Incentive-auction rules could impact FirstNet funding, unlicensed use

In theory, this would allow smaller carriers to bid on 600 MHz without the risk of being outbid by deep-pocketed AT&T and Verizon—something that many industry observers believed happened in 2007, when the two telecom giants dominated the 700 MHz auction. Without such restrictions, some believe the 700 MHz auction results could be repeated, which would reduce viable competition among commercial carriers.

But word of the potential restrictions was enough for AT&T to threaten to sit out the incentive auction. If that happened, it would remove a key bidder from the process and negatively impact the revenue generated from the auction. Wheeler said yesterday that he does not believe that AT&T would carry out its threat, but the bottom line is that this could turn into a poker game with very high stakes, as AT&T and the FCC wait to see if the other one is bluffing.

But the FCC, AT&T, TV broadcasters and other commercial wireless carriers are not the only stakeholders in this process.

Public-safety officials are interested, because the $7 billion in funding that Congress earmarked for FirstNet is contingent upon that much revenue being generated through FCC spectrum auctions. The H Block auction conducted earlier this year generated $1.5 billion to this cause, and another auction is scheduled for this year, but the incentive auction likely will need to be very successful to fully fund FirstNet.

Meanwhile, companies interested in pursuing strategies that utilize spectrum in the TV “white spaces” also are monitoring the situation closely. TV white spaces are the frequencies between television channels that the FCC made available for unlicensed use; however, if a lot of TV broadcast spectrum is auctioned to commercial operators and broadcasters are relocated in lower frequency bands, there will be less white-spaces spectrum to use, particularly in urban areas.

Exactly how all of this will be resolved is unknown, but it is clear that the FCC has a monumental challenge ahead of it, as it tries to balance the interests of all stakeholders (as well as Congress, which always wants a healthy payday for the U.S. Treasury from spectrum auctions).

If successful, the incentive auction could revamp the way spectrum auctions are conducted and spectrum policy is implemented—not just in the U.S., but on a global bases. If it is not successful, the FCC will have to a lot of questions from a number of powerful stakeholders.