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FCC Votes Unanimously to Launch Incentive Auction Rulemaking

And so it begins. The FCC voted unanimously on Friday to
begin the process of reclaiming broadcast spectrum to auction for wireless
broadband use.

That came in the form of a notice of proposed rulemaking
outlining the FCC's framework for an auction that will reclaim spectrum from
broadcasters, and then auction that reclaimed spectrum to the highest bidder,
who are expected to be wireless companies clamoring for more spectrum.

The auction will consist of three parts: broadcasters
offering up spectrum for the lowest price, repacking the remaining stations
into smaller spectrum quarters, and then auctioning the freed-up spectrum to
the highest bidder

Broadcasters participating in the auction will have three options: Sell their entire 6 Mhz; two stations agree to share and free up 6 Mhz for sale; or a UHF agrees to move to V and frees up that 6 mhz channel. The FCC is also seeking comment on whether it should also compensate broadcasters who agree to accept more interference.

As expected, the FCC did not release a model for that
repacking, and said it is seeking comment on just how to do that.

Commission Republicans had some questions about the order,
including whether it freed up too much spectrum for unlicensed -- which would
affect how much money was made from auctioning the spectrum -- and whether the
auction would be able to cover all of broadcasting and cable's relocation
expenses, and whether it would discourage larger bidders.

Commissioner McDowell was concerned about whether the FCC
was setting aide too much unlicensed spectrum and to the discussion of caps on
spectrum holdings. Both could reduce the take from the wireless portion of the

FCC Chairman Julius Genachowski called the auction proposal
a "big deal," and the world's first spectrum incentive auction, which
would result in both more spectrum for wireless, and a still-healthy broadcast
business that could lead video content into the 21st century.  He said the
auctions have gone from gone from idea to bold law to a thoughtful, thorough,
path-breaking proposal.

Commissioner Jessica Rosenworcel called the incentive
auctions a "complex but critical task." She said their success would
hinge on four principles: simplicity, fairness, balance and public safety.

The last is a particular concern. As the top telecom advisor
to Senate Commerce Committee Chairman Jay Rockefeller (D-W. Va.) Rosenworcel
was instrumental in the legislation creating the incentive auctions, some of
the proceeds of which will go toward the building and operation of an
interoperable broadband emergency communications network.

Rosenworcel said fairness was key when dealing with the
broadcasters who do not opt to get out of the business.

"Fairness demands that we consider how to accomplish
repacking by minimizing unnecessary disruption and maximizing the ability of
the public to continue to receive free over-the-air television," she said
in her statement. "We must be faithful to the law, which requires efforts
to preserve the coverage area and population of each licensee, as well as
coordination along the border with Mexico and Canada."

But she also said fairness works both ways. "At the same
time, we ask that broadcasters make a fair assessment of the opportunities this
auction provides the industry. By offering incentives to share channels and
incentives to relocate from the UHF to VHF band, this auction can mean new
resources for broadcasters to develop new programming and deploy new
services.  These are propositions that can strengthen broadcasting, by
providing new models for station ownership, by providing new funding sources
for local content, and by providing new ways to use technology to make
efficient use of our airwaves."

Commissioner Ajit Pai had a series of concerns that were not
included in the rulemaking, but took the opportunity to list them himself and
ask for comment. Among those was his concern that the FCC had not sufficiently
considered the impact on the auction if the $1.75 billion set aside to
compensate broadcasters and cable for repacking did not cover those expenses,
as the FCC conceded might not be the case.

Everyone at the Friday public meeting, at which the item was
voted, agreed it was simply the beginning of a process, but also with an end
point, or at least a target. The FCC will try to vote on final rules next year,
and hold the auction by 2014.

Following are some of the key issues the FCC teed up for

"Auction design.  We invite comment on
auction design choices and the tradeoffs they present.  For both the
reverse and forward auctions, we invite comment on different procedures to
collect bids, determine which bids are accepted, and what each bidder pays or
receives in payment.  We also seek comment on methodologies for the
repacking process, which is part of the process for determining which
broadcaster bids will be accepted in the reverse auction.  And we seek
comment on an Incentive Auction Rules Option and Discussion report prepared by
Auctionomics and Power Auctions illustrating a comprehensive approach to the
auction design choices presented.  Further, we invite comment on how to
design the incentive auction so as to facilitate the participation of a wide
array of broadcasters and make it as easy as possible for them to submit
successful bids.

"Participation in the Reverse Auction. We
interpret the Spectrum Act to limit eligibility to participate in the reverse auction
to commercial and noncommercial full power and Class A broadcast television
licensees.  We invite comment on whether to establish reverse auction bid
options in addition to those identified in the Spectrum Act (to go off the air,
to move from a UHF to a VHF television channel, and to share a channel),
including bids to voluntarily accept additional interference.

"Repacking.   We invite comment on how
to implement Congress's mandate to make "all reasonable efforts" to preserve
the "coverage area and population served" of television stations as of the date
of enactment of the Spectrum Act.  In particular, we propose to interpret
"coverage area" to mean a full power television station's "service area" as
defined in the Commission's rules, and we propose several approaches to
preserving population served.

"Unlicensed Use of Spectrum.  We propose
measures that would make a substantial amount of spectrum available for
unlicensed uses, including a significant portion that would be available on a
uniform nationwide basis for the first time.  Television white spaces will
continue to be available for unlicensed use in the repacked television
band.  In addition, we propose to make the guard bands spectrum in our
proposed 600 MHz band plan available for unlicensed use, propose making channel
37 available for such use, and propose making two channels currently designated
for wireless microphone use available for white space devices. 

"Transition. We seek comment on how to implement
the repacking of broadcast television spectrum and clear the reclaimed spectrum
as expeditiously as possible while minimizing disruption to broadcast
television stations and their viewers.  In particular, we propose
streamlined broadcast license modification procedures, invite comment on
reasonable deadlines for stations to transition to any new channel assignments
or cease broadcasting, and propose to allow stations eligible for reimbursement
of relocation costs to elect between actual cost-based payments or advance
payments based on estimated costs."