Wheeler the Expected Decider on Spectrum Aggregation Rules for Incentive Auction

The fight pits AT&T and Verizon Wireless against most of the rest of industry. T-Mobile has been particularly aggressive in pushing for some limits, though not for keeping the two largest carriers out of the auction entirely. The issue emerged as a major point of contention between Democrats and Republicans during a House Communications Subcommittee hearing last month (CD July 24 p1) and has been a major topic on most recent panels featuring carriers held to discuss the auction. The two sides have filed economic analyses reaching opposite conclusions on the economic effect of aggregation limits. The Department of Justice said in a key April filing (http://bit.ly/16S6zag) that auction rules should guarantee that smaller carriers, especially those that need lower frequency spectrum, are able to expand their spectrum portfolios. Spectrum aggregation limits were contentious as Congress took up the spectrum title of the Middle Class Tax Relief and Job Creation Act, which authorized the incentive auction (CD Jan 17/12 p4).

The FCC sought comment on the broader question of mobile spectrum holdings in September, approving an NPRM on the topic the same day the commission also sought comment on incentive auction rules (CD Oct 1/12 p5). Commissioner Ajit Pai and then-Commissioner Robert McDowell, also a Republican, both expressed concerns at that point over where the investigation might lead.

Wheeler has a long history in the wireless industry, and he significantly expanded CTIA as president from 1992 to 2003. Acting FCC Chairwoman Mignon Clyburn reiterated at Friday’s commission meeting that the agency is still on course to wrap up auction rules by the end of the year and hold an auction in 2014 (http://fcc.us/19e4WFk).

"There’s no question that Tom Wheeler will be the decision maker when it comes to a number of auction questions, and that’s true nowhere more than on spectrum aggregation,” said a wireless industry lawyer who has not been active in the spectrum aggregation fight and who is neutral on the issue. “However it works out, Wheeler as chairman of the FCC will own the auction.”

"Wheeler owns the auction,” said a carrier executive opposed to aggregation limits. “Whether the auction is a success or a failure is really going to be on what he decides to do and how he decides to conduct it.” Wheeler could “buy into the notion” that putting restrictions on AT&T and Verizon will mean higher revenues from the auction, “but I don’t think that’s the decision he’s going to make,” the executive said.

"Without question, Tom Wheeler will be the dominant force in shaping critical policy aspects of the incentive auction,” said Jeff Silva, analyst at Medley Global Advisors. “That doesn’t necessarily mean the incentive auction top to bottom will reflect every policy aspiration of Wheeler. Being very early in his tenure as FCC chairman, Wheeler is apt to be looking beyond just the near-term horizon in assessing policy options as he hears from fellow commissioners, industry players, public interest groups, lawmakers and other stakeholders. As important as the incentive auction will be for Wheeler ... his work at the FCC will have just begun. As such, the way in which he manages the incentive auction rulemaking after arriving at the FCC could have important ramifications with respect to his ability to achieve consensus on a whole host of other issues long after broadcast-spectrum bidding has ended.” Silva said Wheeler is politically adept. “Tom wants to get this right, but he also understands the importance of relationships in this town and being strategically positioned for other battles in the distance,” he said. “It’s in his DNA.”

"Aside from his present-day experience and knowledge, Tom Wheeler is a student of history,” said Free State Foundation President Randolph May. “The history of the FCC trying to encumber auctions with special conditions is not a happy or productive one. And this particular auction is going to be complicated enough without special conditions. So, I'm hopeful that Mr. Wheeler will recognize the value of running the auction without special encumbrances designed to limit any parties from bidding."

Free Press Policy Director Matt Wood said the FCC is unlikely to make any of the major decisions about the incentive auction before it’s back at full strength. “Obviously, based on the amount of time spent and ink spilled on the topic this spring and summer, aggregation limits are a key topic,” Wood said. “No matter how much energy AT&T and Verizon put into their empty claims, the FCC clearly has the authority to promote competition with sensible and generally applicable safeguards.”

"There’s no doubt that aggregation limits is the kind of non-technical, policy issue that the chairman decides, but his decision space will be limited by the judgments the technical people make regarding TV repacking, guard bands and the balance of licensed and unlicensed,” said Richard Bennett, senior fellow at the Information Technology and Innovation Foundation. “The FCC likes to make everyone happy, so the more spectrum is up for auction the better the chances that carriers who use existing spectrum lightly will be able to add more. The wild card is how highly the rules rate Sprint’s vast Clearwire holdings that are ideal for small cells. In an efficient market, Sprint would swap some of the Clearwire spectrum for 600 MHz spectrum, but the aggregation limits could make that difficult.”

Public interest lawyer Andrew Schwartzman noted that the other commissioners will have a say in the policy the FCC adopts. “On the one hand, one should not ignore the role that the other two Democratic Commissioners will play in this decision,” Schwartzman said by e-mail. “They will undoubtedly exercise some influence in the discussions with a Chairman Wheeler. On the other hand, I would assume that the two Democratic Commissioners will ultimately support whatever the Chairman wants to do in the end.”