Pai Says He Will Be a Strong ‘No’ Vote on Rules Limiting Bidding in Incentive Auction

Pai cited Wheeler’s oft-repeated refrain that the FCC should promote “competition, competition, competition.” “Right now, I worry that the greatest obstacle in our way might be the commission itself,” Pai said. “In order for the incentive auctions to succeed, we must have robust competition among wireless carriers for licenses in the forward auction.” By most accounts the spectrum aggregation order “appears to go in the opposite direction,” Pai said. “It restricts competition. Certain companies selected by the government will be shielded from competing against other companies. Instead of good, old-fashioned competition, the chosen few would have spectrum set aside specially for them."

Pai said his position on the auction is simple. “The FCC should not limit carriers’ ability to participate,” he said. “We should not pick winners and losers. The inevitable effect of a policy that limits participation will be less spectrum for mobile broadband, less funding for national priorities, a higher budget deficit, and an increased chance of a failed auction."

Bidding restrictions run counter to what Congress wanted when it passed the spectrum law that provided the FCC with authority to hold an incentive auction, said House Commerce Committee Majority Chief Counsel David Redl, who spoke on a panel that followed Pai’s speech. “One of the reasons that my bosses wanted to pursue this course was to bring market forces to bear on the broadcast band,” Redl said. “What is the true economic value of the spectrum? Do broadcasters value it more than wireless carriers and if so then maybe that’s what it should be used for, and vice versa.” The auction is supposed to be voluntary, he said. “Another word for voluntary is free to participate and we believe everyone should be free to participate,” he said. “It’s ensconced in the statute.”

"We wholeheartedly agree with the commissioner to the extent that the objective of the legislation is certainly to ensure that there will be more spectrum that’s made available for mobile broadband services,” said Shawn Chang, senior Democratic communications counsel to the House Commerce Committee. Chang said broadcasters must be protected “so that we make sure that this is a completely voluntary auction,” he said. “We also want to make sure that the auction will be able to enhance and promote competition in the wireless space.”

Anna-Maria Kovacs, visiting scholar at Georgetown University’s Center for Business and Public Policy, said smaller carriers have done well in the past without bidding limits. In the AWS-1 auction in 2006, “T-Mobile won approximately 27 percent of the spectrum and other small players won 47 percent,” Kovacs said. In the 2008 700 MHz auction neither Sprint nor T-Mobile participated, she said. “Small players who represent approximately 10 percent of the subscriber base got 28 percent of the spectrum,” she said. “Open auctions can be very good for smaller competitors,” she said.

"The best way to ensure that all carriers can participate in the incentive auction is by licensing the spectrum in smaller geographic license sizes and implementing reasonable aggregation limits so no one carrier can buy the entire lot,” Competitive Carriers Association President Steve Berry said in response to Pai’s comments. “Failure to place restrictions on the amount of spectrum any one carrier can buy will cement the current duopoly market at the expense of competition and consumers, as the largest two carriers have the resources and ability to shut out every other carrier from participation. To avoid this scenario and reach the commission’s goal of having robust competition among wireless carriers in the auction and in the marketplace, reasonable aggregation limits must be in place. Anything less solidifies a duopoly market."

Meanwhile, meetings continue at the FCC on spectrum aggregation rules. Competitors to AT&T and Verizon met with Wheeler, Chief of Staff Ruth Milkman and others Monday to urge they stand firm on bidding limits proposed for the auction. Among those represented at the meeting were CCA, Dish Network, the Rural Wireless Association, Sprint and T-Mobile.

"With more than 100 competitive carriers working to deploy advanced services like LTE and LTE Advanced throughout America, the competitive carrier representatives believe that the Commission’s proposed framework will improve opportunities for competitive providers to bid on and win much-needed low-band 600 MHz spectrum,” said an ex parte filing on the meeting. “It is critical that smaller carriers and carriers that currently have little or no access to low-band spectrum become part of the 600 MHz ecosystem. This will provide new consumer services and bring economies of scale to every competitive carrier. As a result, the Commission’s proposed framework will lead to greater auction revenue, which means more money in the hands of broadcasters who voluntarily sell their spectrum.”

AT&T CEO Randall Stephenson spoke with Wheeler Monday on spectrum holdings and other wireless issues, AT&T said in a filing at the agency (http://bit.ly/PxjmLg). AT&T executives including Senior Executive Vice President Jim Cicconi met with Milkman, acting General Counsel Jon Sallet and others Wednesday to explain the carrier’s stance on the incentive auction. “We have expended significant resources, not only in working with the Commission and industry in this proceeding to develop rules that maximized the chances of a successful auction, but also in supporting the underlying legislation which authorized the Commission to conduct these auctions,” they said, according to an ex parte filing. “Our desire to participate in this auction and our hope for a successful auction is unchanged. We believe that all stakeholders will be able to work together to achieve a successful incentive auction for the 600 MHz band.” (hbuskirk@warren-news.com)