Rosenworcel Seeks Support for AWS-3 Auction Procedures

WASHINGTON, Jan. 6, 2025 – The head of the Federal Communications Commission circulated Monday a proposal that would pave the way for the agency to bring in billions through a spectrum auction to get Chinese gear out of rural networks.

The auction, limited to the AWS-3 band used by mobile carriers, will be used to fund the agency’s Rip and Replace program, as it’s known. The effort to get aging and potentially insecure network gear from blacklisted Chinese firms out of rural networks was underfunded by about $3 billion in 2021.

FCC Chairwoman Jessica Rosenworcel and industry groups had been pushing lawmakers hard to come up with the rest of that money, as the prorated support has made for slow going and pushed deadlines. They likely got a tailwind when news of the Salt Typhoon hack broke and China-backed hackers were found to have infiltrated the major American telecom carriers.

The auction will pay back a short term loan from the Treasury, a process provided for by the sweeping defense policy bill signed into law Dec. 23. Of the 126 providers participating in Rip and Replace, 36 say they’re done with the job and about half report being unable to complete the work without extra cash.

“With ‘Salt Typhoon’ and other recent incidents, we are all acutely aware of the risk posed by Chinese hackers and intelligence services to our privacy, economy, and security,” Rosenworcel said in a statement. “Today’s proposal is a critical step toward finally filling the shortfall in the Rip and Replace program.  I am confident that the FCC’s world-leading and award-winning auction team will meet this important moment.”

The notice of proposed rulemaking being circulated would take public comments on procedures for auctioning the band, which include updates to the ones already in place. The agency sold the same airwaves off in 2014, but Dish ultimately handed back some of the licenses it won. 

The company had partnerships with two smaller firms that were eligible for a discount, and the FCC found Dish had de facto control of the licenses those two companies won. The agency nullified the discount and the companies defaulted on licenses worth the extra amount they owed, about $3.4 billion.

Dish would actually be on the hook for default payments if the reauction fetches less than what they paid for the licenses, but analysts at New Street Research expect the auction to clear that amount. They noted the major wireless carriers—AT&T, Verizon, T-Mobile, and Dish—had all deployed adjacent spectrum and wouldn’t incur extra deployment costs putting AWS-3 to work.

“We have argued that there is no such thing as too much spectrum; spectrum represents future market share; carriers always want more,” New Street Analyst Jonathan Chaplin wrote in an investor note last month. “We assume all four will bid on all of the licenses.”

Most of the value, analysts say, is in airwaves covering Boston, Chicago, and New York City.

The proposal would need to be approved by commissioners to get the ball rolling. Rosenworcel is stepping down on Jan. 20, but incoming GOP Chairman Brendan Carr has also been hawkish on China and eager to get spectrum out the door.

Rosenworcel also called on Congress to restore the agency’s ability to auction off airwaves as it sees fit, which expired for the first time in March 2023. There’s been talk among industry watchers of auction authority being included in the budget reconciliation package this year.