McDowell casts doubts on incentive auctions
FCC commissioner Robert McDowell last week said what many in the industry have long thought — that the FCC’s plan for incentive auctions will not generate nearly as much spectrum as federal officials have thought.
McDowell made his comments at the National Association of Broadcasters show in Las Vegas, according to the National Journal. And that could be a problem, because Congress had some pretty aggressive predictions.
Under the incentive-auction plan enacted in February, television broadcasters would voluntarily give up spectrum — 6 MHz of contiguous spectrum for each TV station — in return for a portion of the auction proceeds generated by the FCC auctioning the spectrum to commercial wireless operators.
Incentive auctions were going to put valuable airwaves in the hands of spectrum-hungry commercial wireless operators that would pay tens of billions of dollars for the privilege of using the frequencies — money that is earmarked for several purposes, such as funding the public-safety broadband network and helping pay down the national deficit.
But McDowell said he believes the amount of spectrum that will be available through incentive auctions will not be nearly as much as the 120 MHz projected in the FCC’s National Broadband Plan. Mobile wireless consultant Andrew Seybold has researched the issue and has reached an even more blunt conclusion.
“Incentive auctions are going to fail,” Seybold said.
There are many reasons behind this statement. For broadcasters, the key word in the incentive-auction law is “voluntarily.” They don’t have to move from their spectrum, if they don’t want to move. And, while there are some smaller broadcasters that may need cash bad enough that a one-time payday is an attractive option, many other broadcasters want to explore their options before relinquishing valuable airwaves that could fuel a long-term broadband business model in the future.
For the FCC to auction spectrum for the greatest amount of revenue, it likes to clear swaths nationwide. But a problem arises if Channel 48 in one city opts to participate in an incentive auction, but Channel 48 in another city elects to stay put, removing the possibility of a nationwide sale of the swath that maximizes revenue for the U.S. Treasury, Seybold said.
“You can’t build broadband networks on 20 different pieces of 6 MHz spectrum,” he said.
It does appear that the FCC will have the right to “repack” the broadcast spectrum in a manner that will enable successful auctions, but “that’s going to be a very time-consuming and very long battle” between the FCC and TV broadcasters, Seybold said.
Will this have a negative impact on the U.S. government’s ability to provide the $7 billion in funding for the public-safety broadband network? Probably not, according to Seybold, who believes the auction of AWS spectrum that has been cleared already should generate more than the $7 billion in proceeds needed for the public-safety LTE network.
However, the potential problems associated with the incentive auctions could mean that other initiatives outlined in the new law may not get funded for several years, if at all. That scenario could make it more difficult for public safety to convince Congress to give it additional funds that most industry observers believe will be needed to establish nationwide broadband coverage for first responders.
Given these circumstances, it’s important that decision-makers make wise choices regarding the network buildout to stretch the $7 billion in funding called for under the law as far as possible.
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