AWS-3 Auction Seen as Lowering Pressure for Incentive Auction to Bring in Big Numbers

NAB General Counsel Rick Kaplan said he's surprised the FCC isn’t scrapping Thursday’s vote on an auction procedure public notice given the “game changing” nature of the AWS-3 auction. “The tremendous success of the AWS-3 auction gives the FCC a great deal of breathing room to step back and make sure it gets the incentive auction right,” Kaplan said. The FCC should be asking lots of questions in light of the AWS-3 numbers, Kaplan said. “For example, can we repack less stations so we don’t deplete the TV Broadcaster Relocation Fund?” he asked. “Should the FCC take a new approach to unlicensed spectrum, perhaps even expanding the duplex gap and guard bands to provide more opportunities and less interference? How does the outcome of the AWS-3 auction affect competition in the wireless industry? These are all fundamental questions to which the answers will be different after the AWS-3 auction than they were before it.”

Some industry officials hope the FCC will tweak the incentive auction rules now that the funding for FirstNet is more certain. In May, the FCC opted to guarantee AT&T and Verizon the opportunity to buy more spectrum in the incentive auction than had been proposed by Chairman Tom Wheeler, partly out of concern that FirstNet be fully funded (see 1405160030).

Competitive Carriers Association President Steve Berry said the auction shows how hungry carriers are for more spectrum. But Berry said the FCC should scrub its decision to adopt a second, MHz/POP reserve price for the forward auction that must be met in addition to an aggregate reserve price. “The ultimate success of the incentive auction is jeopardized by the ‘double-trigger’ that’s been proposed for opening access to reserved spectrum for competitive carriers,” he said. “This has become unnecessary now that FirstNet is fully funded.”

Low-band spectrum like that for sale in the incentive auction is “incredibly concentrated in the hands of the largest two carriers, and with the success of the AWS-3 auction, the commission can now truly ensure that competitive carriers have an opportunity to win spectrum through the incentive auction,” Berry said. “The more carriers that can participate, the better for consumers and the economy.”

Public Knowledge Senior Vice President Harold Feld said to some extent the auction is like a Rorschach inkblot -- everyone projects on it what he or she wants to see. “It certainly gives the FCC some enhanced flexibility on a number of fronts now that FirstNet is paid for,” Feld said. The FCC can help competitors to AT&T and Verizon by setting aside more spectrum for them to buy, or eliminating the reserve trigger, he said. “It is also extremely helpful with unlicensed spectrum and on repacking the broadcasters. There is more safety at the margins that incremental changes are unlikely to make the difference between success and failure for the auction.”

But Feld conceded other bigger considerations are also in play. “Keep in mind that Congress just spent an amount approximately equal to the entire AWS-3 auction revenue by doing one year of tax extenders without any offsetting cuts,” he said. “With a Republican Congress eager to make the corporate tax cuts permanent, we are likely to see a lot of Hill pressure to continue to maximize revenue for pure deficit reduction.” But if the nation’s two biggest carriers buy up most of the spectrum in major markets, “that will put enormous pressure on the FCC to do something to help the rest of the industry,” Feld said. “That could be efforts to make the 600 MHz auction more competitive or things like data roaming reform.”

“Competitive auctions are always better than those where the two largest bidders can freeze everyone else out,” said Matt Wood, Free Press policy director. “In the incentive auction, the commission should build on the success here, with a renewed commitment and freedom to promote competition and preserve open spectrum for unlicensed use.”

Angela Giancarlo, wireless lawyer at Mayer Brown and former FCC legal adviser, said the FCC may be less inclined to tweak the incentive auction rules. “The buzz surrounding the current auction is that the prices are high because Verizon and AT&T are participating without limitation,” she said. Giancarlo said with fiscally minded Republicans to control of the Senate and the House, “the FCC will face greater pressure for a repeat in the incentive auction, which means that Verizon and AT&T must have the right incentives to participate and win spectrum.”

FirstNet should not be the FCC’s only concern, said Fred Campbell, director of the Center for Boundless Innovation in Technology and former chief of the Wireless Bureau. “Funding FirstNet is important, but other critical issues remain, including the need to attract adequate broadcaster participation,” he said. “It would be unwise for the FCC to create additional uncertainty for broadcasters by altering the rules.”

“The amazing success of AWS-3 not only proves that ​spectrum above 1 GHz is incredibly valuable, but, more importantly, it underscores the benefits of keeping auctions simple,” said Robert McDowell, former FCC commissioner now at Wiley Rein. “The 600 MHz auction is shaping up to be complicated. The lesson here is to reboot that thinking to simplify its structure to produce a win-win-win result."