Incentive Auction Commenters Disagree on Key Policy Disputes Before Commission

The FCC has logged more than 200 incentive auction comments in response to a Sept. 28 rulemaking. The most important single filing, several industry officials said, was a joint letter by NAB, wireless carriers, Qualcomm and Intel released Thursday, which laid out concerns with the preferred band plan’s proposal of putting some broadcasters in the “duplexer gap,” surrounded by wireless operations (CD Jan 25 p3). But most of the comments touch on arguments at the FCC that are already well developed in other dockets. Many parts of the FCC’s proposed rules met with general support.

"As evidenced by the NPRM, this first-ever spectrum incentive auction will involve many moving pieces,” CEA said (http://xrl.us/bocbzk). “The Commission has wisely gathered an impressive team of auction design experts and has adopted an NPRM that includes very thoughtful proposals.” But CEA said the auction should follow four principles: The FCC should “maximize participation” in the auction, adopt simple, straightforward rules, promote innovation, and balance the interests of various parties. “A balanced approach is integral to the success of the auction,” CEA said. “In order for the auction to work, all stakeholders must feel that their interests have been considered, and that they are being treated fairly. This balanced approach must be reflected not only in the incentive auction itself, but also in the repacking model and rules.” For example, the FCC should protect broadcasters and guarantee they're fairly compensated for any spectrum they decide to sell. But at the same time, the FCC needs to recognize “the primary goal of the Spectrum Act: freeing up spectrum in a timely manner to help meet the staggering demand for wireless broadband services,” CEA said.

"The well thought out NPRM is an important first step toward alleviating the looming spectrum crisis that CTIA has warned policymakers about for the last three years,” CTIA said. “However, there is much work to be done.” The growing importance of tablets shows why the FCC needs to bring more spectrum online for broadband, CTIA said (http://xrl.us/boc37q). “This category of devices did not exist when CTIA identified ‘a looming spectrum crisis’ several years ago,” the group said. “Now many of these tablets come equipped with CMRS and Wi-Fi capability, dramatically increasing wireless usage across both platforms."

A likely area of continuing debate will be the provisions the FCC makes for Wi-Fi and unlicensed in general. In approving the NPRM last year, commissioners Robert McDowell and Ajit Pai questioned whether the FCC was proposing too-big guard bands and too much spectrum for unlicensed use (CD Oct 1 p1).

The White Spaces Alliance wants the FCC to approve guard bands of 10-12 MHz, which can be used by white spaces devices, as part of a band plan for the auction, and make Channel 37 available for unlicensed use. The auction rules should “maximize the availability of unlicensed spectrum, make contiguous blocks of at least three 6-MHz channels available for unlicensed use in the TV broadcast bands, particularly in rural, unserved and underserved markets, and to authorize the opportunistic use of both unlicensed and licensed, but unused channels by white space technologies,” the group said (http://xrl.us/boc3jz). Wireless ISPs need access to the TV white spaces, the Wireless Internet Service Providers Association said. “WISPs are experiencing the effects of congestion and capacity constraints resulting from increased consumer bandwidth consumption,” the group said (http://xrl.us/boc3km). “The ability to use unlicensed TV white space spectrum will help WISPs overcome these obstacles by enabling them to expand broadband service into areas that are currently unserved and deliver additional services in existing coverage areas.”

Google and Microsoft said in joint comments the FCC should: “(1) create a band plan with unlicensed designations that are large enough to support investment; (2) preserve white spaces in the remaining television broadcast bands; and (3) promote efficient use of the UHF spectrum by establishing new rules for wireless microphone operations.” The two offered up a treatise on all the ways unlicensed spectrum is growing in importance, from applications in the home, to machine-to-machine communications, to cellular offload (http://xrl.us/boc5co). “American households’ dependence on unlicensed technologies, and the value of this unlicensed technology application to the economy, is likely to grow substantially in the near future,” they said. “Whole-home distribution of online video will contribute greatly to this growth. By 2016, two-thirds of all mobile broadband traffic is expected to consist of online video."

"To a far greater degree than was perhaps imaginable when the Commission initially approved unlicensed use of the TV white space channels, the unlicensed economy is thriving, creating jobs, delivering broadband to unserved areas, and meeting the explosion of consumer wireless data demand with low-cost and small cell spectrum re-use,” the Public Interest Spectrum Coalition said (http://xrl.us/boc4fo). “Unlicensed spectrum increasingly serves as an incubator of wireless innovation."

But CTIA countered that the guard bands should be no larger than is required to protect licensed services from harmful interference, consistent with last year’s spectrum law. “While certain innovations such as Wi-Fi offloading or small cell technologies can help make the most of this scarce resource, there is no substitute for licensed, exclusive-use spectrum with flexible service rules to deliver on the incredible benefits of mobile broadband,” CTIA said.

Another big question is whether the FCC will impose limits on who can bid for the spectrum in some markets, possibly forcing AT&T and Verizon Wireless in some cases to sit out the auction.

"Though already possessing unrivalled spectrum depth below 1 GHz, AT&T and Verizon have nonetheless indicated a great interest in participating in the incentive auctions, likely aiming to acquire as much 600 MHz spectrum as possible at auction,” Sprint Nextel said (http://xrl.us/boc4g9). “As part of its effort to make the most spectrum available to promote wireless competition, the Commission should implement a cap on spectrum holdings below 1 GHz as proposed by many commenters in its Spectrum Holdings proceeding, including potentially imposing a limit on the amount of spectrum any bidder can acquire in the incentive auctions -- particularly for bidders already possessing undue concentration of low-band spectrum licenses."

The FCC should design the auction in a way that maximizes bidding by all carriers, not just Verizon and AT&T, the Competitive Carriers Association said. “Put simply, the auction will be a failure, and the wireless industry will be substantially worse off, if the principal result of the auction is to further entrench the dominance of AT&T and Verizon at the expense of the rest of the industry,” CCA said (http://xrl.us/boc39d). “Rural, mid-size and regional carriers deliver vital public interest benefits to consumers who may not be well served by the largest carriers.” CCA said industry consolidation, as measured by the Herfindahl-Hirschman Index, increased from 2,151 in 2003, when there were six national carriers, to “an alarming” 2,848 in 2010, with the current four.

T-Mobile also called for caps, saying the FCC should restrict all carriers from owning more than one-third of the spectrum below 1 GHz in any market. The carrier noted that Verizon and AT&T already own 67.2 percent of 700 MHz commercial spectrum and 91.3 percent of cellular (850 MHz) spectrum. Device interoperability is also important, T-Mobile argued. “The Commission should promote interoperability across all paired 600 MHz band channels either by adopting an express interoperability requirement or by using a quasi-random assignment process to assign generic 600 MHz blocks,” the carrier said (http://xrl.us/boc4ek). “These measures would help prevent ‘boutique’ band classes that reduce the availability, affordability, and portability of end user equipment; increase consumer switching costs; and delay the deployment of mobile broadband services.”

U.S. Cellular encouraged the FCC to offer the spectrum in smaller-sized licenses to maximize the number of carriers who will bid in the auction. “Broadband access is most lacking in small and rural markets, and the propagation characteristics of the 600 MHz band are ideally suited to serve these areas,” the carrier said (http://xrl.us/boc39q).

But AT&T and Verizon Wireless said the FCC should not bar any carrier from bidding for broadcast spectrum before the auction even gets started. Carriers themselves should be able to decide whether they want to bid even if doing so pushes their holdings above permitted levels in a given market. “In brief, if a winning bidder’s acquisition of new spectrum would bring its total holdings in a market to a level that is determined to threaten competition, that licensee should be free to choose which spectrum it will divest to remedy the anticompetitive harm,” AT&T said (http://xrl.us/boc39w). “Such flexibility will allow a licensee to achieve efficiencies by rationalizing its spectrum holdings, and it will create no risk to competition. In contrast, if the Commission adopted rules that would limit the participation of well-capitalized market actors in this auction, it would sabotage forward-auction competition and undermine prospects for obtaining the bid levels needed to meet the statutory closing conditions for any given channel-clearing target."

"Spectrum is the lifeblood of the wireless industry -- an increasingly important sector of the U.S. economy,” Verizon said. “The Commission should reject calls for spectrum aggregation limits or other restrictions on bidder participation,” it said (http://xrl.us/boc4a9). “In addition to conflicting with Congress’s direction in the Spectrum Act not to impose eligibility restrictions, they would undermine robust forward auction bidding, contrary to Congress’s objectives. Limits would potentially suppress the value of bids and inefficiently distort the results of the auction by restricting companies that value the spectrum the most from obtaining it to serve their customers."

DirecTV and Dish Network urged the FCC to avoid expanding or altering any carriage rights to facilitate a smooth post-auction broadcaster relocation process for their viewers and broadcast partners. The FCC should “fully reimburse MVPDs [multichannel video programming distributors] for all reasonable relocation costs” and ensure MVPD/broadcaster coordination during the transition process, they said in joint comments (http://xrl.us/boc3yc). The repacking timetable should account for MVPD coordination and broadcasters should provide a 120-day notice of relocation related changes, they said. This notice “can be structured to limit any burden on broadcast stations.” Applicable notices could be provided directly to the MVPDs or maintained on a commission-supplied database “to ensure that all MVPDs have access to the same information for all station changes,” they said. The DBS companies also cautioned the FCC against taking actions that result in new or altered carriage rights for broadcasters.

Public television organizations urged the FCC to maintain the public’s access to services provided by Corporation for Public Broadcasting-qualified stations and minimize any service disruptions from the repacking process. PBS, CPB and the Association of Public Television Stations filed joint comments (http://xrl.us/boc34p). The auction rules “should preserve the existing coverage area and population served by each public television station,” they said. The commission shouldn’t accept bids in the reverse auction that would create white spaces “where no public television station would remain on-air to serve viewers in a particular market.” The organizations also suggested making channel sharing arrangements “a viable option for stations to continue their broadcast television station operations, rather than a house of cards that unexpectedly falls apart months, or even years, into the arrangement to the unfair disadvantage of an innocent party,” they said.

Broadcasters raised a host of concerns, both idiosyncratic and general, about the planned auction and repacking of the TV band, in comments received after our deadline Friday. Some reflected the uncertainty broadcasters face about what their operations will look like if they choose to stay in business. Others offered hints about what might convince a station to participate in the auction.

Tribune, which recently emerged from bankruptcy, said the commission should make sure stations which sell their spectrum at auction are taxed on that revenue rationally. The law authorizing the auction was silent on its tax implications, Tribune said (http://xrl.us/boc4gz). “The Commission should coordinate with the IRS to achieve the most favorable possible tax treatment of auction proceeds,” it said. “The auction process should be designed to allow a broadcaster to participate without triggering a current income tax liability.” The company has not decided whether it will be a “buyer, a seller or a bystander in any auction,” it said.

Broadcasters should be on equal footing with wireless companies in the forward auction, Tribune said. “The Commission should adopt rules that permit both broadcast and wireless use of all spectrum in both phases of the auction.” The company supported calls to allow broadcasters to use different transmission technology, it said. “Eventually, one-to-many broadcast-style capability will likely be integrated into wireless networks."

Univision also called on the commission to give stations which retain their licenses more flexibility to offer new services. The FCC should initiate a proceeding to relax its service rules and encourage such flexible use, it said. “The Commission’s rules already permit digital television station licensees to offer services of any nature on an ancillary or supplemental basis” (http://xrl.us/boc4i5).

State broadcast associations made some of their concerns about the auction process explicit. A group consisting of the vast majority of state associations told the commission it must be careful not to undermine the requirement that participation by stations be voluntary. That could happen if the FCC “were not completely faithful to, or were tentative or ambiguous about” implementing Congress’s mandate that it take all reasonable efforts to preserve the coverage area and population served for stations who do not participate, the state groups’ filing said. If there’s ambiguity, a station “may reasonably conclude that the potential adverse effects of repacking ... are so great that it has no realistic business option except to participate,” it said (http://xrl.us/boc4cn). The same could be said if a station is not confident that it will be fully and quickly reimbursed for the cost incurred during repacking, it said.

The commission should start coordinating now with Mexico and Canada a plan to address how repacking will affect signals that carry over borders, the state groups said. The law authorizing the auction and channel repacking requires it, it said. The groups estimated that about a third of U.S. TV stations will be affected by border coordination issues. “The absence of such coordinations ... will create so much uncertainty that no licensee will be able to make an informed, reasonable judgment whether to participate,” the filing said.

The New York State Broadcasters Association raised similar concerns, in a separate filing. In some markets, potential interference with Canadian stations could leave no available spectrum for New York broadcasters near the border, it said. “Even if the Commission seeks to clear only 60 MHz, most stations in Rochester, Buffalo, Watertown, and Burlington/Plattsburgh could not be accommodated in the remaining spectrum,” it said (http://xrl.us/boc4dy). “If Canada does not agree to repack its television stations to accommodate a new American band plan, the Commission cannot respond by reducing the level of service of American stations."

New York City faces its own set of unique challenges, the state’s association said. Most stations broadcast from a site on the Empire State Building and will face strict limits on how they might move to a new channel assignment, it said. And new facilities at One World Trade Center might not be ready on the FCC’s transition schedule, it said. Moreover, because of the city’s population density, a small change in a station’s coverage area could affect hundreds of thousands of viewers, it said.

Disney urged the commission to protect existing interference agreements between stations, and stations that operate digital facilities at higher-than-regularly authorized FCC power limits to replicate their pre-DTV transition coverage. The commission should give stations enough time to build new facilities required in a repack of the TV band, the company said. “Transitioning to a new channel is a complicated undertaking and it can take many years to obtain the requisite information to determine the technical parameters for a relocated station” (http://xrl.us/boc4kk). Disney also asked the commission to protect auxiliary services such as wireless microphones.

Weigel Broadcasting said the FCC should protect low-power TV stations that carry major network programming. It owns three such stations in Indiana, and said its low-power WBND South Bend is the only ABC affiliate in the area. Such stations are “functionally indistinguishable from their full power network affiliated counterparts,” the company said. “Weigel therefore is deeply concerned that proposals included in the Notice could unintentionally disrupt or diminish these stations’ service to the community -- or worse, force them off the air” in repacking the TV band, it said. The FCC should make sure there is enough spectrum left over in each market to ensure all local network affiliates can remain on the air, whether those affiliates have a full power, class A or low power TV license, Weigel said. “Limiting distribution of these stations’ signals to pay-television or Internet transmissions only is not an acceptable alternative to free, over-the-air access.”