Lawmakers Weigh Evenly-Applied FCC Spectrum Auction Bidding Limits

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By Bryce Baschuk  

Dec. 10 --Spectrum stakeholders told lawmakers that they may be making progress in the hotly-debated issue of bidding restrictions related to the Federal Communications Commission's upcoming broadcast incentive spectrum auction.

The witnesses representing wireless carriers large and small Dec. 10 explained to members of the Senate Committee on Commerce, Science, and Transportation that if the FCC is to apply any auction mechanisms to prevent wireless companies from acquiring too much spectrum, the restrictions should apply evenly to all bidders. 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 Communications Inc. and AT&T Inc.--in the forthcoming auction.

Committee ranking member John Thune (R-S.D.) urged the FCC to resist “putting its thumb on the scales” by restricting the ability of bidders to bid for spectrum.

“Instead of exploring auction rules to arbitrarily limit or benefit certain carriers, the FCC has the ability to consider setting a limit on the amount of spectrum any single bidder can win in the incentive auction,” Thune said. “Such a limit, applying equally to every bidder, would at least allow all companies to have a fair shot at acquiring the spectrum they need while preventing any single entity from winning all the licenses.”

Sen. Richard Blumenthal (D-Conn.) said any “auction eligibility directives” should be neutral and fair. The commission “needs to adopt policy approaches that encourage the public interest,” Blumenthal said. “They may not be neutral to all participants involved but they should be fair.”

FCC officials are drafting auction rules that will enable TV broadcasters to voluntarily release spectrum in a reverse auction for wireless commercial broadband, in return for a portion of the proceeds from a subsequent forward auction of the relinquished spectrum. The remaining revenue generated from the forward auction of the spectrum to wireless carriers will also fund the $7 billion development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt. The 600 MHz spectrum band is prized by carriers because its frequencies are able to pass through walls with less attenuation, resulting in better in-building penetration.

FCC Position Unclear

It remains unclear if the FCC will implement spectrum caps or screens to prevent Verizon and AT&T from purchasing all the spectrum in the auction. Section 6404 of the Middle Class Tax Relief and Job Creation 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. In April, the Antitrust Division of the Department of Justice urged the FCC to consider “caps, weights, and other measures” to limit Verizon and AT&T's ability to outbid smaller wireless carriers for the broadcast spectrum.

Gary Epstein, the FCC's chairman of the Incentive Auction Task Force, said he didn't know what FCC Chairman Tom Wheeler or the other commissioners will do with regard to spectrum caps or screens. “I know the chairman has stated that the letter filed by the Department of Justice is something they look at and give persuasive weight to,” he said. “But they also give persuasive weight to multiple filings.”

“AT&T continues to believe that an open and unrestricted auction is the best way forward,” said Joan Marsh, AT&T's vice president of federal regulatory affairs. “If there is to be a limit it must be applied evenly to all participants,” she said. “If the goal is to ensure multiple winners it should be a rule that applies to all bidders.”

Marsh added that she thought the FCC's spectrum aggregation policies need to be updated and “everyone needs to understand the rules of the road clearly.”

'Making Some Progress.’

Steven K. Berry, president and chief executive officer of the Competitive Carriers Association, which represents Sprint Nextel Corp., T-Mobile U.S.A. Inc., and other small wireless carriers, said he was “encouraged by AT&T's statement that there could be rules on how much spectrum each carrier could purchase in the auction. Maybe we are making some progress,” he said. “No one or two carriers should be able to walk away with the whole pie,” Berry said.

“In addition to reasonable aggregation limits, spectrum must be made available in sufficiently small geographic areas to allow participation by rural, mid-size, and regional carriers, as well as national providers,” Berry said. The 600 MHz spectrum also must be interoperable, and policymakers should “reject bidding packages and blind bidding that may prevent competitive carriers from accessing spectrum,” he said.

Spectrum aggregation concerns can be addressed in “less restrictive ways that have been proposed by T-Mobile and Sprint,” said Hal Singer, a senior fellow at the Progressive Policy Institute. “A cap that hits all bidders equally would mitigate that concern.”

Harold Feld, senior vice president of Public Knowledge, said the FCC should embrace a “no piggies” rule that would limit the amount of licenses that bidders can purchase but not exclude any bidders. Feld also stumped for the importance of preserving unlicensed spectrum use in the guard bands between the auction's resulting spectrum bands.

2015 Auction Deadline

Sen. Mark Pryor (D-Ark.) said it is important for the commission to keep Wheeler's new 2015 auction deadline. “The certainty provided to all parties from a clear timeline is important,” Pryor said. He added that it is important to get the auction's software and hardware working correctly in order to hold a successful auction.

Wheeler said the commission would delay the auction until mid-2015 in order to provide more time to perfect the operating system and software that are being developed to run the complicated auction, he wrote in a Dec. 6 blog post. The announcement marked a departure from the auction schedule laid out by Wheeler's predecessors, former acting Chairwoman Mignon Clyburn and Chairman Julius Genachowski, who both said the spectrum auctions would be held in 2014. Wheeler noted his intention to prevent technical disruptions like those that bogged down the administration's recent roll out of the Healthcare.gov website, during a speech delivered at Ohio State University.

Thune said he agreed with Wheeler's decision to delay the broadcast spectrum incentive auctions until 2015. “It is important for the auction to be completed as soon as possible, but one lesson from the disastrous rollout of Healthcare.gov is that a short delay of this complicated effort may be justified,” he said. Epstein said the commission is “researching, developing and retesting” the auction's operating system and software in order to “ensure that they meet the strictest performance requirements.”

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