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FCC Considers Changes To 600 MHz TV Spectrum Auction

May 9, 2015 - Written By David Steele

We’ve a report today that shows the Federal Communications Commission, or FCC, is continuing with the basic proposed framework for the incentive auction of the 600 MHz broadcast TV spectrum, which was originally released in June 2014. The FCC needs to make a number of changes to the detailing behind the auction and there remain a number of obstacles, not least of which is how to address the availability of spectrum to the smaller carriers. An official for the FCC confirmed that a draft order on the auction framework was circulated earlier this week and asks for the commissioners to consider the “petitions for reconsideration” from thirty or so different parties asking the FCC to implement changes to the draft framework.

The format of the auction will consist of two parts. The first is a “reverse auction,” which means the broadcasters agree to sell their spectrum rights. Following this auction, the spectrum is moved around or repacked, depending on what broadcasters agree to relinquish their spectrum. After this has been reorganized, the FCC will conduct a traditional “forward” auction, whereby carriers and other entities will bid for spectrum. However, one of the big issues that remains is how the smaller carriers (T-Mobile US, Sprint, Dish Network, C Spire Wireless amongst others) will be allocated spectrum in order to prevent the two biggest players – AT&T and Verizon – from outbidding and claiming all of the spectrum. A number of action groups want at least half of the spectrum reserved for the smaller players in the carrier universe.

The difficulty the FCC faces here is that the larger carriers have deeper pockets compared with the smaller carriers and the broadcasters are agreeing to relinquish their spectrum because of the rustling of crisp banknotes. By restricting part of the available spectrum for those carriers less able to pay for the airwaves, this will restrict the money that the broadcasters earn from selling off their spectrum allocation. Another issue that is still up for debate is the FCC’s use of “dynamic reserve pricing,” that is, a television broadcaster may be offered a lower price for its spectrum even if it cannot be assigned a channel in the remaining spectrum available in the UHF band. If the broadcaster refuses the offer, it may be assigned a channel in the 600 MHz band alongside the wireless carriers. The FCC states that the aim here is to guard against the risk that a station may be awarded an opening price simply because there is no channel to offer in the pre-auction band. However, the Expanding Opportunities for Broadcasters Coalition (a group of broadcasters interested in participating in the auction) has argued against this, stating that using it could lead to a failed auction and it is “a blunt tool to drive down broadcaster prices and, in the process, create potentially substantial amounts of additional impairment” or interference.