FCC Approves Plan to Auction Off

As protests swirled over FCC proposals to establish rules of the road for the Internet, the commission on Thursday approved a plan that also promises to have a huge impact on the media landscape: the auctioning of broadcast airwaves for wireless use.

The auction, scheduled to place in 2015, is meant to respond to the growth in wireless services, via smartphones and tablets, and free up additional capacity as a way to spur innovation.

The result, however, is likely to remake the channel lineup, particularly in the UHF band, a large chunk of which will be cleared to make way for contiguous blocks of spectrum to be used by mobile carriers.

The commission voted 3-2 to approve the plan.

Stations are being asked to decide whether to give up their spectrum, meaning some will either shut down or share a channel with another outlet. Those airwaves then will be auctioned off to wireless carriers, with stations sharing in the proceeds. Other funds will be used to create a wireless emergency network, as well as to pay down national debt.

Although Congress approved of auctioning off broadcast spectrum in 2012, it was left to the FCC to implement it, in a complex plan that also has been tinged with controversy.

Broadcasters have been wary of how the FCC will carry out the auction, warning of a host of issues including that stations which remain in business will see a reduced coverage area, or that they will face disruption if they are moved on the channel lineup. But their reticence is also about the very idea that the primacy of broadcasting as a communications is shifting to broadband. An FCC goal had been for as much as 120 MHz of broadcast spectrum to be repurposed for broadband use.

After the vote, the National Assn. of Broadcasters quickly released a statement criticizing the FCC’s action, saying that they “cavalierly concluded that broadcasters forced into a shrunken TV band won’t be guaranteed full compensation for this disruptive move — as was the express intent of Congress.”

Indeed, commissioners Ajit Pai and Michael O’Rielly, who dissented, warned that the plan approved still left a host of remaining questions unanswered. Pai objected to a plan to “score” stations to determine their value as they enter the auction, among other concerns. He also said that the plan placed too many complications on bidding.

FCC chairman Tom Wheeler acknowledged that the plan as exceedingly complex — he compared it to assembling a Rubik’s cube — but said that the auction plan allows the free market “to decide the highest and best use of spectrum.”

Large wireless providers warned that restrictions placed on the bidding process would dampen participation — AT&T had warned that it might even sit it out. But Wheeler had said that certain provisions were necessary to ensure that no one large carrier gobble’s up the lion’s share of the spectrum. Nevertheless, after the vote, AT&T’s Jim Cicconi said that the company would support the auction framework and, after a compromise on language, and would “participate actively and meaningfully in the auction.”

On TV, the biggest impact will be on many stations in the UHF band, regarded as the most valuable because it can increase the reach of mobile networks over long distances and at far less cost. That’s where the FCC plans to clear away each broadcasters’ 6 MHz allotments and assemble contiguous spectrum to create uplink and downlink bands for wireless services. Wireless firms will bid on 5 MHz blocks.

The actual auction plan includes two parts: A “reverse auction” in which broadcasters will compete against one another to give up some or all of their spectrum. The price will start high and then descend, with stations given the option of dropping out at any point.

The FCC will then hold a “forward auction” in which wireless firms will bid to buy spectrum relinquished by broadcasters.

The commission will use the proceeds from the auction to pay broadcasters for giving up their spectrum, as well as to “repack” stations that chose not to give up their airwaves, yet have to be moved to a new channel to clear the way for wireless use. And an estimated $7 billion of the proceeds is slated to be used to create a new emergency communications network called FirstNet.

The FCC’s plan calls for retaining a station’s coverage area as of Feb. 22, 2012. An FCC official said that the contours will retain the same households as of that date.

It is still unclear just how much the auction will raise. An AT&T executive, Joan Marsh, wrote in April that the FCC would need to raise about $30 billion for it to work.

The auction also is expected to free up additional spectrum for unlicensed use, something that Wheeler says will alleviate congestion with the growth of Wi-Fi. The plan is to make it available via a “guard band” — or the gap between the spectrum allocated for broadcasting and that allocated for wireless use. In addition, the FCC plans to make it available on channel 37.

The FCC held a different vote on a plan to revise rules on mobile spectrum holdings, including provisions to reserve low-band spectrum for smaller carriers, but the vote was the same, with Pai and O’Rielly dissenting. O’Rielly said that the rule would “allow the favored few to buy the spectrum at below market rates,” and argued that it was unduly beneficial to “certain multinational companies.” He was referring to carriers like T-Mobile and Sprint, who do not have the same market dominance as AT&T and Verizon.

But Wheeler said that it was necessary to ensure competition and availability in rural areas, where access to broadband is wanting.

“Two national carriers control the vast majority of that low-band spectrum,” Wheeler said in a blog post last month.  “This disparity makes it difficult for rural consumers to have access to the competition and choice that would be available if more wireless competitors also had access to low-band spectrum.  It also creates challenges for consumers in urban environments who sometimes have difficulty using their mobile phones at home or in their offices.”

Filed Under:

Follow @Variety on Twitter for breaking news, reviews and more
Comments 2