Broadcast Television Spectrum Incentive Auction

In February 2012, Congress enacted a law authorizing the terms by which the Federal Communications Commission (FCC) must hold an innovative rulemaking to address wireless spectrum needs. Then, in September, the FCC launched the Broadcast Television Spectrum Incentive Auction proceeding in accordance with that law. The comment cycle for this proceeding concluded this March. The rulemaking calls for an unprecedented type of auction, originating from FCC chairman Julius Genachowski’s 2010 National Broadband Plan in which he laid out a case for more spectrum to be freed up for wireless broadband services. The basic concept aims to repurpose spectrum by incentivizing broadcast television licensees to give up their spectrum rights on a voluntary basis in exchange for money from the auction. The FCC proceeding would ultimately make more unlicensed and licensed spectrum available for broadband use.

According to an FCC staff report, broadcast television currently claims 294 megahertz (MHz) of spectrum. This spectrum is divided into five very high frequency (VHF) and ultra high frequency (UHF) bands, with 8,402 television stations operating in those bands in 6 MHz blocks. While there are a variety of television stations, the congressional law states that only full-power and class A commercial and noncommercial licensees are permitted to participate in the auction.

The design of the auction has three core components as proposed in the FCC proceeding: a reverse auction, forward auction, and repacking. The reverse auction depends on the forward auction. In the reverse auction, the FCC would assess the lowest price at which broadcasters would turn over their spectrum rights voluntarily. The forward auction would gauge the price corporations would be compensated for employing wireless licenses. Repacking would reorganize broadcast television licensees that don’t join the auction or whose bids are declined so that they occupy less spectrum, thereby affording blocks of contiguous cleared airwaves to become available for flexible wireless use.

A step-by-step analysis follows.

The first step is for the FCC to gain an understanding of how many broadcast stations may be willing to sell their spectrum licenses in the auction. The commission will operate a so-called reverse auction. In a normal auction, the seller finds the highest price a buyer will pay. By contrast, in a reverse auction, the buyer, who in this case is the FCC, will determine the lowest prices at which broadcast stations may be willing to sell their licenses.

Second, for the reverse auction, stations in different geographic groupings will submit bids identifying the lowest price at which they are willing to sell. The FCC will notify each broadcast station whether its bid was accepted. With respect to those whose bids were accepted, it will be obligated to sell their licenses.

In the forward auction, the FCC sells to the highest bidders, presumably in this case, wireless carriers. If the auction process is successful, the forward auction will provide enough money to compensate the broadcasters who participated in the reverse auction, pay the packing costs of the broadcasters who didn’t volunteer spectrum, and raise left-over revenues for the Treasury Department for purposes such as deficit reduction.

Unlicensed spectrum reflects another major aspect of the FCC proceeding. Unlicensed spectrum means users can operate without an FCC license; however, users of unlicensed devices cannot harm radio services. At the same time, they must use approved radio equipment and meet specific technical conditions. Unlicensed spectrum has sparked a wide array of exciting and innovative technologies including Wi-Fi. The FCC has even devised parameters for unlicensed devices to operate in unused TV channels, better known as “white spaces.”

So, in addition to the auction, the FCC rulemaking proposes to allocate more spectrum for unlicensed usage. It proposes to keep the “white spaces” policy in the repacked bands, as well as to make the guard bands in the future band scheme allowable for unlicensed purposes. Combining these steps, the FCC hopes for new wireless broadband products and services like Wi-Fi to become available nationwide as a result of unleashing more unlicensed spectrum.

The public speculates that the FCC will adopt the final rules for the Broadcast Television Spectrum Incentive Auction later this year as commission staff have said it is looking toward holding the auction in 2014. The recent nomination of Tom Wheeler to become FCC chairman, replacing Julius Genachowski, who really was the one who came up with the concept of this unique auction, raises some question about how committed the FCC will be to completing the auction process. But given how much the FCC has accomplished so far and the law authorizing the auction, it would seem they would stay on track to adopt final rules by the end of 2013.

Helen Domenici is a senior associate with the Technology and Public Policy Program at the Center for Strategic and International Studies in Washington, D.C.

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