FCC Votes Unanimously to Launch Incentive Auction Rulemaking

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And so it begins. The FCC voted unanimously on Friday to begin the process of reclaiming broadcast spectrum to auction for wireless broadband use.

That came in the form of a notice of proposed rulemaking outlining the FCC's framework for an auction that will reclaim spectrum from broadcasters, and then auction that reclaimed spectrum to the highest bidder, who are expected to be wireless companies clamoring for more spectrum.

The auction will consist of three parts: broadcasters offering up spectrum for the lowest price, repacking the remaining stations into smaller spectrum quarters, and then auctioning the freed-up spectrum to the highest bidder.

As expected, the FCC did not release a model for that repacking, and said it is seeking comment on just how to do that.

Commission Republicans had some questions about the order, including whether it freed up too much spectrum for unlicensed -- which would affect how much money was made from auctioning the spectrum -- and whether the auction would be able to cover all of broadcasting and cable's relocation expenses, and whether it would discourage larger bidders.

Commissioner McDowell was concerned about whether the FCC was setting aide too much unlicensed spectrum and to the discussion of caps on spectrum holdings. Both could reduce the take from the wireless portion of the auction.

FCC chairman Julius Genachowski called the auction proposal a "big deal," and the world's first spectrum incentive auction, which would result in both more spectrum for wireless, and a still-healthy broadcast business that could lead video content into the 21st century.  He said the auctions have gone from gone from idea to bold law to a thoughtful, thorough, path-breaking proposal.

Commissioner Jessica Rosenworcel called the incentive auctions a "complex but critical task." She said their success would hinge on four principles: simplicity, fairness, balance and public safety.

The last is a particular concern. As the top telecom advisor to Senate Commerce Committee Chairman Jay Rockefeller (D-W. Va.) Rosenworcel was instrumental in the legislation creating the incentive auctions, some of the proceeds of which will go toward the building and operation of an interoperable broadband emergency communications network.

Rosenworcel said fairness was key when dealing with the broadcasters who do not opt to get out of the business.

"Fairness demands that we consider how to accomplish repacking by minimizing unnecessary disruption and maximizing the ability of the public to continue to receive free over-the-air television," she said in her statement. "We must be faithful to the law, which requires efforts to preserve the coverage area and population of each licensee, as well as coordination along the border with Mexico and Canada."

But she also said fairness works both ways. "At the same time, we ask that broadcasters make a fair assessment of the opportunities this auction provides the industry. By offering incentives to share channels and incentives to relocate from the UHF to VHF band, this auction can mean new resources for broadcasters to develop new programming and deploy new services.  These are propositions that can strengthen broadcasting, by providing new models for station ownership, by providing new funding sources for local content, and by providing new ways to use technology to make efficient use of our airwaves."

Commissioner Ajit Pai had a series of concerns that were not included in the rulemaking, but took the opportunity to list them himself and ask for comment. Among those was his concern that the FCC had not sufficiently considered the impact on the auction if the $1.75 billion set aside to compensate broadcasters and cable for repacking did not cover those expenses, as the FCC conceded might not be the case.

Everyone at the Friday public meeting, at which the item was voted, agreed it was simply the beginning of a process, but also with an end point, or at least a target. The FCC will try to vote on final rules next year, and hold the auction by 2014.

Following are some of the key issues the FCC teed up for comment:

"Auction design.  We invite comment on auction design choices and the tradeoffs they present.  For both the reverse and forward auctions, we invite comment on different procedures to collect bids, determine which bids are accepted, and what each bidder pays or receives in payment.  We also seek comment on methodologies for the repacking process, which is part of the process for determining which broadcaster bids will be accepted in the reverse auction.  And we seek comment on an Incentive Auction Rules Option and Discussion report prepared by Auctionomics and Power Auctions illustrating a comprehensive approach to the auction design choices presented.  Further, we invite comment on how to design the incentive auction so as to facilitate the participation of a wide array of broadcasters and make it as easy as possible for them to submit successful bids.

"Participation in the Reverse Auction. We interpret the Spectrum Act to limit eligibility to participate in the reverse auction to commercial and noncommercial full power and Class A broadcast television licensees.  We invite comment on whether to establish reverse auction bid options in addition to those identified in the Spectrum Act (to go off the air, to move from a UHF to a VHF television channel, and to share a channel), including bids to voluntarily accept additional interference.

"Repacking.   We invite comment on how to implement Congress's mandate to make "all reasonable efforts" to preserve the "coverage area and population served" of television stations as of the date of enactment of the Spectrum Act.  In particular, we propose to interpret "coverage area" to mean a full power television station's "service area" as defined in the Commission's rules, and we propose several approaches to preserving population served.

"Unlicensed Use of Spectrum.  We propose measures that would make a substantial amount of spectrum available for unlicensed uses, including a significant portion that would be available on a uniform nationwide basis for the first time.  Television white spaces will continue to be available for unlicensed use in the repacked television band.  In addition, we propose to make the guard bands spectrum in our proposed 600 MHz band plan available for unlicensed use, propose making channel 37 available for such use, and propose making two channels currently designated for wireless microphone use available for white space devices. 

"Transition. We seek comment on how to implement the repacking of broadcast television spectrum and clear the reclaimed spectrum as expeditiously as possible while minimizing disruption to broadcast television stations and their viewers.  In particular, we propose streamlined broadcast license modification procedures, invite comment on reasonable deadlines for stations to transition to any new channel assignments or cease broadcasting, and propose to allow stations eligible for reimbursement of relocation costs to elect between actual cost-based payments or advance payments based on estimated costs."

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