Industry Seeks Certainty on Spectrum Auction Plans from Incoming FCC Chairman

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By Bryce Baschuk  

Oct. 22 --President Barack Obama's nominee for Federal Communications Commission Chairman, Tom Wheeler, should provide industry participants with greater certainty as to how the commission will structure its upcoming spectrum incentive auction, lawyers representing carriers and broadcasters said at an event hosted by the Institute for Policy Innovation.

The commission is drafting rules for the first-ever auction in which TV broadcasters can voluntarily give up spectrum that the FCC will then subsequently auction to wireless carriers for mobile broadband use. The proceeds of the auction, which is scheduled to take place in 2014, will be used, in part, to compensate broadcasters for their spectrum, fund the development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt.

John Hane, an attorney with Pillsbury Winthrop Shaw Pittman LLP, said he would like to see Wheeler work with broadcasters to make sure that those who don't auction their spectrum aren't harmed when the band is repackaged.

“I would like to see him give assurances that the broadcasters that remain post-auction are not going to be squeezed in subtle ways, which I am almost certain is part of the planning,” Hane said.

The timing of Wheeler's confirmation has been held up by Sen. Ted Cruz (R-Texas), who last week placed a hold on the nominee to be chairman over concerns about Wheeler's views on disclosure of spending on political advertising.

Broadcasters Thinking Twice?

Broadcasters' biggest concern is that the FCC is planning to conduct the auction in a way that will attend to the needs of wireless carriers and “throw the broadcasters under the bus,” Hane said. “That is the biggest single failure of the whole incentive auction process; [the FCC] is simply trying to get these broadcasters out of the way, to the side, so everything can get better.”

“The FCC has given absolutely no thought to transition issues,” Hane added. “Not only this transition, post-repacking, but future transitions.”

Broadcasters may think twice about participating in the spectrum auctions if the FCC places bid restrictions on AT&T Inc. and Verizon Communications Inc., said Ari Meltzer, an associate at Wiley Rein, LLP.

Lawmakers, lobbyists and academics have sparred over whether the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-96) permits the FCC to restrict the participation of the two largest U.S. wireless carriers--Verizon Wireless and AT&T--in the forthcoming auctions. Section 6404 of the Act added a new paragraph 17 to section 309(j) of the Communications Act that preserves the FCC's authority to protect against undue concentration of spectrum holdings.

Auction Bidding Restrictions

It would be good to have “some certainty and to know fairly quickly whether the commission really is seriously considering restricting certain bidders in the auction,” said Charla Rath, vice president of wireless policy development at Verizon.

“There has been a lot of push on actually why the two largest carriers should be excluded or restricted in some way versus the next two largest carriers,” Rath said. “We are worried about that. We continue to believe it doesn't make any sense to place restrictions on the largest two carriers.”

In April, the Department of Justice urged the agency to consider “caps, weights, and other measures” to ensure that smaller wireless carriers can gain access to spectrum that is auctioned.

If AT&T and Verizon are restricted from bidding, “there is going to be less money potential for the broadcasters and they may not be willing to sell their spectrum and the auction could be less valuable or could fall apart,” said Bret Swanson, president of a technology research firm called Entropy Economics, LLC.

“For a broadcaster to say 'I am going to give up my spectrum, I am going to effectively sell out my business,' that is a big commitment for broadcasters to make,” Meltzer said. “If broadcasters think there is a good chance the auction is not going to work it is not worth their time, it's not worth their commitment and it's not worth the instability it will create to their business model to even take the steps to participate in the auction.”

'Progress' with 1755-1780 MHz

Verizon's Rath, meanwhile, said the company is working closely with the federal government to use spectrum in the 1755-1780 MHz band in a “more meaningful way.”

Earlier this month, the FCC and the departments of Commerce and Defense announced that they are working to repurpose the 1755-1780 MHz band in time for it to be paired for commercial auction with the 2155-2180 MHz band, also known as the AWS-3 band, which is required to be auctioned by the FCC by February 2015. The 1755-1780 MHz band is used by several agencies including Defense for communications systems related to aircraft pilot training, unmanned aerial vehicles, military satellites, and precision-guided munitions training, among other uses.

“Absolutely I think they are making great progress there and working with the right people,” Rath said. “I'm encouraged by a willingness to see them take these issues on.”

Rath noted that there probably will be some sharing in the 1775-1780 MHz band, “but not in the kind that the administration is thinking of.”

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com