Senate Hearing Underscores Auction Debate Over Bidder Limits, Broadcaster Participation

"It was the very reason” of reverse auction software testing that caused Wheeler to delay the auction by several months, testified FCC Incentive Auction Task Force Chairman Gary Epstein. “It is a challenge but one that we know we have to meet and make it right.” He emphasized all the testing and the mock auction the agency plans to hold “before we go to actual market.”

Stakeholders debated over which companies can participate and how. “It may be the last opportunity in over a decade” for greenfield 600 MHz spectrum, said Competitive Carriers Association President Steve Berry. “This spectrum is efficient, in and of itself, especially in rural areas.” Berry praised the flexibility of a bill introduced by Sen. Amy Klobuchar, D-Minn. -- the Rural Spectrum Accessibility Act of 2013 (S-1776). “We definitely need spectrum, especially in rural areas,” Berry said. He advocated for his members to have access to such low-band spectrum. “I want them to bid,” Berry said of AT&T and Verizon. “We want partners.” But “I don’t want them to be able to walk away with the entire pie,” he said.

AT&T Vice President-Federal Regulatory Affairs Joan Marsh backed “an open and unrestricted auction” and pointed to what she sees as such an auction’s virtues. She highlighted in written testimony the “robust and intensifying competition” AT&T faces and emphasized the advances of T-Mobile and Sprint. She also said no scoring is the “best approach” and will help in attracting participants.

Let all participants bid, said committee ranking member John Thune, R-S.D., in an opening statement. “A short delay to this complicated effort may be justified,” Thune said of the delayed timeline, emphasizing the importance of a timely auction but also the lessons of the problem-filled start of healthcare.gov. The FCC needs to focus on how to ensure maximum participation of broadcast and wireless bidders, Thune said. He pointed favorably to the potential role of geographically smaller license sizes.

"I don’t like the word ‘restrictions’ so much as ‘directives,'” said Sen. Richard Blumenthal, D-Conn., citing Wheeler’s potential support for Justice Department auction recommendations (http://1.usa.gov/JceFV2). “It may not be neutral to everyone involved ... but they should be fair.” Blumenthal asked Epstein if he could commit to whether Wheeler is moving to screens or caps that would help in terms of competition. Epstein said the Justice Department influences Wheeler and the FCC but there’s also an incredible number of filings in the proceeding on this issue that carry weight.

AT&T and CCA took shots at one another in the days leading up to the hearing. Berry argued in a The Hill op-ed last week (http://bit.ly/1dPXExw) that his members lack access to low-band spectrum. He questioned AT&T’s “loaded rhetoric” about rigging the market. “The two largest carriers hold approximately 84% of all spectrum below 1 GHz,” wrote Berry.

Marsh responded Monday that facts are “missing” in the spectrum debate. Marsh objects “to claims by CCA that its members have been ‘denied access’ to low band spectrum when in fact many of its members acquired low band spectrum at auction and subsequently made the decision to sell it,” she wrote in a blog post (http://bit.ly/19zB0C5), outlining the low-band spectrum CCA members had formerly possessed. “I also have a problem with objections about the depth of AT&T’s low band portfolio, and AT&T’s alleged intent to ‘block’ competitive access to low band spectrum. Much of AT&T’s spectrum portfolio was built through secondary market transactions with small carriers that made the business decision to sell rather than deploy their low band holdings.” She judged it “hypocritical” for CCA members “to sell 700 MHz spectrum for a profit then allege disadvantage because you lack low band holdings."

The National Grange, an agricultural advocacy group, wrote Senate Commerce leaders Monday urging an open auction. “We believe in the importance of open auction participation and rules that will help maximize revenues and enable all four national wireless carriers to bid on all available spectrum without restrictions,” wrote Legislative Director Grace Boatright.

"The key is to attract broadcasters,” said Epstein of the auction. The FCC has crafted the “bipartisan compromise” between licensed and unlicensed spectrum, Epstein said of how the agency has approached these proceedings. Don’t expect to “coerce” broadcasters into participating, NAB Executive Vice President Rick Kaplan warned Senate Commerce in written testimony (http://bit.ly/1fh8HNq), instead urging the agency “to make it as easy as possible for them to participate if the economics make sense.” He told the hearing that “broadcasters must show up."

Unless enough broadcasters show up, “there won’t be anything to bid on,” said Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden. “They should not score the stations -- they should hold a straight-up auction.”

Kaplan encouraged the FCC to ensure TV viewers are protected during the repacking process. The DTV transition will have been a “walk in the park” compared to the challenge the auction will present, he said. Kaplan pointed to congressional pressure on the FCC to negotiate with Canada and Mexico about stations along the border and urged such agreements. “The reality here is that without the ability to repack stations along the border, the Commission would be foregoing hundreds of millions, if not more than a billion dollars of potential revenue,” Kaplan wrote.

"The Commission has recognized since day one the act’s requirement to coordinate with Canada and Mexico,” Epstein wrote. He described over six months a “series of technical meetings” with Canada and more recently with Mexico. “We're really pleased to report that both countries have recognized the significant advantages of a common band plan,” he said, emphasizing the high priority of the meetings. “Chairman Wheeler has already met with both Canadian and Mexican representatives,” he said, citing “the need for certainty.”

"Spectrum is the oxygen of the wireless system, and parts of it are now gasping for air,” said Sen. Ed Markey, D-Mass. He stressed the need to balance various interests, including the question of who can bid for what spectrum. He asked about what white spaces can mean “economically” and the long-term potential. Sen. Cory Booker, D-N.J., also asked about the potential of TV white spaces. Public Knowledge wants the FCC to issue a further public notice at its January meeting to outline key policy decisions on TV white spaces, said Senior Vice President Harold Feld in written testimony (http://bit.ly/1jJnGm9).

Senate Commerce Committee Chairman Jay Rockefeller, D-W.Va., underscored in his written opening statement his belief that the auction must be driven by one principle -- funding FirstNet. “I know Chairman Wheeler understands better than anyone that, unlike a Rubik’s cube, this auction is no game,” Rockefeller said, stressing the FCC’s expertise in designing the auction. Rockefeller didn’t attend the hearing. Communications Subcommittee Chairman Mark Pryor, D-Ark., in his opening statement also pointed to the FCC as the expert agency. Sen. Bill Nelson, D-Fla., asked Epstein if in the event of a national disaster, such as another terrorist attack, the government could claim spectrum it needs. Epstein said he was not prepared to answer but cited “strong powers in certain parts of the Communications Act.”