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Below are ten questions that regulators, auctions participants and consumers should be asking themselves in the run up to the auctions, along with today’s versions of the answers to the questions.
1. What happens if not enough broadcasters volunteer to give up spectrum? The target is to recapture 120 MHz. What if they can only get half of that? Will the auction continue or go back to square one?
Unclear. Though FCC officials say that there is no “Plan B,” there is no shortage of speculation about what might happen. There is no guarantee that enough broadcasters will voluntarily participate in the auction to provide the requisite spectrum. Among the possible alternatives being discussed include a market-based solution (cutting out the government “middle-man” as the market-maker), changing other key elements of the proposed process and the nuclear option of the government simply taking frequencies from incumbent licensees. That last option is highly unlikely and would certainly be challenged in the courts.
2. Is it possible that some markets will see more broadcasters contributing more spectrum for auction to wireless providers than is needed, while in other markets too few broadcasters may be willing to offer up their spectrum? What then?
Unclear. The purpose of the reverse auction is to obtain spectrum specifically in those places where there is the greatest demand, which is directly correlated to population density. The more people per square mile, the more demand that exists for wireless broadband. Not surprisingly, these are also the locations with the greatest demand for broadcast spectrum. For example, Glendive, Montana, is the nation’s smallest television market. It has only one television station and wireless networks covering the locale are not faced a capacity crunch. (Nielsen divides the U.S. into 210 Designated Market Areas (DMAs), and Glendive is ranked 210th. Rankings are done by number of TV Households. Glendive has one full-power station (KXGN) and one TV translator (K13PL), but translators are not included in the forward auction process.) On the other extreme, New York City has 22 full power TV stations, and is one of the most congested wireless broadband spectrum markets in the country. Thus, while it may not be necessary for a broadcaster to give up spectrum in Glendive for wireless networks to work well, it will be critical to have some broadcasters in the New York market offer up some spectrum to offset capacity crunches on wireless broadband networks covering the New York market.
3. Will the audiences for over-the-air broadcast stations be negatively affected by a smaller service area?
Maybe. The FCC has been adamant that broadcaster participation in the auction will be completely voluntary. Repacking, on the other hand, could affect all broadcasters, whether or not they choose to participate in the auction. After it is determined which stations have volunteered for the auction, and the extent to which these stations would cede service areas or go off the air entirely, the stations remaining in the market, and in nearby markets, would be “repacked.” This would result in some station operations being moved to other frequencies, while others stations could lose some of their coverage areas, whether they want to or not, but for which they will be compensated.
4. While the FCC and others are now anticipating and sometimes obsessing about the forward and reverse auctions over current TV broadcast spectrum, are there other spectrum auctions underway or being considered that might also help quench the insatiable thirst of wireless companies for more and more spectrum? If so, when will these auctions take place and for what purposes are those portions of the spectrum currently allocated?
Yes, the FCC plans to conduct several other auctions of spectrum that could be used for commercial wireless services and public safety purposes. One is the anticipated 2014, auction of “H-block” spectrum that originally was allocated to the “personal communications service.” Some of the spectrum earmarked for near-term auction is that used by the military, which has agreed to move its operations there to other portions of the spectrum. Indeed, and although it’s a politically sensitive issue, many observers suggest that there are significant other portions of “military” spectrum, currently not used or lightly used, that also should be considered for future wireless auctions.
5. What will be considered an acceptable level of interference for broadcasters? For broadband providers?
Unclear. The FCC has proposed allowing broadcasters, if not going off the air, to agree to accept additional interference in their reverse auction bids. A station might accept payment in exchange for accepting increased interference and, thereby, accepting a reduced service area. These levels have not been established. Further, as stations are repacked, some existing interference in some geographic areas might actually go away, while new interference may be introduced elsewhere. That is, those who currently are able to watch an over-the-air signal might not be able to after repacking, but some who are unable to see a particular station over-the-air now might then be able to receive the signal in the future. The FCC’s Notice of Proposed Rule Making addressed the thorny interference issues involved in this process; but it provided far more questions than answers.
6. Who will be allowed to participate in the auction? If “caps” are imposed, what frequencies will be included in computing the cap?
Unclear. Once the FCC has “harvested” what it hopes will be adequate amounts of spectrum, it must then redistribute it to wireless broadband providers, though an auction process. There has been no shortage of debate about whether the nation’s largest providers, AT&T and Verizon, ought to be allowed to participate in the auction or, if allowed, whether there ought to be limits on the amount of spectrum each might acquire. Either banning or placing limits on these two bidders likely would result in fewer broadcasters proffering their spectrum for auction, because of reduced prices for ceded spectrum, thus undermining Congress’ goal of the FCC reallocating a sizeable chunk of broadcast spectrum. Some anticipate that revenues from the auction would be as much as 40 percent lower if bidder restrictions are imposed. This would be a particularly bad outcome in light of Congress’ instruction to the FCC to raise revenues in this auction that would pay for the construction of a nationwide, interoperable public safety network.
7. What are the government’s choices if not enough money is raised in the forward auction to cover the expenses incurred in the reverse auction?
Unclear. Television broadcasters, and trade associations and organizations representing their interests, have expressed concern, as noted above, over the prospect that not enough money will be raised in the forward auction, especially in light of the possibility that the forward auction is restricted. It is unlikely that Congress would allocate funds for the acquisition of the frequencies, particularly because of the government policy of taking in revenue from spectrum auctions, not expending money. Would the entire process be scrapped? Would there be a new Notice of Proposed Rulemaking issued, with revised rules? No one knows.
8. What is a realistic expectation for the first available date for new wireless frequencies?
Unclear. The FCC has been stating that it intends to complete its rulemaking and policy decisions by the end of 2013, and to have all three steps (reverse auction, repacking and forward auction) completed before the end of 2014. But many have been skeptical ever since that ambitious schedule was announced. One potential monkey wrench in the process is the likelihood, as noted below, of court appeals brought by those displeased with the FCC’s decisions. Most commentators now suggest that the end of 2014, would be the absolute earliest that the forward auction could be completed, and only the following year would spectrum be available for mobile broadband use. Yes, these timetables are moving targets.
9. Will this spectrum action permanently satisfy the need for more wireless broadband spectrum?
Unlikely. In 2004, a prestigious engineering journal published an article where the co-authors made the provocative assertion that the country was in fact approaching the end of spectrum scarcity because of the ability of new technologies and regulatory reform to better utilize frequencies. That perspective on the future spectrum needs in the United States breaks from the now majority view in the engineering community that more spectrum will be needed as demand continues to outpace projections. Anyone can speculate, but no one knows for certain, what the next big demand for spectrum will be, or whether technological advances will accommodate new and expanded uses into an already-packed spectrum, absent an influx of new, reallocated spectrum. The only thing that is clear is that every projection ever made about how much spectrum was needed to power the nation’s largest wireless networks have fallen short of the reality.
10. Will “losers” in the process be able to stall the process from going forward through legal challenges and other means?
Yes. There is no shortage of examples of FCC decisions that have had to be delayed due to legal challenges in the reconsideration process at the agency and subsequently in the courts. [Under the earlier system of broadcast station licensing, those who were not selected for the assignment would often challenge the FCC’s decision, delaying the new station’s construction, sometimes for years. This was one of the rationales for moving station licensing from a “comparative application” process to an “auction process” in 1993. It is highly likely that one or more dissatisfied parties would challenge a part or all of the process, in which case implementation might be delayed for the duration of the appeal. It also is possible that some of those displeased with the process may –- at most any stage – try to persuade the Congress to weigh in and force politically-inspired changes to the process.
Barry Umansky, J.D., and Dom Caristi, Ph.D. are affiliated with The Digital Policy Institute, an independent, interdisciplinary research and policy development organization located at Ball State University in Muncie, IN. The DPI has served as a catalyst for research and education on digital media issues since 2004. Additionally, the DPI is also a member of the Consumer Advisory Committee at the Federal Communications Commission (FCC).
Read more: Digital Policy Institute: Top 10 unanswered questions involving spectrum auctions – FierceWireless http://www.fiercewireless.com/story/digital-policy-institute-top-10-unanswered-questions-involving-spectrum-auc/2013-10-18#ixzz2iauj2EBc
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