By David Shepardson
WASHINGTON (Reuters) - Federal Communications Commission Chairman Ajit Pai said on Monday he backs a public auction to free up spectrum in a key band currently used for delivering video content for next-generation 5G wireless networks, an announcement that sent a major satellite company's shares down 40%.
The C-band is a block of spectrum used by satellite company customers to deliver video and radio programming to 120 million U.S. households and is seen as the most likely short-term source of available spectrum for 5G use. Experts believe the C-band spectrum can be divided to maintain existing service and deliver 5G service.
Pai said he supports a public auction of 280 megahertz of the C-band. "I'm confident they'll quickly conduct a public auction that will give everyone a fair chance to compete for this #5G spectrum, while preserving availability of the upper 200 MHz of the band for continued delivery of programming," he wrote on Twitter.
Major satellite service providers including Intelsat SA, Telesat and SES SA, which hold the existing C-band licenses, have proposed selling the spectrum privately to wireless carriers, arguing a private sale would make the spectrum available for 5G faster. But that has drawn criticism from some U.S. lawmakers.
Shares in Intelsat fell 40% in extremely heavy trading in New York to $8.03.
The satellite firms said in a statement that Pai's proposal failed to address "the critical involvement of the incumbent satellite operators in executing the complex task of reconfiguring and transitioning their networks."
The group added that it would "continue to work cooperatively with the FCC to develop an effective alternative plan and achieve the best outcome for the American public while protecting the interests of our users and the rights of our companies.”
FCC officials told reporters on a conference call Pai plans to bring his auction proposal before the commission for a vote early next year.
An FCC official also confirmed that, after Republican Senator John Kennedy raised the C-band issue with President Donald Trump, Trump called Pai on Oct. 30 "to find out what the issue was about."
Because Trump did not express a view on how the spectrum should be sold, the White House did not need to file a public description of the conversation and no one at the White House ever expressed a view, the FCC official said. The White House declined to comment.
Mid-band spectrum is critical for 5G because it offers "both geographic coverage and the capacity to transmit large amounts of data — a combination that is appealing to entrepreneurs and wireless consumers alike," Pai said in a letter to lawmakers.
He said the FCC "must make C-band spectrum available for 5G quickly," adding that he proposed "preserving the availability of the upper 200 megahertz of this band for the continued delivery of programming."
Verizon Communications Inc (NYSE:VZ) said Monday that "any auction should include appropriate incentives and protections to ensure it could be put to use in short order.
"China and other countries have already provided huge blocks of mid-band spectrum to carriers for 5G, and there is a risk that those countries will become the hub of 5G innovation and investment if the US fails to act promptly to do the same," Verizon said.
AT&T Inc (NYSE:T) said earlier this month a private auction could lead to extensive legal challenges and said the FCC would have to be closely involved in developing and supervising the auction.
Two Republican senators said on Monday they had introduced legislation to require that the spectrum auction begin before the end of 2020, with at least 50% of the value of auction revenues to be reserved for U.S. taxpayers.