PCS H-Block Auction Will Take Place as Planned in January, Wheeler Says

"We're holding an auction on the 22nd of January,” Wheeler said. “If I could wear a sandwich board up here and say ‘Auction open, y'all come,’ I would. I think there’s going to be some interesting dynamics that come as a result of these changes.” The FCC already established a reserve price for the spectrum, which a bidder must meet, he noted. “This isn’t exactly going to be a worry-about-walking-away-with-nothing-in-your-pocket auction,” he said. “Secondly, the decision of some parties not to participate may be seen as an opportunity for other parties to participate and that’s the wonder of the market."

Wheeler also said Thursday the incentive auction of TV spectrum, H-block auction and other wireless issues have taken most of his time since he’s been at the FCC. “The whole issue of spectrum ownership, the auctions, and everything, I've spent more time on that than I have on any single topic,” he said. “I'm not sitting around here sucking eggs. We're looking seriously at these issues.” Wheeler was president of CTIA and a venture capitalist before his appointment to the FCC.

Questions continue to swirl about the H-block auction. “We believe Sprint’s announcement very much validates the original concern by some policymakers that putting the H block up for a stand-alone auction would render the auction a retail sale not an auction,” said Wells Fargo analyst Jennifer Fritzsche. “So what now? Will DISH be the only one showing up at the party? Maybe the better question is whether there will be a party."

Two recent Wireless Bureau chiefs said Sprint’s decision not to bid raises some big questions for the FCC. “Sprint’s and T-Mobile’s announcements are unfortunate and now put the commission between a rock and a hard place,” said NAB Executive Vice President Rick Kaplan, bureau chief under then-Chairman Julius Genachowski. “Even beyond the question about how there can be a spectrum crunch when all of the major carriers are passing on the first spectrum auction in years, the commission is faced with either postponing the auction or agreeing to an unseemly deal with Dish, where Dish essentially agrees to pay the FCC its $1.5 billion in exchange for regulatory relief in an unrelated matter."

In an Oct. 3 blog post, former Wireless Bureau Chief Fred Campbell, now at the Competitive Enterprise Institute’s Communications Liberty and Innovation Project, questioned how the bureau had negotiated a reserve price for the H block with Dish and urged the full commission to investigate. “The FCC’s Wireless Bureau recently adopted an unusually high $1.564 billion reserve price for the auction of the H block spectrum,” Campbell wrote (http://bit.ly/1cXOjDn). “No matter what the FCC Commissioners decide, if the reserve price stands, the only sure winner would be DISH,” Campbell said. “The FCC would be the only sure loser. The appearance of impropriety in the H block proceeding could compromise public trust in the integrity of FCC spectrum auctions. To ensure the public trust is maintained, the FCC Commissioners should thoroughly review the processes and procedures implemented by the Wireless Bureau in this proceeding before auctioning the H block spectrum.” Campbell was chief under Kevin Martin.

"Sprint’s decision to abandon the H block auction demonstrates the difficulty in trying to predict in advance who will participate in an auction and to what extent,” Campbell told us Thursday. “The business plans of private companies can never be known or predicted in advance with precision by the FCC or anyone else. The very purpose of an auction is to discover which companies value particular spectrum assets the most by creating conditions that provide fair opportunities for them to pursue their own business plans and acquire the spectrum that best serves their needs."

Commissioner Jessica Rosenworcel had no comment on the H-block developments, but had pushed hard to combine the H block with other spectrum for a later auction. Rosenworcel had stressed the every dollar counts especially since the auction proceeds will help pay for FirstNet under last year’s spectrum law. “Holding a single auction of all 65 megahertz at once is bound to yield more interest, more bidders, and more revenue than dividing this spectrum up and holding an auction of the 10 megahertz H block alone,” Rosenworcel said in September.

"The move is not really too surprising, although there had been hope Sprint would bid,” said Public Knowledge Senior Vice President Harold Feld. “This also validates Commissioner Rosenworcel’s concern that few carriers would show up for an H Block auction as opposed to an auction combining H Block and other spectrum. ... In any event, it seems that the best thing for the FCC to do is approve the Dish petition and then see if AT&T wants to bid against them. We need to remember that the reason we haven’t auctioned this spectrum before is that it was pretty marginal.”