that we need to be protecting that, but we also think that it should be the FCC considering all the different arguments and not just agreeing with what the satellite companies have decided is the right amount for 5G.
Tim Brennan: Just a couple of quick things. I don’t care if someone makes a whole lot of money from selling this stuff. I care if less than the competitive or less than the efficient supply is made available, but if in doing so, people make a “windfall,” that’s fine, that’s the market signal. That gets to this other claim about what’s “irreplaceable.” The market will tell you whether it’s irreplaceable or not. If people bid an infinite amount then I guess it’s irreplaceable. If they don’t, then it’s what it’s worth and maybe there are other ways to economize on its use. Rather than just asserting irreplaceability and that’s again what the market is designed to do. Again, that’s all to say that whether auctions work and are easy to design, how effective they are, and that sort of thing, is something that the auction technicians can discuss. But doing things like asserting that certain things are irreplaceable is probably not all that helpful.
Peter Pitsch: But the important point here about the CBA approach is that in fact [satellite companies] do bear the opportunity costs of not clearing the spectrum. We simultaneously hear that there’s this huge amount of money to be made, but somehow economically rational satellite companies are not making as much available. Indeed, what we have said is that within three years, we can make far faster than any of the alternatives mind you, within three years we can make 180 megahertz available, but as new compression technologies and other things come online that are not proven now, we are very open to doing more and it will likely happen.
The market power issue that the professor correctly points out, is the key issue here. Because CBA has every reason to make the spectrum available if it makes sense. Our economist, Coleman Bazelon, many you know him, he’s an institution on spectrum economic issues, looked at this and he said the relevant market includes 900 megahertz of mobile spectrum generally.
Generally economists look askance on calling cherry pie filling, a relevant market. As valuable as this is for 5G…
Scott Wallsten: The relevant market is 900 megahertz, in which bands?
Peter Pitsch: They’re mostly existing mobile bands. I can’t tell you them right off the top of my head. [The relevant market analysis] ignores many existing mobile bands, it ignores all millimeter wave bands and it’s widely accepted estimate of demand elasticity and shows pretty straightforwardly that it would be economically irrational for CBA to withhold 100 megahertz, say from 200 when it should be 300. If in fact that were efficient, they would lose money doing that. Interestingly, I think the real fear of a lot of people is that the auction itself may not be sufficiently competitive and therefore may undercut the incentives for the C-Band Alliance to go forward. But if the FCC adopts a competitive auction design, that problem should be pretty straightforwardly handled.
Steve Sharkey: One thing that a monopolist does is, control supply. So if you’ve got 500 megahertz and can sell a portion it now at a very high cost and then sell some more later at a high cost, that may look better to you than selling a lot of it at a lower cost. To the extent that the CBA proposal undersupplies the market by providing only 180 megahertz, you’d expect those prices to be extremely high and competition to be great around that and keep the price in return for the satellite company is very high.
Peter Pitsch: My quick answer is, if the relevant market is 900 megahertz and you accept the widely-accepted demand elasticity, the arithmetic doesn’t work.
Steve Sharkey: There is not 900 megahertz out there.
Peter Pitsch: I’m happy to debate the ins and outs to that but…
Scott Wallsten: We should take some questions from the audience. Let me ask one more thing and it’s a little bit of an unfair question. I understand C-Band Alliance’s objective should be to maximize its total returns, whether that’s from selling spectrum and from its current operations. What is T-Mobile’s objective? Because you would think T-Mobile could also participate in the private sale. Is it that the T-Mobile thinks that it would potentially have access to more spectrum at a lower price if it were an auction? Because your objective is to get a spectrum, right?
Steve Sharkey: So we’ve been buying spectrum for a long time, right? We go head to head with AT&T and Verizon in a lot of both public auctions and private auctions. I’ll tell you, they’ve got a lot more resources than we do. In an undersupplied market, they have got resources and will have an advantage that we don’t have.
Peter Pitsch: Steve and I have been friends for 30 years. God willing we’ll be friends 30 years from now, that might be pushing it in my case. The complexity and difficulty surrounding these alternatives means that they’re likely to take a really long time. If you look at the auction proceedings from 2001 to date, from the completion of an NPRM to the completion of the auction is two years.
We’re talking 2022 and if you look at the complexity of the things that they’re proposing to put in this auction, it would be way beyond that. Verizon and AT&T, the last time I looked, have a lot of really capable lawyers. They really want this spectrum quickly and they think that this approach will do it.
Scott Wallsten: There was a Twitter question and it’s about the windfalls to Tim so you can elaborate on windfalls. Question: If Professor Brennan does not care about the dollar that’s being made, how does he suspect an incentive to reach a solution that can be achieved?
Tim Brennan: I obviously don’t understand the question. If I have something that is worth $50 to somebody I can sell it for $50. If I bought it for $49 and make a dollar, that’s fine. If I bought it for 50 cents to make $49.50, that’s fine. As long as it’s going to the highest value use that’s fine. If someone wants to tax the windfall profits, that’s fine. If someone’s got a wealth distribution issue with something that they want to, if you like that, that’s fine. But if the question is efficient allocation of resources in general spectrum review in particular, whether someone makes money getting it to a more highly valued use, that’s a virtue of the system, not a problem with the system.
Scott Wallsten: Let me I think another way to say, is that windfalls can make us really upset. But we should allow them because they may be very efficient.
Tim Brennan: That’s right. Then if you want a tax windfalls that’s fine.
Scott Wallsten: Questions?
Audience Question: What is the role that Congress is going to play in all this? To what extent are your positions formed based on how Congress will feel about where the money goes in terms of windfall, how that’s going affect their efficiency, the race for 5G and all that. What are you guys thinking about when it comes to all this?
Steve Sharkey: I’m happy to jump in. I don’t think we’re really guided by what Congress is going to do here. I think they’ll take their own actions. In general, Congress has wanted to recognize revenue from spectrum auctions, right? They’ve wanted some return for the public as a result of that. From our point of view, it doesn’t really matter to us where the money goes. I’m arguing here against a windfall, but frankly that not such a driver for us. We’re just interested in getting that spectrum and getting as much of it freed up as possible. It’s not really a windfall per se that we have an issue with. But I think Congress like you said earlier, a number of people in Congress are looking at this now, and saying “well wait a minute, why should those companies just getting this windfall? And why shouldn’t the public get some return?” I have no doubt that they’ll have a role to play here.
Peter Pitsch: We’re very interested in what Congress thinks on this. Chairman Wicker and Subcommittee Chairman Thune have written to the FCC urging them to move quickly on this. They didn’t take a position by the way on a particular approach, they were neutral on that, but they emphasized the importance of speed.
I really want to emphasize this point. Our approach internalizes that, right? You have a market process that places a weight on the value of getting the spectrum in the market. The other players involved don’t bear any economic consequences from the capital markets for this happening or not happening.
We are very interested in making this happen. I said how crucial it is for 5G. I want to emphasize this point about security. There’s a lot of concern today about the security of the 5G ecosystem. If the FCC makes this spectrum available quickly, the secure 5G vendor community is going to be enormously benefited, because the major carriers, Steve’s [T-Mobile] and AT&T and Verizon and Sprint, do not use non-secure vendors. I won’t name names, but you know who I’m talking about. Probably the single best thing you can do to foster that 5G ecosystem of secure vendors is to get the spectrum in the marketplace quickly for everyone.
Colleen King: I don’t want to speak for Congress because my Hill team will just get mad at me, but I do want comment on the speed question that Peter keeps bringing up and this is really the fastest way to go. We have some concerns with that argument. First of all, as we’ve discussed before, the FCC is expert in what they do. If we’re talking about a process, it’s going to make this spectrum available, transparently, with all the legal rights and requirements that come with that, that we’ve had throughout spectrum policy history, there’s a lot of steps that go into that.
We have an FCC that’s very good at doing that. It’s done that. The idea that we would let some private companies do that, I’m sure they have lots of auction experts, but there are a lot of different steps. We don’t think first of all that the FCC have the authority to do that. The Communications Act requires competitive bidding process. Auctions are hard, they are complex, we don’t disagree with that. We think that the FCC has authority to do that and prevent any kind of legal challenges to the auction process or whatever process you come up with because they’re going to be using their system and they’re doing it under their own authority.
Scott Wallsten: Are you saying that Congress should keep its nose out of it?
Colleen King: No, I would not say that.
Peter Pitsch: The competitive processes is only required where there is mutual exclusivity, it is not going exist here. The C-Band Alliance has made a lot of efforts to put things in the record. If you Google our band plan “CBA band plan” you’ll see the trade press. It’s a very competition-friendly band plan. The auction design is being vetted with lots of different companies, some of them are at this table. We are going to make a very transparent process. The Commission throughout the process will be approving the design, the conduct of the auction, the grant of the licenses ultimately will all be approved by the FCC. The auction we’re going to conduct will all be on the record. It’s going a lot like an FCC auction except we’re going to do it three years faster.
Question: This is a specific question about timing. The proposal as generally understood, the sale takes place 36 months after an FCC order. There’s a recent FCC filing that say, we’re going to do this in 2 years in the top 15 markets in 18 months and then everybody else after 36 months. I Just wanted to understand is that the intended scope now and how much longer after 36 month will those others go online?
Peter Pitsch: Well hopefully all of our pronouncements have been consistent on this but let me speak truth. We have said that we will clear all 180 megahertz in 36 months. We have also said in the band plan that because we don’t need satellites for clearing the first 60 with the guard band, we can do that in 18 months. Now the actual auction, if the FCC were to rule in August or September, our auction could likely occur early 2020. The likely winners would be known in 2020, early 2020. They would have to go through this FCC process that I’ve been talking about. But the economic reality is, that they will all start calling up Nokia and Qualcomm and Ericsson and others and saying, “hey, we’re likely going to be deploying in 18 and 36 months. What can you do for us yesterday?”
Steve Sharkey: I would like to agree with Colleen on this one though, that an FCC-run auction make sense here, right? There’s a reason that they take some time, it is not just the auction structure that they deal with, they end up getting into competitive issues, whether it’s bidding credits, license sizes, payment requirements, plans and timing can all impact the auction and the competitive nature of that auction. One of the things that takes time, is parties going back to the FCC and fighting hard on a lot of those issues. You lose all of that regulatory oversight by just going and outsourcing the auction process to a third party.
Scott Wallsten: Is all of this the result of poorly defined property rights? T-Mobile and every wireless carrier is involved in lots of secondary trades in both directions, presumably, and we obviously don’t have this kind of a debate over every sale. Is that the root of the controversy or is there something else?
Steve Sharkey: We do a lot of secondary transactions and if the C-Band Alliance was trying to sell something that they owned, I think there’ll be no controversy here, right? The fact is they’re trying to sell something that they don’t own, that don’t exist right now, which is mobile broadband rights to this spectrum. Right now it’s a satellite band and that’s what they’ve got licenses for and what they’re trying to sell is mobile terrestrial rights. So that’s what separates this from a normal secondary market transactions.
Question: It seems as though 300 megahertz seems to be the magic number. If the sale did stay on the private side, the CBA would run with this on the whole spectrum, is there any conversation or ability to go to some of these organizations privately and try to have them clear the CBA share proceeds with them? If you didn’t deal with the FCC at all and you just keep this private, why hasn’t there been more discussion with earth stations? I’m sort of hearing they’re not willing to do it, it hasn’t been approached? Why can’t that be in place to gets more stuff?
Peter Pitsch: So in the first 200 megahertz, basically the earth station folks just have to show up, right? They’re going to get a filter installed, at our expense, and they will be kept whole. Your question though is a good one because for spectrum beyond the initial 200 and particularly if you were to use compression technology for example to solve the problem then, the earth station folks, the content folks, would be much more intrusive. Then there would be a bunch of stronger reason for an incentive situation to be developed there. But the point we’re making now is, we’re keeping those existing customers, including earth station folks completely whole. I’m not going to put words in Patrick’s mouth, but certainly in dealing with the content companies and they’re on record, they’ve made very detailed requests and others have. We basically have said yes to all of them.
Question: Steve, why do you think that the FCC incentive auction would yield more than 180 or 200 megahertz? Lots of the FCC auctions yielded less than originally anticipated?
Steve Sharkey: Because when you look at how relatively expensive it is to move these systems to something like fiber versus the value of that spectrum, and those earth stations recouping their money, then we think we’ll create a lot more than 180 and potentially up to the full 500.
When you look at the value and certainly you would want to put the value on what we would say the spectrum is worth, but there are a range of estimates for $40 billion and up for this spectrum. It’s a lot of money. When you look at the costs of $1 billion to run fiber to all these earth stations, that goes a long the way.