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Cable Technology Feature Article

November 04, 2013

FCC Urged to Forego Bidding Restrictions and TV Spectrum Scoring in Next Year's Incentive Auctions

By Tara Seals, TMCnet Contributor

A pair of broadcaster-friendly organizations has jumped in with a new lobbying effort in front of the Federal Communications Commission (FCC (News - Alert)) to implement a spectrum incentive auction framework, ahead of the upcoming sale of local broadcasters’ unused analog TV signals to mobile carriers.

The FCC is preparing to do a two-sided auction for the spectrum, in an effort to pay broadcasters a fair value for their assets, before selling it to the highest-bidding mobile carriers.

Reacting to bidding restrictions that the FCC is considering in an effort to promote competition, The Expanding Opportunities for Broadcasters Coalition (EOBC) and the Consumer Electronics Association (CEA) are calling for a framework that supports “open participation by all wireless firms while meeting the price expectations of potentially-willing TV broadcast sellers for their spectrum as repurposed for wireless broadband, maximizing the benefits for consumers and public safety.”

The FCC is contemplating a cap on the amount of spectrum that AT&T (News - Alert) and Verizon could bid for—which is a position championed (unsurprisingly of course) by Sprint and T-Mobile. It’s also considering “scoring” the spectrum on a market-by-market basis, by taking into account the relative values of low-band and high-band spectrum and population covered.

The report argues that FCC bidding restrictions could reduce incentive auction revenues by nearly $5.8 billion, even if restrictions are placed on just 50 percent of the available spectrum, because it’s called an incentive auction for a reason: TV stations need a reason to put the airwaves up for sale. A proposal to lower the prices paid to broadcasters for their spectrum licenses by scoring TV stations would give low-scoring affiliates an incentive to forego participation in the auction and pursue alternative options in the marketplace.

“New options are emerging for TV stations to use their existing spectrum licenses,” said Preston Padden, executive director, EBOC. “To attract the critical mass of broadcasters necessary to make the auction a success, we need competitive bidding among all wireless carriers for every license and the assurance that every TV station will be fully compensated for its spectrum rights.”

The report also analyzes previous FCC auctions that imposed bidding restrictions on nationwide mobile spectrum and argues that such moves have failed to spur widespread, long-term participation by small firms in the wireless industry as originally intended. Also, it postulates that restrictions could delay the provision of new wireless services to 68 percent of the public by a weighted average of nearly seven years.

The report noted that Sprint and T-Mobile (News - Alert) are big enough to not need special protections. “The Department of Justice (DOJ) has not offered evidence that an open auction has the potential to cause harm to Sprint (News - Alert) and T-Mobile in the competitive marketplace,” the report reads. “After an exhaustive review of market data in 2011, the DOJ concluded that all four nationwide carriers (Verizon (News - Alert), AT&T, Sprint, and T-Mobile) are especially well positioned to drive competition in the wireless marketplace, at both the national and local levels.”

Within the last year, Sprint and T-Mobile have further strengthened their competitive positions by acquiring substantial amounts of additional investment capital, secondary market spectrum and new customers in the marketplace.

“The success of the incentive auction depends on the ability of every TV station to sell its spectrum license for its value in the wireless broadband market and the ability of every bidder to compete for all available spectrum,” said Fred Campbell, former chief of the FCC’s Wireless Telecommunications Bureau, and author of the report. He also said, “Maximizing the participation of TV stations and wireless firms in the incentive auction is the surest way to fully realize the transformational potential of mobile broadband services for consumers and support the build out of FirstNet, an interoperable, next-generation communications network for America’s first responders.”

Edited by Ryan Sartor

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