Lawmakers Press FCC for Details on Spectrum Auction Work

Subcommittee Chairman Greg Walden, R-Ore., reaffirmed in his opening remarks his skepticism that FCC restrictions on auction participation would not have any adverse impact on auction proceeds. “Let me be clear: It would be folly at best for the FCC to think that it could know better than a true market-based auction the maximum amount the auction could raise. A carefully crafted auction that recognizes the value of participation and has the humility to let the market decide the value of spectrum will best serve all of the goals of the legislation,” he said. Walden said he was concerned the commission “seems to be contemplating inserting its judgment for that of the market when it comes to placing a value on a broadcast license.” “For the incentive auction to be successful, broadcasters that participate should be assured that they will be compensated based on the market value of their licenses -- as determined by the auction -- not based on estimates by the FCC.”

The FCC is “committed to an open, transparent, and inclusive process,” Epstein told lawmakers. “A guiding principle has been to get it done on time and to get it done right,” he said. “The key for the commission is to continue to solicit and carefully review ideas from the experts from outside and within the commission to enable the commission to make the hard decisions based on the best available data and ideas.”

Walden said low-power translator TV stations play a “unique role” in states in the mountain West and urged Epstein to “consider the ongoing need for translators as they conduct their repacking analysis.” Epstein told Walden the commission has specific questions about low-power translators and is “not seeking to eek out the last pound of spectrum” in rural areas. Epstein defended the FCC’s proposals to use data from the 2010 census, rather that the 2000 census, in calculating broadcast coverage areas. NAB’s Rick Kaplan signaled his opposition to any methodology changes: “Congress was very wise not to allow the FCC to move the goal posts,” he said. Doing so would “shrink coverage areas significantly in some areas of the country.”

Rep. John Dingell, D-Mich., reaffirmed his desire that the spectrum auction proceed in a “fair and transparent manner” that maximizes the revenue from the auction. “With respect to the reverse auction, broadcasters should be treated fairly and I will do my very best to ensure that the commission takes actions that will protect constituents in border areas,” Dingell said. “Concerning the forward action, the commission should implement simple rules in a transparent manner to allow the greatest number of parties to bid on reclaimed broadcaster frequencies.”

Epstein told lawmakers the commission will “do all that we can” to coordinate border frequency agreements with Mexico and Canada. He said acting FCC Chairwoman Mignon Clyburn has placed international coordination issues at the “highest priority level” and she plans to visit Canada Thursday along with Epstein. “What we intend to do by the start of the auction is advance the process sufficiently to ensure as much certainty as possible,” he said. Dingell told Epstein his constituents “are not feeling very much certainty on this matter” and said “this is subject to very intense conversations, or should be, with the United States, Mexico and Canada to ensure that our people up there do not go dark.” Dingell urged Epstein not to reassign or reallocate the broadcast frequencies until the FCC completes negotiations with Mexico and Canada. “I would prefer you measure twice and cut once when it comes to broadcast repackaging,” he said.

Dingell reaffirmed his belief that that auction should be designed to raise a “significant amount of money” to help fund the buildout of FirstNet for first responders. This “constitutes significant pressure on the commission to maximize the auction revenue,” he said. Dingell recently sent a letter with seven other House Democrats that asked Clyburn not to adopt spectrum auction rules that exclude certain carriers from bidding in the forward auction (CD July 17 p14). “We hope the commission will adopt transparent and simple rules to encourage participation by the broadest possible group of broadcasters and wireless providers,” said the signers.

Other Democrats reaffirmed their desire for the FCC to craft auction rules that would restrict AT&T and Verizon’s ability to bid on certain spectrum bands in order, they said, to facilitate more competition in the wireless marketplace. Subcommittee Ranking Member Anna Eshoo, D-Calif., said in her opening remarks policymakers “must promote a competitive wireless landscape in which carriers of all sizes, both regional and national, have an opportunity to bid competitively for licensed spectrum. … An auction that protects and promotes a healthy, competitive wireless marketplace enhances consumer choice and serves the public good. Consistent with statute, the FCC should heed this advice by developing rules that promote competition and broad carrier participation,” she said.

Eshoo asked Joan Marsh, AT&T vice president-federal regulatory affairs, whether the company would elect not to participate in the auction if it “isn’t set up in the way you want.” Marsh said she “is certainly not suggesting that AT&T won’t participate” in the auction. “There is room for all bidders,” she said. Kathleen Ham, T-Mobile vice president-federal regulatory affairs, told Eshoo that a successful auction should include “reasonable” spectrum aggregation limits. “We are not asking to exclude AT&T and Verizon,” she said.

Rep. Mike Doyle, D-Pa., said large carriers currently hold 80 percent of the licenses for spectrum below 1 GHz. “This spectrum provides the best in-building coverage, something critical in urban areas, like many parts of my district,” he said. “The increasing disparity in carriers’ spectrum assets, which the Department of Justice and the commission have both recognized, presents significant risks, such as slowing innovation and stifling price and service competition,” said Doyle. “I hope the FCC uses its authority to prevent further concentration in this upcoming incentive auction.” Justice’s April FCC filing said auction rules should guarantee that smaller carriers, especially those that need lower frequency spectrum, are able to expand their spectrum portfolios (CD April 15 p7).

Public Knowledge Senior Vice President Harold Feld said Justice was correct in raising concerns about consolidation in the marketplace. “This is all there is. There is no spectrum fracking … there are no new spectrum mines for low-band spectrum,” he said. “It is really valuable stuff. It is incredibly powerful and we need to ensure that competitors have access to it,” he said.

House Commerce Committee Ranking Member Henry Waxman, D-Calif., also cited the Justice memo and said it “makes no sense to allow the two biggest [wireless] companies to acquire all of this high quality beachfront spectrum.” Waxman denounced, in his opening remarks, any attempts to “erect straw men, arguing that proponents of a competitive auction want to exclude AT&T and Verizon from the bidding.” “No party I'm aware of is urging the FCC to exclude the biggest wireless companies from participating in the auction. In fact my own view is that both companies should be able to compete in the auction,” he said.

Rep. Marsha Blackburn, R-Tenn., said the law is clear on spectrum aggregation rules: “This is not a science fair project,” she said. “Just because this auction is complicated doesn’t mean the FCC should exclude participants in order to show favoritism to certain telecommunications competitors. Gerrymandering the auctions -- particularly below the 1 GHz level -- to give regulatory favor to some competitors at the expense of those who've earned their success puts all the work we've done up to this point at risk,” she said. “It violates the law. And it also threatens our ability to stand up the public safety network, to provide revenue for deficit reduction, and to find a repacking solution.”

A Sprint spokesman said in an emailed statement the hearing indicated “broad support for an auction structure that encourages broadcasters to make the maximum amount of 600 MHz spectrum available to commercial carriers in this unique two-sided spectrum auction. Sprint agrees with the witnesses asserting that reasonable limits on spectrum aggregation -- especially the low-band spectrum essential to enduring wireless competition -- will bring more carriers to the auction resulting in more aggressive bidding, more spectrum being offered and higher auction revenue to help fund broadcaster repacking and the public safety wireless broadband network. Consumers will lose the benefits of robust wireless competition if the two largest carriers -- which together already hold about 80 percent of the available low-band spectrum and 80 percent of wireless industry revenue -- use their market power to foreclose competitive carriers from obtaining 600 MHz spectrum,” the spokesman said.