Focus Shifts to Package Bidding as FCC Considers Rules for Incentive TV Auction

AT&T urged the FCC to adopt its proposal for package bidding -- its “clock package auction” proposal. “Such package bidding is necessary to maximize efficiency, revenue, and the amount of repurposed spectrum by capturing the large complementarities that regional and national carriers will derive from offering service on the same 600 MHz bands across multiple geographic areas, without handicapping smaller carriers’ ability to obtain individual or relatively few licenses,” AT&T said in reply comments (http://bit.ly/1d0HESu). AT&T said that without package bidding, the forward auction, in which carriers buy spectrum offered for sale by broadcasters, might fail. “Bidders might exit the forward auction early to avoid the classic exposure risk of ‘winning’ a hodgepodge of scattered spectrum assets that lack much of the value they would have presented had they been part of a seamless geographic package,” AT&T said. “That exposure risk would thus suppress forward-auction participation, reduce the amount of repurposed spectrum, and increase the risk of auction failure."

Package bidding would give the nation’s biggest carriers an unfair advantage, the Competitive Carriers Association said. “Package bidding can add significant complexity to the auction, which runs counter to the Commission’s goal of reducing complexity and which can bias the auction proceeding in favor of carriers with the greatest resources to manage complexity, such as AT&T and Verizon,” CCA said (http://bit.ly/1avh1e5). “Package bidding also tends to create opportunities for the largest carriers to game the system to acquire highly desirable licenses at a discount by packaging them with the most valuable licenses, thereby shielding from other bidders the true value that they ascribe to the licenses."

Smaller Cellular Market Area licenses are preferable, but PEAs are still better than EAs, U.S. Cellular said. “PEAs would not be as affordable as CMAs for smaller carriers because they encompass more territory, are more likely to include urban areas, and would not match up as well with these carriers’ existing service areas,” the carrier said (http://bit.ly/1aRRtlQ). “PEAs, however, would address the national carriers’ claims that they require license areas that are larger than CMAs and that align with the boundaries of existing EA-based license areas, while also providing many of the benefits of smaller license areas.” U.S. Cellular weighed in against package bidding. “Package bidding would create substantial exposure risks for smaller bidders because of its potential to reactivate dormant bids, and it would add yet another layer of complexity to the auctions."

CCA member T-Mobile lined up with smaller carriers on package bidding. “The comments reveal at least one point of near-consensus: package bidding would introduce a number of potential problems into the incentive auction and is unnecessary,” T-Mobile said (http://bit.ly/1ek4rJY). “Only the two dominant incumbents support package bidding. Other commenters recognize that package bidding conducted in a way that would allow à la carte bidding for components of the package raises complex questions concerning package definition, clock resets, pricing levels, eligibility, information exchange, competitive effects, and other concerns.”

The Rural Wireless Association and NTCA, filing jointly, indicated that not all small carriers support PEAs, which were proposed by CCA at the urging of the commission. “PEAs, as presently drawn, are still too large to ensure the necessary auction participation by small businesses and rural telephone companies,” the two said (http://bit.ly/1fbKmt6). “Further, and in contrast to licenses based on an FCC-recognized and utilized market size like CMAs, licenses based on the hand-drawn PEAs (which have already been reconfigured once) will be subject to individual carrier modification petitions and possibly to judicial challenge as being arbitrary and capricious."

"There appears to be broad agreement among nearly all commenters that CCA’s compromise PEA proposal strikes the correct balance between promoting auction manageability while also encouraging auction participation (and, thus, increased revenue to the Treasury) and opportunities for a more competitive allocation of spectrum through the auction,” C Spire Wireless said (http://bit.ly/KVA7OL).