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

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By Paul Barbagallo  

Congress should give the Federal Communications Commission as much flexibility and authority as possible in designing so-called “voluntary incentive auctions” of spectrum, a senior agency official said Jan. 17.

Wireless Competition Bureau Chief Rick Kaplan, delivering the keynote address at BroadbandBreakfast.com's Broadband Breakfast Club, said the FCC has had success in auctioning spectrum since the 1990s. He said the FCC should be given deference to develop this new type of auction, under which the FCC would reclaim airwaves from television broadcasters and auction them off to mobile network operators, sharing some of the proceeds with TV stations that volunteer to cease broadcasting and, ultimately, give back their spectrum to the government.

Kaplan was echoing recent comments made by FCC Chairman Julius Genachowski, who has been vocal in opposition to House GOP spectrum legislation that passed the House in December as part of a tax extenders package.

“While unlicensed spectrum doesn't generate direct auction revenue for the Treasury, its positive impact on the economy as a whole is undeniable.”

Rick Kaplan, FCC Wireless Competition Bureau Chief  

Like Genachowski, Kaplan said the agency's two major “sticking points” with the GOP bill are restrictions on the FCC's ability to “foster competition in the market” and to decide how much spectrum should be dedicated for “unlicensed” use.

“While unlicensed spectrum doesn't generate direct auction revenue for the Treasury, its positive impact on the economy as a whole is undeniable,” Kaplan said. “The most famous example is Wi-Fi [wireless fidelity], which utilizes spectrum that has not been licensed to any entity. Where we would be without this incredible innovation, and can we actually afford to miss the next one just like it?”

Unlicensed spectrum has enabled countless wireless devices and services, such as baby monitors, garage door openers, alarm systems, and smart grid monitoring. Roughly 20,000 different devices have been certified by the FCC for use in the Wi-Fi band, three times that in any other frequency band.

‘Every' Carrier Needs More Spectrum.

Mobile network operators also increasingly rely on unlicensed spectrum to offload traffic from their data networks. AT&T Inc. alone operates 27,000 “hot spots” in the United States.

“Making more room in the broadcast spectrum for unlicensed uses, even just a relatively small amount, makes good sense if we aim to be the tech-savvy, ahead-of-the-curve world leader in mobile broadband,”Kaplan added.

Turning to the second issue, Kaplan said Congress should avoid “binding the hands of the FCC” and dictating which companies can participate and which cannot.

Rep. Greg Walden (R-Ore.), the chairman of the House Energy and Commerce Communications and Technology Subcommittee, included a provision in the GOP bill to prevent the FCC from imposing spectrum “caps”on auction bidders.

Walden fears that if the FCC is given carte blanche by Congress to design incentive auctions, the agency may decide to place limits on how much spectrum Verizon Wireless and AT&T, the two largest wireless carriers in the country, could buy in any given market. Under such a scenario, the FCC could even disqualify the companies from participating in bidding altogether.

“The bottom line for the FCC—and I can say this unequivocally—is that we recognize that to serve their customers in the 21st century, every wireless carrier will need more spectrum. And that means everyone,”Kaplan said, “from the biggest wireless providers, down to the mid-sized carriers, and all the way to the small and rural providers. Thus, we have never envisioned blocking out any carrier from an incentive auction. Spectrum constraints are ubiquitous and affect everyone.”

Specter of Usage Caps.

At the same time, Kaplan warned that without some restrictions, the largest carriers could assume control of all the “prime” spectrum.

Frequencies in the broadcast TV spectrum band travel farther and penetrate walls and windows far more effectively than frequencies in other spectrum bands, allowing wireless carriers to provide their services—particularly mobile broadband services—with fewer cell sites.

“If the FCC is powerless to deter an outcome where one or two companies win all of the spectrum licenses [in an auction], that result could cripple competition in the marketplace,” Kaplan said.

During a question-and-answer session, Kaplan said that if Congress fails to approve legislation authorizing incentive auctions, wireless carriers may be forced to raise rates and institute data usage caps.

“[Companies] are going to have to manage their networks in different ways as time goes on and there is such a great demand for capacity,”Kaplan said. “As this demand grows, there's going to have to be some way to control it. Those are things we want to avoid.”

Kaplan's remarks come as Democrats and Republicans continue to try to first iron out differences in their two versions of legislation. Action is expected sometime in the first half of the year on a bill, congressional sources say.