FCC Plans for Incentive Auctions to Shake Up Broadcast TV & Mobile Broadband industries

On Friday, September 28, 2012, the FCC officially announced its long talked about “incentive auction process,” which will reclaim airwaves (AKA spectrum) now owned by TV broadcasters and auction them off for use in wireless broadband networks.  This concept was first introduced in the National Broadband Plan over two years ago, but no specific plan had been announced till yesterday. TV broadcasters that want to keep their spectrum  would be forced to relocate frequencies to different parts of the TV band, in a procedure called “repacking.”  Broadcasters would get some undisclosed portion of the spectrum sales from the Incentive Auctions.

The FCC said in a statement:

“Spectrum is our nation’s ‘invisible infrastructure,’ supporting mobile devices like smartphones and tablets that require much more spectrum than traditional cell phones to support the rapidly growing demands of consumers, businesses and entrepreneurs who increasingly rely on mobile Internet to communicate and innovate. For instance, today’s smartphones use 35 times more spectrum than traditional cell phones, and tablets use 121 times as much spectrum. This consumer demand puts a tremendous strain on the nation’s invisible infrastructure in ways that require innovative new approaches to spectrum policy in order to spur continued economic growth, and help maintain America’s global leadership in mobile.”

“As mobile device adoption continues to grow around the world, this incentive auction will be a model for many countries facing similar spectrum challenges.  These auctions are a market-based tool to repurpose broadcast television spectrum for mobile broadband by offering unique financial opportunities to broadcasters, including a portion of the auction proceeds for participants. The Commission expects a healthy and vibrant broadcasting industry to thrive after the auction, with expanded business opportunities for multi-platform growth in a more robust mobile ecosystem.”

 Also see:  http://www.fcc.gov/incentiveauctions

The commission estimates that mobile broadband traffic will increase more than thirty-fold by 2015. Without additional spectrum, FCC officials say that “consumers will face more dropped calls, connection delays and slower downloads of data.”


Authors Note:  Not all wireless network observers believe that more spectrum is needed.  At the Telecom Council’s TC3 Summit, Shared Spectrum Co. CEO Tom Stroup said that based on measurements his company has performed in major markets around the country, there is no spectrum shortage (in direct conflict with AT&T’s CEO Randall Stephenson who says AT&T needs a whole lot more spectrum to cope with exponential growth in mobile data traffic).  Instead,  Mr. Stroup maintains that most allocated spectrum is not used. He said that <20% of available and allocated spectrum is not in use at any one given time.

One wonders if spectrum-use sensing and sharing (AKA cognitive radio), rather than a reallocation of the airwaves (from broadcasters to wireless broadband operators), would be sufficient to alleviate the so called spectrum shortage crisis.

http://viodi.com/2012/09/24/summary-of-telecom-council-tc3-part-1-service-provider-investment-forum/


Next week, the commission will issue proposed rules for the incentive auctions.  After that, the FCC will seek public comments over the coming months.  The auctions are not expected until 2014, but commission officials and Congress have estimated that the process could generate $15 billion in proceeds. About $7 billion of that would be set aside to build a nationwide emergency communications network for public safety officials, a yet-unfulfilled recommendation of the 9/11 Commission.  Some of the proceeds (TBD) would go to broadcasters that vacated airwaves for the incentive auction.

“In this flat, competitive world, capital and talent can flow anywhere,” Julius Genachowski, the FCC chairman, said before the vote. “We’re in a global bandwidth race. It’s similar to the space race in that success will unleash waves of innovation that will go a long way toward determining who leads our global economy in the 21st century.”

Critics question whether the government should be paying broadcasters for spectrum they originally received for free.  Consumer groups and smaller carriers worry that the auction will tighten AT&T and Verizon’s stranglehold over the U.S. wireless market by transferring more of the nation’s valuable airwaves into their hands.  That’s exactly what happened at the FCC’s 700MHz auction over 4 1/2 years ago.  Here’s what we wrote after that much publicized event:

http://viodi.com/2008/03/03/has-the-700-mhz-auction-been-a-failure/

http://viodi.com/2008/04/11/fcc-700-mhz-auction/


Separately, the FCC commissioners voted unanimously (5 to 0) to begin a review of its mobile spectrum ownership policies, specifically whether it should revise its limits on how much spectrum any one wireless telecommunications company can own in a geographic area.

The FCC  now limits wireless operators to holding no more than one-third of an area’s available airwaves.

http://www.fcc.gov/guides/review-broadcast-ownership-rules

Big wireless telcos (AT&T and VZW) have said those rules, put in place more than a decade ago, should be changed to allow them larger spectrum holdings.  Smaller wireless operators want the FCC to keep limits on spectrum ownership, while also changing its counting method to give greater weight to the most attractive spectrum bands (like 700MHz), over which signals travel further and pass more easily through buildings, trees and other structures.

The new spectrum ownership rules will explore the FCC’s spectrum-screen, which it uses when reviewing spectrum transactions. If a wireless carrier acquires too much spectrum and violates the screen, the deal is more closely scrutinized.

“There is no question that it is time for the Commission to update its policies on measuring how spectrum aggregation impacts competition in the wireless industry,” said Commissioner Mignon Clyburn in casting her vote.

The FCC is seeking comment–the notice includes no tentative conclusions–on the following:

  • “Continuing the current approach to evaluating mobile spectrum holdings in the context of transactions and auctions-a case-by-case analysis, or moving to a different approach such as bright-line limits;
  • “Including additional spectrum bands in evaluating spectrum holdings;
  • “Updating the Commission’s geographic market analysis, including to consider the impacts of mobile spectrum holdings at the national as well as local levels;
  • “Whether the Commission should make distinctions among bands in assessing spectrum holdings; and
  • “Updating the Commission’s attribution rules.”

To read more see:

http://www.broadcastingcable.com/article/489612-FCC_to_Review_Spectrum_Screen.php

0 thoughts on “FCC Plans for Incentive Auctions to Shake Up Broadcast TV & Mobile Broadband industries

  1. Alan, thanks for reporting on this very important topic. The FCC clearly has the opportunity to shake things up by changing policy. Auctions are probably a better way to allocate spectrum than is giving away spectrum in sort of a homesteading model.

    Still, auctions are fraught with issues, such as

    – the size of the geographic block (larger blocks means you get rural areas that aren’t necessarily served by the winner who only wants the urban areas, while smaller blocks are probably harder to administrate)

    – Only established companies can effectively compete for the auction blocks and this especially favors incumbents, as they understand the rules and have the financial horsepower to win blocks.

    – By locking up airwaves, incumbents don’t necessarily have to worry about competition coming from entirely new areas, which could mean slower innovation and less pressure on pricing.

    – Auctions are a hidden tax. Granted, it is a tax on only those with mobile broadband connection, but the auction costs eventually will flow through to the end customers in the form of the prices they pay. And this is most likely a regressive tax, as the carriers will pass on their costs based on the market, not on the income level of the consumer.

    To your point, it seems like now is the time for the FCC to look closely at spectrum sensing technologies to allow spectrum to dynamically be assigned.

    Prior to another auction, a market trial of this approach might be a prudent approach to measure and compare the benefits of a spectrum management by technology, instead of by the FCC or by the constructs of an auction that favors the status quo.

    Of course, an automatic spectrum management approach could also automate and reduce the need for FCC intervention in spectrum management.

    As reference, here is the conclusion from an article on the cost of the DTV transition:

    “It will be interesting to see how economic historians view the digital TV transition. Hopefully, they will learn from it and be able to influence politicians and regulators the next time we have the opportunity to make such a historic shift in our communications’ infrastructure.”

    http://viodi.com/2008/05/13/dtv-transition/

    1. Ken, Great list of data points related to the hazards of FCC spectrum auctions. Especially like the one about it being a “hidden tax,” ultimately passed on to the consumer.

      Most journalists didn’t pick up on the FCC’s plan to review large carrier spectrum ownership limits, e.g. spectrum screen. That’s way overdue, IMHO, especially considering how much spectrum VZW and AT&T have acquired in last few years. Those two carriers hold 6 times more spectrum than all the other US carriers combined!

      My big concern is that AT&T and VZW might acquire even more spectrum in the near future, which would pretty much eliminate all competition they face for wireless broadband. Note that AT&T has been clamering for more spectrum for some time, while VZW just bought tons of spectrum from cablecos that gave up plans to build their own broadband wireless networks.

      Does anyone remember the results of the last big FCC licensed spectrum auction over 4 1/2 years ago? AT&T and VZW greatly increased their spectrum holdings at the expense of smaller wireless operators at that 700 MHz auction. Here’s what we wrote after that much publicized event:

      http://viodi.com/2008/03/03/has-the-700-mhz-auction-been-a-failure/
      http://viodi.com/2008/04/11/fcc-700-mhz-auction/

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