NPRM Proposes Single-Step Auction of TV Broadcast Spectrum
In a proposal that is raising some concerns internally at the FCC, a notice of proposed rulemaking on rules for an incentive auction of broadcast spectrum proposes that a reverse auction, where broadcasters will propose to sell their spectrum or opt to share spectrum, and a forward auction, where the agency will offer the licenses for 4G and LTE, take place concurrently, officials said. The NPRM was circulated by FCC Chairman Julius Genachowski Sept. 7 (CD Sept 10 p1) and it was being reviewed by the various commissioner offices last week. The NPRM is slated to get a vote at the FCC’s Sept. 28 meeting.
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A concurrent auction makes sense, a former FCC official said Friday. “You could see who is selling and who is buying and you could do it all in one process. It’s actually quite elegant, in fact. I think it’s really a great idea.” A single-step auction should not present risks beyond a two-step process, the former official said. “I think the auction experts came up with a pretty ingenious idea, which should shave a lot of time off the process,” the lawyer said. “Broadcasters don’t want to be sitting around having made it clear that they're willing to sell their stations and somehow it gets out. That devalues the station if it’s not sold in the auction."
The proposal for a concurrent auction is raising some red flags at the agency, said an FCC official. “My opinion is that it would be problematic,” the official said. “The uncertainty that it would create would outweigh any potential benefits. … I'm eager to hear more.” But the official also said “it’s not a bad idea” to “tee up” the proposal and seek comments.
Two other proposals in the NPRM are likely to be controversial, officials said. The first addresses how much spectrum the final order will set aside for unlicensed use beyond the TV white spaces. The NPRM proposes to reserve guard bands that would be available for unlicensed use as well as other, unspecified spectrum, officials said. Also potentially controversial is the extent to which the NPRM is tied into a second NPRM on spectrum aggregation, which would raise once again questions about whether some carriers, particularly AT&T and Verizon Wireless, could be excluded from bidding for some of the broadcast spectrum based on their spectrum holdings in a given market.
Another agency official said the NPRM is disappointing in that it doesn’t contain any firm dates for an auction. A senior FCC official said prior to release of the NPRM the target was to hold an auction in 2014 (CD Special Bulletin Sept 7). An auction deadline has been a particular concern of Commissioner Ajit Pai (See related story this issue).
"Generally speaking, this auction is a novel and highly-complex undertaking,” said Jeff Silva, analyst at Medley Global Advisors. “It will be virtually impossible to eliminate all potential risks while attempting to attain rewards in the form of additional spectrum for mobile broadband. It wouldn’t surprise me if other countries learn from the U.S. incentive auction experience and try to emulate it with tweaks here and there down the road."
Some “anxiety” over the structure of the auction is understandable, said Richard Bennett of the Information Technology and Innovation Foundation. “National carriers, especially the smaller ones such as MetroPCS and Leap, may be more likely to bid if they know how much is available in which regions in advance, but it works both ways,” he said. “However the auction is structured, nobody knows what they're going to win. The FCC is very good at designing auctions, so it’s likely that the structure of the auction will be sound."
"While I don’t like the policy choice, the Congressional directive is to maximize auction revenues,” said communications lawyer Andrew Schwartzman. “From an auction-theory standpoint, holding simultaneous auctions is likely to raise more money.”