Welcome to the spectrum-dome: FCC lays groundwork for its controversial incentive auction

This spring is shaping up to be a very contentious season for almost everyone that has a stake in the country’s wireless airwaves. The Federal Communications Commission on Friday released its recommendations for how the upcoming broadcast airwaves incentive auction should be conducted. It will impact mobile carriers, internet companies, TV broadcasters and proponents of free-to-use unlicensed spectrum.
The incentive auction will be the first of its kind, requiring an enormously complex process involving a reverse auction, a reconfiguration of the UHF TV band, and a forward auction of newly created 4G licenses – and there’s no guarantee that the FCC can pull it off.

FCC incentive auction

Source: FCC

The spectrum in question is in the 600 MHz UHF band, which now carries TV signals in markets all across the country. However, mobile carriers have long had interest in the band, because its low frequencies would enable their LTE signals to propagate further, creating higher coverage networks.
Now the FCC has to convince hundreds of TV stations around the country to sell off their licenses and instead share channels with other stations, migrate to the VHF band or go off air entirely. If enough broadcasters participate, the FCC will get enough spectrum to hold a traditional spectrum auction for mobile carriers – if they’re willing to meet the broadcasters’ prices. That’s a lot of ifs.

The nuts and bolts

The FCC’s report and order (R&O) – which will go before the full commission in its May 15 meeting – tries to maximize the chances that the incentive auction doesn’t flop by creating as much leeway in the process as possible. The R&O recommends splitting the airwaves into the small discrete chunks of 10 MHz (5 MHz for the uplink and 5 MHz for the downlink). Then it would split those licenses up geographically into partial economic areas (PEAs) that would allow operators to bid on them on market-by-market basis (as opposed to the big nationwide or regional licenses the FCC has auctioned in the past).

Source: Shutterstock / Refat

Source: Shutterstock / Refat

So, for instance, if many broadcasters in LA decided to part with their airwaves, the FCC could still auction off multiple 4G licenses in southern California even if broadcasters in New York decide not participate. And if only a few broadcasters in any given market are interested, the FCC could still pull out some usable 4G spectrum (it only takes two 6 MHz broadcast licenses to create a single 10 MHz mobile broadband license).
The other big issue is how much new unlicensed spectrum would be created in the band. As opposed to licensed airwaves, which are controlled by a single carrier, unlicensed are open to anyone to use and form the backbone of Wi-Fi and Bluetooth communications. In lower bands like 600 MHz, those airwaves could be used for new longer-range white spaces broadband technologies.
While unlicensed advocates want the FCC to dedicate as many as 24 MHz for free-to-use airwaves, the FCC’s proposal would set aside one specific band for unlicensed: Channel 37, which is used today for radio astronomy and medical telemetry. But the FCC would also allow unlicensed use in the “guard band” between TV and mobile broadband – think of it as DMZ where no cellular or broadcast signal can tread – and a section of airwaves called the duplex, which divides the uplink 4G signals from downlink signals.
Source: Shutterstock / iconmonstr

Source: Shutterstock / iconmonstr

When repacking broadcasters’ 6 MHz channels into 10 MHz licenses, the FCC would add all of the leftover megahertz onto the guard and duplex bands, so the more broadcasters participate in the auction, the more unlicensed airwaves will be created in a given market. FCC officials estimated that could be anywhere between 12 and 20 MHz.

What’s at stake

There’s a lot on the table, and there are lot of competing interests taking their seats, some of whom may elect to take their chips and leave. The FCC has to convince broadcasters — who tend to have a deep distrust for their regulator — that this auction is in their best interests. Meanwhile, the carriers are fighting amongst themselves about how the spoils will be split.
The FCC’s R&O doesn’t even address one of the most controversial parts of the auction: whether AT&T and Verizon will face restrictions on how much spectrum they can bid on in any given market. Congress is calling for an unfettered auction where AT&T and Verizon have free rein, though lawmakers seem more concerned about boosting auction revenue for federal coffers than they are about competition.

FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly (Source: FCC)

FCC Commissioners (L to R): Commissioner Ajit Pai, Commissioner Mignon Clyburn, Chairman Tom Wheeler, Commissioner Jessica Rosenworcel and Commissioner Michael O’Rielly (Source: FCC)

FCC Chairman Tom Wheeler is backing plans that would limit those two megacarriers’ ability to bid in the auction to ensure smaller regional carriers, as well as Sprint(s s) and T-Mobile(s tmus), will be able to pick up licenses. AT&T this week threatened to back out of the auction entirely if the final rules go against it. Whether AT&T is just posturing remains to be seen, but if it sticks to its threat it would take a major bidder out of the auction, and increase the chances the FCC fails to meet its bidding revenue targets.
The auction is still over a year away, scheduled for mid-2015, but one thing is for certain. Nailing down the rules of the auction is going to be a long, controversial process, all the way up until the first bid is placed.