May 5 — House Republicans slammed the Federal Communications Commission's “reckless” proposal to set aside certain spectrum holdings for smaller carriers in its 2015 broadcast spectrum auction.
In a May 2 letter sent to FCC Chairman Tom Wheeler, every Republican on the House Energy and Commerce Subcommittee on Communications and Technology said the agency “must not be in the business of picking winners and losers by excluding parties from the auction or constraining parties' ability to bid.”
The letter came as the agency prepares to vote on rules that will govern the world's first broadcast spectrum incentive auctions in 2015 as authorized by the Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-96). An FCC spokesman declined to comment on the letter.
The law requires the FCC to hold a reverse auction that will enable TV broadcasters to voluntarily release their spectrum in return for a portion of the proceeds from a subsequent forward auction of the relinquished spectrum. The remaining revenue generated from wireless carriers in the forward auction is to be used to fund the $7 billion development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt.
The commission revealed last month that it plans to reserve a portion––up to 30 megahertz (MHz)––of broadcast spectrum for wireless carriers that own less than a third of the sub-1 gigahertz (GHz) licenses in U.S. markets. The goal of setting such limits––which would primarily affect Verizon Communications Inc. and AT&T Inc.––is to prevent the industry's behemoths from using their market power to outspend smaller carriers in the auction, FCC officials have said.
Wheeler has said he wants to ensure that more carriers have access to low-band spectrum, which has excellent propagation qualities, in order to improve competition and choice in the wireless marketplace.
The FCC plans to vote on the proposal (GN 12-268), (WT 12-269) at its May 15 open meeting and Wheeler plans to testify before the subcommittee at a May 20 hearing.
Republican members said Wheeler's proposal is “in conflict with the plain language of the statute,” which members of the subcommittee helped craft in 2012.
“This type of market manipulation has been tried before to the detriment of auction participation, revenue, and wireless broadband progress,” the letter said. “We have serious concerns with the commission's intended course of action and urge you to adopt auction rules that allow the free market to decide the fate of the broadcast band.”
The Republican letter follows a recent Democratic member letter that urged Wheeler to craft an auction in a way that maximizes auction participation by all bidders.
Republicans urged Wheeler not to tweak an already complicated auction because his efforts could deter overall participation and thus inhibit the agency's ability to fund FirstNet and pay down the nation's debt.
“Artificial set-asides, restrictions on bidder eligibility, and contortions in auction design alter the playing field and distort the outcome,” the Republican letter said. “The commission is not better able than the market to dictate the worth of spectrum and attempts to do so jeopardize the success of the auction.”
“Because this auction is voluntary, it requires both willing buyers and willing sellers,” the letter said. “There may not be enough willing sellers––at any price––to clear more than 60 MHz for auction. Structuring the auction in an attempt to force a particular outcome is bad policy; when that outcome is potentially impossible, it borders on reckless.”
Executives at Verizon and AT&T recently argued that the commission's spectrum aggregation rules would offer an unfair advantage that could permit carriers like T-Mobile US Inc. and Sprint Corp. to buy spectrum at a discount.
The Competitive Carriers Association, which represents T-Mobile, Sprint and smaller, rural wireless carriers, was not entirely pleased with the FCC's spectrum rules either.
The CCA said the agency's proposal would exclude some regional carriers from bidding on reserved spectrum holdings in the auction because they have significant spectrum holdings in some markets, according to a recent FCC filing. As a result the group is urging the FCC to further specify that bidding on reserved spectrum be subject to both local and national eligibility requirements.
AT&T Vice President of Federal Regulatory Affairs Joan Marsh said the “uncomfortable box that CCA finds itself in is not a surprise to us,” according to a blog post. “Low band arguments have largely been proffered by carriers that are seeking little more than auction advantages and preferences––and an auction environment where they can bid free from robust bidding competition.”
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