Incentive-auction proposals filled with promise, questions

Take a look at a spectrum chart, and it’s difficult to find frequencies that have not been dedicated already for either licensed or unlicensed use. But the FCC and the Obama administration have expressed the desire to clear as much as 500 MHz of spectrum, so wireless carriers have the radio-frequency foundation needed to meet the data-throughput demands of a society hooked on broadband usage via smartphones, tablets and laptop computers.

While some industry experts believe as much as 120 MHz can be cleared for broadband use with relatively little inconvenience to incumbent users, any effort to clear significantly more spectrum than that is going to require current users to move or relinquish their radio frequencies altogether.

With this in mind, the FCC is seeking the authority to conduct incentive auctions, which would let an incumbent spectrum licensee receive a portion of the revenue from an auction of its existing airwaves in return for vacating spectrum.

In theory, there are numerous potential licensees that could take advantage of such a model, but most speculation has centered on television broadcasters, which have 6 MHz channels that deliver free programming over the air. TV broadcasters are particularly relevant because they are licensed on prime spectrum that has excellent propagation characteristics and because less than 20% of households receive over-the-air broadcasts.

With the number of households accessing over-the-air broadcasts dwindling, some contend that the valuable television spectrum is being underutilized. But broadcasters note that they just altered their systems a few years ago — clearing spectrum for the 700 MHz auction — and should not be forced to do so again.

If given the authority to conduct incentive auctions, the FCC plans to give TV broadcasters an option to relinquish valuable spectrum and share in the proceeds from an auction. For a cash-strapped broadcaster — and those certainly exist in the rough economic environment — it could be an attractive way to make ends meet, especially if 95% of its viewers access its programming via cable or satellite.

Of course, having a broadcaster vacate spectrum in a particular region is not a panacea. Conducting an auction on 6 MHz of spectrum in a given geographic region will not generate as much revenue for the U.S. Treasury as being able to auction 6 MHz of spectrum that is available nationwide. Even if a broadcaster does not relinquish its spectrum, it may need to move to other frequencies before the FCC can auction the airwaves effectively.

With this in mind, the wording of various legislation being proposed on Capitol Hill is sure to monitored closely. Broadcasters are looking for the word “voluntary.” In an incentive-auction bill recently introduced by Rep. Bob Latta (R-Ohio), the FCC would be allowed to conduct incentive auctions but would not allowed to “reclaim frequencies of broadcast television licensees directly or indirectly on an involuntary basis.”

As with most things, the devil is in the details. If broadcasters are given options and are promptly given appropriate compensation, they probably won’t object to the idea of incentive auctions. However, without some ability to “repack” broadcasting licensees to clear spectrum swaths on a nationwide basis, it’s questionable whether such a model would generate the kind of contiguous broadband spectrum that the FCC and the administration envision. One thing is certain: With so much at stake, the debate promises to be vibrant.

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