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Genachowski: Concerned About Incentive Auction Legislation

FCC Chairman Julius Genachowski said Monday that he was hopeful Congress would pass incentive auction legislation but worried that it would include provisions preventing the FCC from maximizing the overall value of the spectrum.

He also said he was pleased with the fallout of the network neutrality rules, saying they resolved a radioactive issue without putting crimp in investment or innovation.

Genachowski was speaking at the Flatirons broadband policy conference at the University of Colorado.

Flatirons executive director Phil Weiser, ex of the White House and a fan of the FCC's codification of network neutrality rules, asked whether the model of stakeholder participation and after-the-fact adjudication rather than more prescriptive rules would be a model going forward.

The chairman said that the challenge was the FCC had to deal with a changing world and still ensure baseline practices to ensure investment and innovation. He said he tried to bring a "certain humility" to the process without locking in a system. He said the rules were very limited -- "less than a page."

He put in a plug for multi-stakeholder solutions to resolving disputes about internet business practices-the FCC network neutrality rules include having industry players weigh in on what constitutes reasonable network management. He said that he is pleased with what has happened since the FCC adopted the rules -- they went into effect last fall.

"We tried to resolve a radioactive dispute that was not doing anyone any good and increasing the level of innovation and investment throughout the broadband economy. And, in fact, that is what we have seen since these rules were adopted."

Asked to comment on the FCC's decision to oppose the AT&T-T-Mobile deal, he said it had triggered "all the flashing red lights" in terms of threats to competition, and that the FCC -- and DOJ, which moved to block the deal in court -- did not prejudge the deal and "ultimately did the right thing." He said the deal was "clearly over the line" if "you believe that competition is at the core of the free enterprise system and the key to a 21st century global economy.

Genachowski spent some time trying to knock down what he said were the myths that broadband only created jobs for engineers and entrepreneurs in Silicon Valley. He pointed to eBay's impact on small businesses, and Groupon's creation of sales jobs, among others.

Asked whether the creative destruction of the Internet would be a net gain or loss in terms of jobs, he said he was confident that it would create more jobs than it took away, pointing to a McKinsey study that concluded 2.6 jobs were created for every one that was lost, saying that sounded about right.

As has become tradition, he put in a plug for mobile wireless and reclaiming broadcast spectrum through incentive auctions. "Turns out that when you become chairman of the FCC, they don't take you to a room and say: 'Sir, here is your roomful of vacant spectrum that you can put on the market and be a hero.'" He said new mobile devices put demand on spectrum that dramatically exceeds what anyone had anticipated. He said that an average smartphone uses 24 times the spectrum of its traditional-phone predecessor. For tablets, he said, that figure is 140x.

Genachowski was asked about reports that Congress had come up with a compromise on incentive auction legislation (expected to be part of a payroll tax package because spectrum auctions would raise money to pay for, say, a couple of months' worth of extended unemployment benefits). He said that he hoped Congress would pass legislation -- "it is close to becoming law, and that would be a very good thing," he said. But he said he was concerned about proposals that "could undermine our ability to maximize the opportunity of these incentive auctions."

He was clearly referring to the House Republican-backed incentive auction legislation, calling them "proposals that would limit our ability to allocate some of the spectrum to unlicensed use, and restrictions on our ability to make sure that we free up the maximum amount of spectrum we could by doing this."

A broadcaster source said those reports of agreement may have been premature. The congressional conferees on the tax extension package have until the end of the week to come up with a framework for the package.

Silicon Flatirons senior fellow Dale Hatfield, former chief of the FCC's Office of Engineering and Technology, said that the FCC has focused on the transmission side, but wanted to know what the FCC's role could be in terms of receiver performance. Hatfield did not mention LightSquared, but that is the receiver issue the FCC is currently weighing as it decides how to proceed on LightSquared's waiver given ongoing receiver issues.

Genachowski did not mention LightSquared either, but gave it a shout out of sorts or at least for the principle of removing obstacles to innovative uses of spectrum.

He said that receivers were an issue "everyone had to wrestle with together," said the chairman. "In an effort to create competition to existing wireless carriers -- primarily AT&T and Verizon -- the FCC waived the prohibition on LightSquared using its satellite license for a terrestrial national wireless broadband service. One of the ways that we can free up more spectrum for mobile broadband is by removing regulations that restrict the use of spectrum in certain areas." He said that in the "interim operiod" when the spectrum is limited to some things, "you can see "neighboring uses of spectrum kind of edge over outside their lane, and then that creates an interference problem when you want to do the right thing and remove unnecessary barriers to use of spectrum."

He was referring to the GPS interference issue with LightSquared. The GPS band is adjacent to LightSquared's allocation, and some of the highly sensitive GPS devices are sensing LightSquared in-band transmissions.

"We do need to figure it out," he said. "The demand curve is such that we can't allow any spectrum anywhere to be inefficiently utilized. We need to rely on market mechanisms to work. Market mechanisms needs rules of the road that allocates rights and responsibilities among various players. It is possible that the current approach does allocate rights and responsibilities that leads to the most efficient use of spectrum."