Capitol Report: ‘Give away $60 billion’ to foreign companies? The ‘America First’ Trump administration faces a tricky 5G choice

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A big step in the U.S. deployment of 5G wireless could take place by year’s end, as the Federal Communications Commission is expected to back a plan from the satellite industry for auctioning off radio spectrum.

A section of spectrum is due to get repurposed for wireless carriers to use for fifth-generation services, and three satellite companies have proposed running an auction for this “C-band” spectrum as they relinquish it. The companies have formed a C-Band Alliance and maintain their plan offers “by far the fastest way” of achieving 5G deployment and competing with other countries — especially China, where a long-awaited 5G service has just rolled out — and yet not disrupting existing U.S. broadcast services.

But some Republican and Democratic lawmakers aren’t buying the C-Band Alliance’s arguments, and they instead want the FCC to run a public auction of the spectrum. Republican Sen. John Kennedy is among the alliance’s most vocal critics on Capitol Hill, and he has lobbied President Donald Trump on the issue. The Louisiana lawmaker has stressed that the C-Band Alliance’s membership consists of two Luxembourg-based companies, Intelsat I, -3.05% and SES SG, +4.79% SESG, +1.21%  , and Canada-based Telesat, whose principal shareholders are Canada’s Public Sector Pension Investment Board and U.S.-based Loral Space & Communications Inc. LORL, +0.55%  

“These three foreign corporations want the FCC to give them the airwaves and let them auction them off, and the foreign companies get to keep the money,” Kennedy said in a speech last month on the Senate floor. “Gosh, I couldn’t ask for something like that with a straight face. But you know what’s even more incredible? The FCC is thinking about doing it.”

Kennedy suggested such a move wouldn’t fit with the Trump administration’s “America First” stance, as he noted the proceeds for the auction are expected to amount to about $60 billion. “Don’t give away $60 billion that belongs to the people of America to two companies in Luxembourg and one other one in Canada,” he said.

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In the House, meanwhile, two Democrats and two Republicans rolled out a bill last month that would require the FCC to run a public auction of C-band spectrum. The C-BAND Act comes from Pennsylvania Democratic Rep. Mike Doyle, California Democratic Rep. Doris Matsui, Ohio Republican Rep. Bill Johnson and Montana GOP Rep. Greg Gianforte.

Much of the C-Band Alliance’s auction plan is “deeply concerning,” said Doyle at a Capitol Hill hearing on the spectrum sale last month. “If we do nothing and tell our constituents that we gave away $60 billion to a handful of foreign satellite companies and left the folks back home high and dry, this is something the American people are never going to forget.”

The C-Band Alliance, for its part, has stressed that it’s not planning to pocket all of the proceeds. It wrote in a letter Thursday to lawmakers that it’s “committed to making a significant contribution to the U.S. Treasury.” Height Capital Markets analysts have estimated the negotiated amount could be a “20% cut, net of clearing costs, for the government.”

The Height analysts also wrote in a recent note that they expect the FCC at its Dec. 12 open meeting to adopt a final order allowing a private auction run by the alliance. Analysts at Beacon Policy Advisors have offered the same prediction, saying in a note that it’s the consensus view. The FCC’s next open meetings are slated for Nov. 22 and Dec. 12.

A recent letter to Kennedy from FCC Chairman Ajit Pai was encouraging for supporters of the C-Band Alliance’s plan, according to Beacon’s analysts. Pai wrote in the letter that the agency’s top priorities in setting up an auction were speed, the amount of spectrum, revenue for the federal government and incumbent protections.

The C-Band Alliance, through 5G Everywhere in America LLC, has disclosed spending $515,000 in the past two years on lobbying regulators and lawmakers on its auction plan. The proposal’s opponents include T-Mobile US Inc. TMUS, -2.53%  and advocacy groups such as Citizens Against Government Waste and Public Knowledge. Meanwhile, AT&T Inc. T, -0.22%  and Verizon Communications Inc. VZ, +0.35%  have signaled some support for the plan, joining the C-Band Alliance in filing a set of principles for the auction with the FCC, and the alliance’s supporters also include groups such as the Competitive Enterprise Institute, R Street Institute and Tech Freedom.

The key feature of the C-Band Alliance’s proposal is that it gets 5G rolled out as quickly as possible while protecting an ecosystem that helps deliver broadcast services to nearly 120 million U.S. homes, a spokesman for the alliance told MarketWatch on Monday in an email. That ecosystem has been occupied for “decades by major U.S. broadcasting players,” and it has been “built out by the satellite companies with the investment of billions of dollars over time,” the spokesman added.

In its letter Thursday to lawmakers, the C-Band Alliance stressed that no other auction plan would free up spectrum for 5G as rapidly.

“Time is of the essence,” the letter said. “Just last week, the three largest Chinese mobile network operators — China Telecom CHA, -2.53%  , China Unicom CHU, -4.09%  and China Mobile CHL, -1.48%  — simultaneously announced the rollout of their 5G networks and launched plans in dozens of cities across China. Losing the global race to 5G to China would bring dire economic and national security consequences and give China the power to unilaterally establish the technological rules of the road for decades to come.”

Read more: China launches massive 5G mobile network