FCC Official Urges Flexibility for Agency In Designing Voluntary ‘Incentive Auctions'

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Congress should give the Federal Communications Commission as much flexibility as possible in designing so-called “incentive auctions” of spectrum, in which television broadcasters, who license spectrum through the FCC, could voluntarily release some of it back to the government in exchange for a share of the auction proceeds, a senior agency official said Sept. 13.

Wireless Competition Bureau Chief Rick Kaplan, speaking during a panel discussion hosted by the Information Technology and Innovation Foundation, underscored the FCC's subject-matter expertise—and historic success—in designing and conducting auctions of spectrum, which have raised significant sums for the treasury.

“The worst outcome is for Congress to pass legislation and we have an auction that fails,” Kaplan said. “That sets us back many, many, many years. We need flexibility to the point where we know that we can develop an auction that will succeed and raise a lot of money.”

The FCC does not have the statutory authority to divvy up proceeds of an auction among private entities; all auction revenue must be deposited in the treasury.

President Obama's $447 billion jobs bill has emerged as a legislative vehicle for such auction approval, as has the package of recommendations due in November from the 12-member Joint Select Committee on Deficit Reduction, also known as the super committee.

Keep It Simple, Levin Says.

Some versions of legislation have included provisions that FCC officials deem overly prescriptive, threatening the outcomes of auctions.

Blair Levin, the architect of the FCC's National Broadband Plan, in which the concept of incentive auctions originated, said Congress should keep any bill simple.

“I am very distressed by the extent to which the role of the FCC as an expert agency seems to be continually under attack,” said Levin, now a communications and society fellow at the Aspen Institute.

In drafting the National Broadband Plan, Levin said he and his team felt that any legislation should be one sentence long: The FCC shall have the authority to share proceeds with any spectrum licensee who wishes to relinquish its spectrum.

“Every sentence that Congress has added is, in my view, counterproductive,” Levin said. “Now, I'm not a purist. I understand the politics. I understand they have to add some language. But let's understand clearly, every sentence that has been added is not designed to improve the likelihood of the success of the auction.”

Other Versions More Restrictive.

Several iterations of such legislation, like the 55-page Spectrum Innovation Act of 2011 introduced by House Energy and Commerce Republicans, would limit the FCC to holding only one reserve auction and one forward auction.

The bill, which is still in draft form, would further mandate reserve prices for the auction, pricing rules for TV broadcasters, and a sequencing of offers from broadcasters and bids from mobile network operators.

Congressional leaders also continue to discuss how much the treasury should receive after broadcasters are given incentives for their participation.

With an eye on deficit reduction, the Obama administration estimates that incentive auctions could raise as much as $28 billion.

Some experts believe the FCC, not Congress, is best positioned to make judgments about the percentage of revenues that should be set aside for deficit reduction, since the agency will be the one evaluating the supply-and-demand curves.

Congress could also err, some believe, by imposing restrictions on which broadcasters can participate in an incentive auction, such as Hispanic and rural broadcasters.

GOP Staffer Sees Benefit in More Mandates.

Speaking on the same panel, David Redl, counsel for the House Energy and Commerce Committee, was quick to defend his panel's bill.

Redl touted one provision in the discussion draft mandating “downward pressure” on the reverse side of the auction.

To Redl, this will ensure the auctions “do not simply become a way for licensees to attract the most from their position.”

If broadcasters want to relinquish their spectrum, Redl says, there should be competition for those dollars to leave the market.

“I don't think that all the language you see [in legislation] is policy language that couches the terms of what the FCC can do in an incentive auctions or viewed as some condemnation of the FCC or a lack of faith in the FCC,” Redl said. “The fact of the matter is, it is a political process and there are political realities to be dealt with. As we expand into a space like incentive auctions, which is an area that is brand new, there are certainly members who are concerned that the process be done in a way that fulfils congressional goals without unduly restricting the FCC. It doesn't have to be one or the other.”

FCC Seeks Flexibility.

The FCC's Kaplan responded that the commission staff “really know what it's doing” and should be given as much as much flexibility as possible.

“The FCC is an expert agency and somehow it has really gotten sucked into the political process, maybe even more lately than it has in the past,” Kaplan said. “Giving us maximum flexibility is the best way to ensure that we get the most money for the treasury.”

At the event, the ITIF released a report, Spectrum Policy for Innovation, which includes 10 detailed recommendations for policymakers on how to modernize spectrum policy.

“We're now in a situation where many of the initial assignments of spectrum are obsolete, so the task of spectrum regulation has become one of reassigning already utilized spectrum to new uses that have more social and economic utility than old ones,” the report states. “Spectrum incentive auctions are a quick and practical means of reassigning spectrum, so it's important that Congress expeditiously grants the FCC liberal authority to conduct them.”

Commenting broadly on the report, Larry Downes, a senior adjunct fellow for TechFreedom, a nonpartisan technology policy think tank, said the renewed debate about spectrum reallocation should not be a one-time debate.

“What we've seen over the last 10 years is the emergence of a new kind of network based on non-proprietary standards of the internet, digital and virtual,” Downes said. “We have seen all manner of network being swallowed by the internet, including television and radio and computing networks. What we're actually evolving towards is essentially a completely virtual network where new applications and new devices will attach themselves based on these non-proprietary standards at an accelerating rate.”

For the ITIF report, visit http://www.itif.org/files/2011-spectrum-policy-for-innovation.pdf.