In response to a request for comments, television broadcasters, wireless carriers, and internet companies inundated the Federal Communications Commission (FCC) with letters and comments offering differing approaches to the way the agency should conduct a so-called “incentive auction” of spectrum, which will be first of its kind to be held in the nation.
The FCC is currently writing rules for the auctions, in which the commission will attempt to reclaim airwaves now used for broadcast television and then auction them off to carriers led by Verizon Wireless and AT&T Inc., with a portion of the proceeds paid to the broadcasters.
While the auctions are not expected until 2014, much work lies ahead on specific details.
“It is essential that the commission craft rules that make the most of this potential chance to repurpose significant amounts of new, nationwide spectrum,” CTIA, the wireless industry's trade association, said in a filing Jan. 25, the deadline for the first round of public comment.
“By adopting a carefully crafted band plan and by enacting rules that encourage all parties to participate, the commission will ensure that the wireless industry is enabled to continue its unfettered path of innovation and investment, to the great benefit of American consumers and the U.S. economy,” the association said in its filing.
For much of the last four years, federal policymakers worked aggressively to find swaths of frequencies that could be made available to wireless carriers to help meet the ever-increasing consumer demand for smartphones and tablet computers, which require more radio spectrum to carry data transmissions--significantly more than what is needed to carry cellular telephone calls.
Congress, in the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-96), authorized the FCC to hold incentive auctions, but left many of the complex details to be worked out by the agency and industry.
CTIA, in its comments, urged the FCC to first place a high priority on making any reclaimed broadcast spectrum available for licensed use.
The commission should then develop a band plan “that maximizes the amount of spectrum made available without inhibiting or interfering with existing systems,” CTIA said.
The FCC also should identify spectrum for unlicensed use in “guard bands,” to the extent “technically feasible,” the association said. Then, the commission should adopt simple, transparent processes for both the reverse and forward auctions to “encourage maximum participation” by both TV stations and wireless carriers. And finally, CTIA said, the commission should provide potential bidders with as much information as possible about the spectrum that is available for bid, as “bidders are more likely to make significant investments when they possess greater information.”
Verizon Communications Inc., and Verizon Wireless, a CTIA member, agreed.
Chief among the challenges for the FCC to address, the companies noted, is how relocate--or “repack”--TV stations that choose not to participate in the auction.
As soon as possible, the FCC should announce a “spectrum clearing target” of at least 120 MHz, the amount contemplated when the FCC released the National Broadband Plan in 2010, they said.
More specifically, the companies noted, the FCC band plan should maximize the amount of paired spectrum made available for the forward auction by offering equal amounts of uplink and downlink in paired 5x5 MHz blocks, with the paired uplink constituting the upper channels adjacent to the lower 700 MHz band to minimize interference problems.
In addition, AT&T Inc. called on the FCC to write rules that encourage as many wireless carriers to bid on spectrum as possible.
“The commission should reject any proposal to restrict the participation of particular carriers in these auctions on the basis of their existing spectrum holdings,” AT&T wrote. “Instead, if a winning bidder's acquisition of new spectrum would bring its total holdings in a market to a level that is determined to threaten competition, that licensee should be free to choose which spectrum it will divest to remedy the perceived anticompetitive harm. But excluding well-capitalized carriers from fully participating in this auction would undermine forward-auction competition, suppress bid levels, and threaten outright auction failure.”
The issue of how much spectrum one carrier could, and should, be able to bid on has been a central issue in the debate.
Sprint Nextel Corp., the third-largest carrier in the United States by subscribers, addressed the question head-on its comments.
“As part of its effort to make the most spectrum available to promote wireless competition, the commission should implement a cap on spectrum holdings below 1 gigahertz…including potentially imposing a limit on the amount of spectrum any bidder can acquire in the incentive auctions--particularly for bidders already possessing undue concentration of low-band spectrum licenses,” Sprint Nextel wrote in its comments, taking aim at Verizon and AT&T.
The Competitive Carriers Association, which represents small, rural wireless carriers, raised the same concerns.
The group called on the FCC to adopt a spectrum “screen” proposal to “more accurately identify instances of spectrum aggregation and should use every tool at its disposal to ensure pro-competitive outcomes at future auctions.”
As expected, one issue that came up in public comments was the FCC proposal to auction the spectrum given up by the broadcasters in 5-MHz blocks, with 6-MHz “guard” bands to prevent interference between mobile broadband services and broadcast TV services, spectrum that would be made available for unlicensed use.
As part of the rulemaking process, the agency also is considering making available an additional 30 MHz of spectrum on an unlicensed basis.
Republican lawmakers and the wireless carriers want the FCC to auction--and re-license--as much spectrum as possible. Auctioning the spectrum will mean a monetary return to the general treasury, while allotting spectrum for unlicensed uses will not, they note.
Weighing in on the issue, the Computer and Communications Industry Association, a lobbying group that represents Google, Facebook, Microsoft, eBay, and Yahoo, said the FCC should permit the proposed guard bands for unlicensed use to be made on both a nationwide and a noninterference basis.
“Here, the commission's rules for TV 'white spaces' provide a useful construct,” the group wrote, referring to the vacant spectrum in and around TV channels, which Google co-founder Larry Page has called “WiFi on steroids.”
“White space devices are authorized on an unlicensed basis nationwide,” the group wrote, “and the commission developed technical rules for minimizing interference that seem easily adopted for the 600 MHz band. In addition, the treatment of devices in the white spaces rules--unlicensed use on a non-interference basis--should serve as the model for allowing use of the proposed 6+ MHz guard bands in re-acquired 600 MHz spectrum.”
Two of the group's members, Google and Microsoft, keyed in on this issue, lauding the FCC for proposing to designate substantial new sub-1-GHz unlicensed frequencies for mobile broadband services, while protecting access to the TV white spaces in the post-auction broadcast band.
“Our companies offer technologies that span the entire wireless economy--including mobile phones, tablets, mobile operating systems, cloud-based services, machine-to-machine services, maps, and gaming,” the two companies wrote in a joint filing. “These businesses depend on access to robust licensed services as well as access to robust unlicensed spectrum resources. One without the other simply will not allow U.S. businesses to meet accelerating consumer demand for wireless products and services.”
In defense of the proposed FCC approach, Mark Cooper, director of research at the Consumer Federation of America, said that setting aside spectrum for unlicensed use actually is not likely to significantly reduce auction revenues.
“If the supply of spectrum for exclusive licenses at auction is reduced, the cellular providers will bid up the price of the spectrum that is auctioned, substantially if their claim of a 'spectrum crunch' is to be believed,” Cooper wrote in comments. “Because licensed and unlicensed have strong complimentary, the availability of unlicensed increases the value of licenses…With almost two-thirds of the wireless data traffic being off-loaded onto Wi-Fi and one-third of the much larger amount of fixed broadband data being extended with Wi-Fi, the value of data traffic in the unlicensed space is not only well in excess of $36 billion, but more importantly, is substantially larger than the value of wireless data traffic in the cellular, licensed space.”
As the FCC writes its rules, Rep. Greg Walden (R-Ore.), chairman of the House Energy and Commerce Communications and Technology Subcommittee, is expected to exercise vigorous oversight of the FCC plan for unlicensed spectrum.
One lingering question for the FCC is how many broadcasters actually will participate. Nothing in the Middle Class Tax Relief and Job Creation Act requires broadcasters to return their spectrum.
One group filing comments calling itself the Expanding Opportunities for Broadcasters Coalition said there are 40 such broadcasters ready to give back their spectrum if the price is right.
The group, led by Preston Padden, a former FOX, ABC, and Disney executive, said incentive auctions will not succeed unless the commission adopts rules designed to facilitate widespread broadcaster participation, especially in the largest markets.
“In most markets, the FCC can assemble 120 MHz of broadcast spectrum without buying out any stations,” the coalition wrote. “But the value of that spectrum will be dramatically diminished if it is not part of a continuous 120 MHz nationwide allocation that includes the major markets. As a result, the payments to broadcasters in the very biggest markets are the key to unlocking the value of the spectrum assembled in most of the country through repacking. It is critical that the reverse auction procedures are designed to permit broadcasters to recognize the market value for any spectrum rights they choose to relinquish. This entails both encouraging price discovery through a descending clock auction and enticing broadcaster interest by offering high initial bid amounts and allowing the auction mechanism to identify actual market prices. This also requires resisting the urge to place any constraints upon the forward auction that will have the effect of limiting the amount of revenue available to compensate broadcasters, cover auction and relocation expenses, and fund a national public safety broadband network.”
Under the Middle Class Tax Act, broadcasters interested in participating have three options: contribute their full 6 megahertz allocation of spectrum, agree to share the same channel with another broadcaster, or move from UHF to VHF. Nearly $2 billion will be made available to compensate TV stations that choose not to take part in the auction and are then relocated to other channels.
The National Association of Broadcasters (NAB), whose executives told reporters Jan. 25 that the group will advocate on behalf of members that want to remain in broadcasting, said they were pleased to reach a consensus with wireless carriers and chip makers on core principles, especially avoiding broadcast operations in the “duplex gap” between mobile uplink and downlink bands.
The group continues to be concerned about the repacking process.
In its comments, the NAB said repacking is critical to “achieving a positive outcome both for the auction and the future strength and innovative capacity of the broadcast industry.”
“At this stage, however, it is evident that progress on the repacking process is far behind the design of the auction itself,” the group wrote. “In particular, the Commission needs to focus on (a) conducting and completing international coordination with Canada and Mexico, and (b) creating and publicly vetting its repacking methodology. As a matter of both law and good public policy, this process cannot move forward until these critical elements of repacking are fully addressed and resolved.”
Filings in docket 12-268 can be found at http://apps.fcc.gov/ecfs/comment_search/input?z=qglon.
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