Potential Mexican Interference Left Out of Incentive Auction Impairment Report

The PN doesn't examine what some observers see as a major potential area of impairment -- broadcast interference from Mexico -- though it does consider interference from Canadian broadcasters. “We anticipate the Commission will have the data necessary to make these calculations in advance of the incentive auction” on Mexico, the analysis said in a footnote. “We note that including the predicted interference from Mexican stations would increase the impairment level in each of the scenarios.”

Lawyers who represent carriers told us leaving Mexico out of the equation is a big potential concern, especially given the difficulty of negotiating with that nation over spectrum issues, as evidenced by the lengthy process of clearing 800 MHz spectrum along the U.S.-Mexico border (see 1504270023). Eleven years after the FCC’s 800 MHz rebanding order, the border region is still a work in progress. A second lawyer said the 800 MHz rebanding and station repacking are not comparable.

The model relies on assumptions different from those the FCC proposed in December in the competitive bidding procedures public notice (see 1412170048). The 2014 PN suggested that the commission would allow up to 20 percent of spectrum cleared for the auction to be impaired -- beyond that level the FCC wouldn't consider the spectrum suitable for clearance and sale for wireless broadband. “Instead of accommodating impairments up to 20 percent, the simulations apply a standard of up to (but not equal to) the equivalent of one license block nationwide, as measured by weighted population,” said the new PN, which was released Wednesday.

“The Public Notice does not take account of any interference from any Mexican TV station into any part of the United States,” Pai complained. “This is far from reality. Indeed, the evidence in the record suggests that interference from TV stations in Mexico could result in significant impairments to major U.S. markets. So the spectrum blocks that today’s Public Notice presents as clean in theory may well be impaired if not entirely unusable in practice.”

Even more disturbing is the task force’s acknowledgement the model doesn’t include analysis of interference from Mexican stations because of insufficient data, Pai said. “This admission is astonishing,” he said. “Even though it has been over three years since Congress passed the Spectrum Act, and even though under the current timeline we’re less than a year from the start of the incentive auction, the FCC still does not have basic information about the location of TV stations along the U.S.-Mexico border. This is not a great sign.”

O’Rielly asked why the task force offers simulations of only one possible alternative. “Parties to this proceeding have raised other means of selecting the initial clearing target and considering impairments,” he said. “Their work, which I am sure was conducted at great expense, seems to have been totally ignored.” O’Rielly questioned the document’s footnote saying the FCC doesn't have sufficient data on Mexico. "This is more than alarming,” he said.

Pai and O’Rielly both complained about how the PN was handled. Both asked to be able to have input on the notice, Pai said. “Why? Because it deviates dramatically from the proposals the Commission made last December, seeks comment on an entirely new approach for reaching an initial clearing target, and presents misleading data on top of all that,” Pai said. "Nonetheless, our requests were denied, and the Chairman’s Office directed staff to release the item over our objections.”

Wheeler was asked about the objections at the news conference after Thursday’s meeting. Wheeler said the item was released in the interest of transparency. “If we’re running a set of numbers based on a certain set of facts, let’s be transparent about what’s going on,” he said. Putting the change in methodology to a commission vote as Pai and O’Rielly suggested would slow the process of preparing for the auction, he said. The lack of data about Mexico isn't a serious problem or barrier to the auction, Wheeler said.

Pai's and O’Rielly’s concerns about the PN aren't likely to be the focus of broadcasters interested in the auction, a broadcast attorney following the auction proceeding told us. Broadcasters deciding whether to offer up their spectrum are going to be much more interested in the participation levels predicted in the simulations than in the methodology used, the attorney said. Such broadcasters are focused on finding out how much they could receive in the auction, and how likely those outcomes are.

Scott Bergmann, vice president-regulatory affairs at CTIA, said the group is still reviewing the document. “As CTIA has said previously, it will be important for the commission to keep impairments of licensed 600 MHz blocks to a minimum and to provide participants in the forward auction with absolute clarity on any potential impairments,” Bergmann said.