FCC Flexibility Critical to Successful Incentive Auctions, Kaplan Says

The FCC has considerable expertise on spectrum issues, Kaplan said. “We are the expert agency. … The people at the FCC really know what they're doing. The engineers have been there a lot longer than I have. … The more flexibility we get the better.” By giving the FCC freedom in how it structures auctions, the agency would have more ability to keep up with change. “An auction is not a process that takes one day,” he said. “It’s many times a multi-month process.”

The “worst outcome” would be for Congress to approve legislation giving the FCC incentive auction authority but make the wrong policy calls “and then we conduct an auction that fails,” Kaplan said. “That sets us back many, many, many years.” Giving the FCC as much flexibility as possible “is the best way to ensure that we get the most money for the Treasury” and also ensure industry competition, he said. “You really want to make sure that there are enough players to put [spectrum] in the right hands for the right reasons."

The FCC also must build flexibility into its rules, Kaplan said. Today, the focus is on mobile broadband, he said. “We don’t know about the technology of tomorrow and what’s down the road.” If rules are flexible “we don’t have to make a constant five-year decision” about how spectrum should be used, he said. He called incentive auctions a “short-term step we can do today to move the ball forward” that “also doesn’t, I think, undercut our long-term goals."

The National Broadband Plan was critical in putting “spectrum back on the map,” Kaplan said. “Average folks who really don’t deal with this issue very often are thinking about it. It’s in front of them,” he said. “It’s great that on the Hill, in Congress, they're debating [spectrum] issues. They're thinking about the issues."

Blair Levin, architect of the FCC broadband plan, said he’s pleased that incentive auctions appear likely to take place, but concerned about how the role of the FCC as an expert agency “appears to be continually undercut” by Congress. Legislation giving the FCC authority for incentive auctions need only be one sentence long, he said. “The FCC shall have authority to share proceeds with any spectrum licensee who wishes to contribute … spectrum,” he said. “Every sentence that Congress has added is in my view counterproductive. I'm not a purist. I understand politics. I understand they have to add some language. … Every sentence that is added is not designed to improve the likelihood of the success of the spectrum auction.” The FCC has on its staff the leading auction experts in the world and has a proven track record on holding spectrum auctions, Levin said. “Give them the freedom to just go out and do that."

"I think that the language we have added does add to the incentive auction legislation,” countered David Redl, counsel to the House Commerce Committee’s Republican majority. “There’s some important distinctions that both the Senate bill and the House Republicans and the House Democrats have added.” He highlighted the insistence by House Republicans that there be pressure on licensees to sell spectrum “to make sure [an auction] doesn’t become simply a way for licensees to extract the most possible from their position.” It’s important to note that the debate has evolved beyond the question of whether the FCC should have authority to conduct incentive auctions, Redl said: “It’s now how do we do incentive auctions and how do we make this a reality.”

House Republicans see no reason to make changes on the use of the 700 MHz D-block, as proposed by the White House and in the key Senate bill (S-911), which would give public safety the band to add to the 24 MHz of 700 MHz spectrum they already have, Redl said. “This has been taken care of,” he said. “In 2005 this was decided -- D-block should be auctioned for commercial purposes.” The big lesson from last month’s Virginia earthquake is that carriers need more spectrum, not public safety, he said. “Commercial users were enraged that they could not get their calls through after the earthquake.” In the House, there have been continuing negotiations trying to bridge the Democratic and Republican drafts on spectrum legislation, he said. “We are making progress. We are moving forward.” Redl said he wanted to make clear that House Republicans did not intend to indicate in their draft spectrum bill that there should not be spectrum allocated for unlicensed use, a concern raised by several high-tech companies. “That’s not what we meant at the staff level when we wrote the draft,” he said. “Our concern at the staff level is with allocating spectrum for unlicensed as a primary use. The vast majority of the unlicensed spectrum now is a secondary use of some sort."

Redl conceded that the FCC does know how to hold auctions and has brought in lots of money for the Treasury as a result of its auction authority. “I don’t think the Hill disagrees with [the FCC’s] ability to get it done,” he said. “But it is a political process and there are political realities to be dealt with on Capitol Hill and at the end of the day the FCC derives it’s policymaking authority from the Congress and members have not forgotten that."

The spectrum discussion is “not a one time discussion,” said Larry Downes of TechFreedom. “Even if we do have the authority to do the voluntary incentive auctions and we reallocate much of the spectrum currently assigned to broadcasters, that’s not going to solve a long term problem,” Downes said. “The accelerating pace of change of this technology will in fact make it a more difficult problem going forward rather than one that’s going to get easier.”

The accelerating demand for spectrum raises fundamental questions about how spectrum is allocated in the U.S., Downes said. “I don’t suggest any criticism here,” he said. “I don’t think this was anything anybody would have predicted was going to happen even 10, 12, 15 years ago.” A broadcast spectrum auction will solve “the immediate problem,” he said, “but long term it’s only the beginning of a much more complicated and difficult process."

ITIF released a paper Tuesday making a strong pitch for incentive auctions (http://xrl.us/bmda32), arguing that TV broadcasters who don’t participate in an auction should be “reassigned to digital TV channels shared with other non-participating broadcasters.” The FCC should also review all spectrum licenses every five to 10 years “for the ultimate deployment of Dynamic Spectrum Allocation systems when practical and beneficial."

"Technology never stops progressing,” the paper contends. “We're now in a situation where many of the initial assignments of spectrum are obsolete, so the task of spectrum regulation has become one of reassigning already utilized spectrum to new uses that have more social and economic utility than old ones. Spectrum incentive auctions are a quick and practical means of reassigning spectrum, so it’s important that Congress expeditiously grants the FCC liberal authority to conduct them.” The paper was written by ITIF Senior Fellow Richard Bennett.