Welcome to the first post in our SpectrumWatch series, which will provide updates on developments in spectrum policy and regulation.
Earlier this year Congress passed legislation authorizing the FCC to create the first-of-its-kind incentive auction, in which TV broadcasters may bid on compensation to give up spectral license rights for auction to mobile wireless carriers. The incentive auction and its outcome have important stakes for broadcasters ― both those who volunteer to sell their spectrum rights at auction and those who are “repacked” to a new channel assignment ― as well as wireless carriers, who are depending upon the auction to make additional spectrum available for 4G networks.
Throughout the summer the FCC has been working hard to develop proposals for the rules that will govern the auction, which by all accounts will be the most complex spectrum auction since the FCC first gained auction authority in 1993. We expect the FCC to release those proposals and solicit comment on them as early as next month.
By way of background, the incentive auction legislation directs the FCC to create two auction processes. First, broadcasters may bid in a “reverse” auction on the compensation they would be willing to accept to relinquish spectrum rights. Broadcasters may offer to relinquish all of their spectrum rights on a channel, relinquish some spectrum rights and channel share, or move from UHF to VHF (which has inferior propagation characteristics for digital television). Second, mobile broadband service providers bid in a “forward” auction to buy the newly-available licenses.
The legislation also authorizes the FCC to engage in a one-time “repacking” of the television spectrum band. The FCC’s repacking authority is subject to protections intended to ensure that broadcasters who do not participate in the auction can continue to provide free over-the-air service to their communities. In addition, Congress established a $1.75 billion fund to cover repacking relocation costs for broadcasters.
The FCC currently is preparing to take important steps to bring the incentive auction to life. It has already formed the Incentive Auction Task Force. The issues to be tackled in the proposed rules are some of the most complex in spectrum history — for example, the sequencing and matching up of ‘reverse’ bids by broadcasters with ‘forward’ bids by wireless carriers potentially creates a challenging “chicken-and-egg” problem that will require innovative solutions. We understand that the FCC has been hard at work throughout the summer in developing proposals to that end, which as noted will be unveiled as early as September. Once those rules are released, a host of interested stakeholders will weigh in with their comments — leading, all parties hope, to an incentive auction that serves the interests of broadcasters, wireless carriers, and the public at large. We will continue to update you on the incentive auction process as it develops.