Spectrum Auction Options Abound

An op-ed by Federal Communications Commission (FCC) Chairman Julius Genachowski was published on September 16, 2012 in TechCrunch.com, explaining why additional spectrum is so critical to the economy. Highlighting the job creation impact of improved mobile broadband capabilities in the U.S., and citing the growing “apps economy,” which alone has created nearly 500,000 jobs, Chairman Genachowski estimated that nearly 1.6 million U.S. jobs have been created over the past five years due to innovations in mobile technology.

Reinforcing Chairman Genachowski’s estimates are the results of a September 2012 study by Deloitte , which found that between 1994 and 2000, spectrum auctions conducted by the FCC have tripled the amount of available spectrum for commercial use, prompting a 250 percent increase in investments and a 300 percent increase in jobs in the mobile marketplace. The study’s authors make several recommendations they believe will help the U.S. maintain its lead in mobile broadband.

The Deloitte study suggests that policymakers should address not only potential spectrum deficits through spectrum auctions, but also look for new approaches to spectrum management. Policymakers should also resolve the uncertainties that currently reside in spectrum management; consider commercially available spectrum as an investment toward improving the economy and increasing jobs; combine traditional spectrum auctions with a viable secondary spectrum market; allocate large blocks of spectrum based on technology driven criteria; and, create a principles-based license renewal process, which would align license holders and spectrum policies with changing technology and economic realities.

Congress already started down this path when it included provisions to authorize spectrum incentive auctions in the Middle Class Tax Relief and Jobs Act enacted in February 2012. Additionally, the FCC approved Verizon’s bid to purchase Advanced Wireless Spectrum (AWS) in a secondary market transaction from a consortium of cable companies that include Comcast, Time-Warner Cable, and Bright House Networks on August 23, 2012. This purchase will enable the company to provide additional mobile broadband build out to provide improved services to its customers. Such innovative approaches to managing spectrum should be encouraged by the FCC.

As part of the upcoming TV broadcast spectrum auction process, broadcast television stations are being asked to voluntarily sell unused spectrum back to the government to be auctioned for mobile use. One particular challenge to the success of the voluntary spectrum auctions will be whether TV stations are willing to participate in the auction, and if they choose not to, what would be done differently. Throughout the legislative process, broadcasters have held that these auctions must be strictly voluntary on the part of broadcasters.

Along with preserving the voluntary nature of the auctions, the Middle Class Tax Relief and Jobs Act preserved viewers’ access to broadcast signals, prevents the FCC from involuntarily moving stations from the UHF to the VHF band, permits only one incentive auction for broadcast spectrum, reimburses stations for costs associated with relocating to new channels, and safeguards access to TV station signals along Canada and Mexico. However, the issue of managing stations along the borders continues to be a concern, as highlighted in a September 14, 2012 article in Broadcast and Cable News. According to this article, it appears that spectrum auctioned from these stations would need to have a separate set of rules to help manage the cross-border effects.

In July 2012, the President’s Council of Advisors on Science and Technology (PCAST) issued a report to the President offering recommendations on other options for spectrum management including spectrum sharing between the federal government and private entities. The PCAST spectrum sharing proposal envisions a “spectrum super-highway” shared by both government and commercial entities, with the government having the ability to pre-empt the private sector for public safety, emergency medical rescue, or national security purposes. On September 12, 2012, the FCC announced it will begin to implement one of the provisions from the PCAST report by freeing up 100 MHz of spectrum in the 3.5 GHz band currently used for radar and allocating it for shared small cell use.

However, not every agency may be willing to share spectrum with the private sector. A September 15, 2012, article in RedOrbit cited House Energy and Commerce Committee members calling for more detailed analysis before moving forward with the PCAST proposals based on testimony presented to the committee by GAO. On September 13, 2012, before the Energy and Commerce Subcommittee on Communications and Technology, GAO Director for Physical Infrastructure Issues Mark Goldstein listed several barriers to spectrum sharing. These barriers include concerns about risk to an agency’s mission, costs to both the federal and non-federal users, spectrum frequencies being used by more than one agency or program, limited federal budgets that prohibit investments in new technologies that would allow spectrum sharing, and a lengthy approval and enforcement process for sharing spectrum. Additionally, Goldstein stated that “While federal spectrum users often share spectrum among themselves, they may have little economic incentive to otherwise use spectrum efficiently, including sharing it with nonfederal users.”

In other words, the upcoming voluntary spectrum auctions are the most immediate means to increase spectrum for mobile broadband use. On September 28, 2012, the FCC voted on a proposed rule (FCC 12-118) for the auctions. The proposed rule is the first stage in the incentive auction process and will include a voluntary reverse auction for broadcasters to sell spectrum back to the government to be repurposed; the repackaging of spectrum in order to reorganize the spectrum bands into contiguous bands; and the forward auction. The FCC will be seeking comments on the proposal to further develop several issues key to the final make-up of the voluntary incentive spectrum auction process. It is expected that the final report and order will be voted on sometime in 2013, with the spectrum auction process slated to begin in 2014.