Spectrum Aggregation Remains a Competitive Concern, DOJ Tells FCC

The DOJ letter was in response to a request from Ruth Milkman, FCC chief of staff, the department said. The letter cites comments DOJ filed April 11, 2013, in the FCC’s mobile holdings proceeding (http://bit.ly/ZeKwIF). “The Department stands by the views articulated in those April 2013 comments, and that no intervening developments in the industry have affected the compelling economic rationale for well-defined, competition-focused rules concerning acquisitions by the most spectrum-rich providers,” wrote William Baer, Antitrust Division chief. “The Communications Act specifically requires that in designing auction policies, the Commission promote competition ‘by avoiding excessive concentration of licenses.'"

Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition, led the mostly tongue-in-cheek protest Wednesday in front of FCC headquarters. Padden said the protest had an important message. “On any objective basis a report and order on this historic auction is of greater importance than a mere notice on net neutrality,” Padden told us.

Padden said he hoped the net neutrality fight won’t mean commissioners are less able to focus on key auction issues before Thursday’s open meeting. “We made the rounds of all the offices,” he said. “They seemed to be prepared for the workload, so I hope not. But just in terms of the general conversation, it certainly has sucked all the oxygen out of the room. ... It just feels wrong that all of the focus and attention is on net neutrality rather than this auction.” Padden said he bought two dozen donuts for the net neutrality protesters as a peace offering, but couldn’t find them, so he gave the donuts to the FCC guards to enjoy.

Several issues are still in play on the incentive auction, including rules for unlicensed and safeguards to make sure FirstNet gets the funding it needs, agency officials said. They said discussions continue on the eighth floor on a compromise that would guarantee AT&T and Verizon the opportunity to bid on some 600 MHz spectrum, while giving smaller carriers free rein to bid in the auction, even in markets where they already own substantial low-band spectrum (CD May 12 p2).

As is the case with net neutrality (CD May 14 p1), Democratic commissioners Mignon Clyburn and Jessica Rosenworcel are key players in the auction orders, since the Republicans Ajit Pai and Mike O'Rielly are expected “no” votes because of their opposition to bidding limits in the auction, industry officials said.

NAB Executive Vice President Rick Kaplan agrees with the “overarching point” of the pro-auction protesters, he said. “Somehow, the first-in-the-world incentive auction and its order has been overshadowed and it’s not clear what the impact on the 400-page-plus item will be.” Commissioners won’t be able to “spend the time and energy” on the auction items they would have absent the net neutrality vote, Kaplan said.

"I'm a little bit disappointed in the commission,” said Recon Analytics analyst Roger Entner, who has clients in the wireless industry. “The point of having a body that’s not elected is the commission stands above the emotional hubbub and popularity that elections are and that it’s focused on the real issues that are at hand in a more sober and objective way.” On net neutrality, the FCC has been like a cat running between shiny objects, Entner said. “There are these not fully-thought-through proposals that are neither feasible or workable, like Title II,” he said. “What is really important is making sure the incentive auction works and that all the conditions are being met. It’s one shot and they've managed to turn it into the most complicated system that they have ever designed and they're not paying enough attention to it. ... ‘Through divine providence it will work out.’ Maybe not.”

"The incentive auction is, without question, on the forefront of every competitive carrier’s mind,” said Steve Berry, president of the Competitive Carriers Association. “Below-1 GHz spectrum is an incredibly valuable limited resource, and I cannot stress enough the significance of this auction, which may be the last chance for carriers to acquire low-band spectrum at auction. DOJ reaffirmed today, as it did a year ago, that the FCC has the authority to craft incentive auction rules to promote competition. With mere hours before the vote, there is still time for the FCC to act on behalf of consumers, public safety and the economy and ensure all carriers have the opportunity to bid, by unleashing valuable low-band spectrum through the use of a competitive auction that promotes competition.”

Public Knowledge Senior Vice President Harold Feld said the Republicans shouldn’t be surprised if they're left out of auction discussions. “Negotiation is a two-way street,” Feld said. “The insistence by Republicans on voting in partisan lockstep, and refusing to do partial concurrences, makes this result inevitable. What on Earth could Wheeler gain by talking to the Republicans when they have made it clear they will vote no on the entire incentive auction order over the spectrum aggregation issue?” Feld said in the past, minority commissioners have been willing to negotiate. “Michael Powell often provided a fourth vote for Bill Kennard when Kennard was chair, in exchange for real input into the order,” Feld said. “Michael Copps and Jonathan Adelstein often negotiated with Chairman Powell or Chairman [Kevin] Martin, recognizing that it was better to trade a vote for improvement in the item than to hold out on ideological grounds. This is not to say they didn’t have 3-2 votes along party lines before, but you used to see a lot more flexibility and genuine engagement from minority commissioners.”