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Spectrum AuctionChange IsIn the Air | @eggerton

By the end of this calendar year, the Federal Communications Commission is scheduled to produce its plan for reclaiming spectrum from television stations and “repacking” them to free up contiguous blocks of the stuff for wireless carriers.

This long-anticipated event has been likened to a second, even more complicated digital TV transition—an event which, one must remember, was complicated enough in and of itself to require a schedule extension.

The current issue stacks up to offer an even more divisive showdown. At stake on the most obvious level are the futures of both broadcasting and wireless broadband, which are soon to be inextricably entwined—literally as well as figuratively. Expect lots of jabbing and dancing, and a few haymakers. Both sides have considerable reach.

Wireless companies say they must have more spectrum to meet the exploding demands of mobile users. According to a justreleased Pew survey, one-third of cellphone owners who go online use those phones for the majority of their Web surfing.

Broadcasters have tablets and smartphones, too, so they recognize that broadband is a power both to be reckoned with and exploited. But they have long suggested that wireless companies may not be using all the spectrum they already have and could, therefore, be more efficient with the spectrum they are already using. They also point to deals in the secondary market that suggest the wireless companies’ dire predictions about their ability to get new spectrum may in fact be overstated.

Regardless of how much spectrum wireless companies need, the FCC is under orders from Congress to get as much of it from broadcasters as they are willing to give up. The resulting incentive auctions are coming by the end of 2014, at least according to acting FCC chair Mignon Clyburn. It likely will be her successor, Tom Wheeler, who presides over the release of the order and the auctions themselves.

The attendant reverse auction will feature broadcasters volunteering spectrum, with the winner being the broadcaster willing to give up spectrum for the least amount of money. Not all broadcasters will get to participate, since sufficient vacant spectrum currently exists in many smaller markets.

The FCC will then auction that spectrum to the highest bidder, with the bulk of the nodding and raised-finger gestures expected to come from wireless companies. Although, depending on how the FCC structures the auction, not all wireless companies may get to participate, at least in every market.

That is the view from 30,000 feet, where the action and strategy seem easy to read: broadcasters vs. wireless service providers in a spectrum battle royal. But the reality is there are a host of players with skin in the game, as is demonstrated by the various dockets the FCC has open for comment on the auctions; the comments numbered more than 800 at last count.

Since it is tough to tell the grapplers without a scorecard (and pretty tough even when you have one), here is a more ringside-seat view of those players as they prepare for their standoff. To paraphrase the man at the mic (oh, and wireless mics are affected by the auctions, too): “Let’s get ready to grrrrumbllllllle!”

Broadcasters: Save Our Service!

The Ones That Will Remain: The National Association of Broadcasters, not surprisingly, is focused on stations that are planning to stay in the business.

The NAB is intent on making sure the FCC preserves the iaudience reach and interference protections of those stations after the auction, when there will be what the association has likened to a second DTV transition, only more complicated, as the FCC moves stations and others share channels in order for contiguous blocks of spectrum in the 600 MHZ band to be freed up for wireless.

Broadcasters do not want the FCC putting stations in the “duplex gap” between wireless uplink and downlink spectrum and do not like the FCC’s proposed “variable” plan of collecting different amounts of spectrum in different markets. That would mean that in some adjoining markets—such as New York and Philadelphia—broadcasters and wireless operators could be operating on the same or adjacent channels, which could lead to unacceptable interference.

There is also a $1.75 billion relocation fund to be used to compensate broadcasters, and cable operators for the costs of moving to new channels or sharing their channels with others. The NAB wants to make sure the FCC treats that as a cap, and does not dislocate and repack more stations than it can pay for moving.

Broadcasters also have an interest in the FCC getting auctions right, rather than have the agency rush to meet the self-imposed deadline of end-of-year 2014. Congress gave the FCC until 2022 to complete the auction and repacking process.

The Broadcasters That May Become Ex-Broadcasters: The Expanding Opportunities for Broadcasters Coalition, sometimes referred to as the “Coalition of the Spectrum Willing,” is a group of more than 70 stations represented by Preston Padden, former exec at Fox and Disney.

They are broadcasters who may be willing to sell their spectrum if the price is right. They should probably be christened “the players to be named later,” since the auction rules allow them to remain anonymous. Padden is also the former head of the Association of Independent TV stations, so he has plenty of contacts among the major-market indies likely to be part of the willing. (Most major-market affiliate owners have signaled they are not interested at present.)

Their goal in the auction is to get as much for their spectrum as possible. That means they want as many bidders in the forward wireless auction as possible—on that score, they are on the same page of the playbook with Verizon and AT&T, and they don’t want the FCC low-balling their valuation of broadcasters in the reverse incentive auction.

Padden and company have been concerned by signals out of the FCC that it might try to value stations according to their population coverage or other characteristics related to their value as TV stations, rather than their value in helping free up the needed spectrum. He says this idea strikes his members as “an economist’s effort to limit payments to some stations,” which he believes will discourage participation.

Cable: WiFi Fans

Cable operators have more than a simple rooting interest in the outcome of the auctions. One such interest involves the relocation fund since, beyond broadcasters, that money can also go to cable operators that have to adjust their head-ends to receive and retransmit the rejiggered broadcast stations. Cable operators have said they may be able to use some of the equipment they already bought to ease the 2009 DTV transition, but they say there could be significant new expenses. Only two weeks ago, National Cable & Telecommunications Association execs met with FCC Media Bureau staff to talk about the need of some operators to buy more discriminating antennas to continue to get a station’s signal after the repacking.

The auction legislation did not create any new must-carry rights, but the NCTA has no trouble reminding the FCC of those rights just the same.“The Commission should ensure that cable operators’ mandatory carriage burdens are not increased as a result of channel sharing or repacking,” the association said in comments at the FCC.

But cable’s biggest issue is WiFi, and the more the FCC can free up the better. While broadcasters are wary of unlicensed users potentially interfering with their signals, cable operators are on the side of the computer and tech companies when it comes to freeing up spectrum for WiFi in the auction.

Cable operators have generally abandoned plans for stand-alone competitive wireless services, opting instead to create WiFi hot spots to extend their service to increasingly mobile, tablet-toting subscribers. The major operators have even gotten together on WiFi’s version of a roaming agreement. Comcast, Bright House, Time Warner Cable, Cablevision and Cox struck a deal last year to allow their subscribers to share wireless hot spots, which the cable industry just announced have topped 200,000.

Wireless: Spectrum Hungry

Wireless companies say spectrum is their “lifeblood,” with that stake being the one the FCC needs to drive into the hearts of those broadcast spectrum vampires. OK…they don’t put it exactly that way. But they do say spectrum is of better use for wireless broadband than for broadcasting, and they want an auction that frees up as much licensed spectrum as possible. This puts them squarely in the catbird seat.

And yet, like broadcasters, they are not all of one mind.

Verizon and AT&T, the 800-pound gorillas in the cellphone space, naturally do not want the FCC to put any conditions on who— specifically themselves—can bid in the forward auction.

The incentive auction legislation language gives the FCC the authority to come up with rules that further competition and the public interest. But AT&T and Verizon do not want that interpreted to mean tightening limits on how much more low-band spectrum they can buy.

Broadcasters’ 600 Mhz band is considered beachfront low-band spectrum, and the FCC has opened another proceeding proposing lowering the spectrum aggregation threshold in markets that trigger further FCC scrutiny.

On the other side of that issue are T-Mobile and Sprint, which would be just as happy not to have to bid against their deep-pocketed competitors for spectrum. They argue that given how much low-band spectrum the top two companies already own, it’s incumbent upon the FCC to impose “reasonable” limits.

One sticking point with that plan is that the FCC, while wanting to preserve competition, also wants to get as much money for the spectrum as possible. T-Mobile has offered up a plan in which the aggregation limits would be loosened or removed if the spectrum does not fetch a set floor price.

President: Broadbander-in-Chief

President Obama has made freeing up spectrum for wireless broadband one of the key tech policies of his presidency. In 2011, he made freeing up 500 MHZ of spectrum for wireless by the end of the decade part of the initiative to get 4G wireless to 98% of the country within five years. He even gave it a shout-out in that year’s State of the Union address.

The White House views the spread of wireless and wired broadband as key to “improving America’s economic growth and competitiveness on many critical dimensions.” Those improvements include health—wireless remote monitoring could save both lives and healthcare dollars, for example—as well as education, energy and much more.

And as more government services go online, usually at a cost savings to Web users as well as the government, it is imperative that those services be available universally. Otherwise it becomes a kind of regressive tax, penalizing the rural, senior and minority populations that lag behind the general population in broadband use. And African-Americans and Hispanics are heavier users of mobile broadband than the general population, so boosting wireless is a way to address the broadband diversity divide.

The Hill: Show Us the Money

The auctions were created by Congress and appended to a must-pass jobs bill.

In addition to freeing up spectrum for broadband, the auctions have a couple of other goals. Proceeds from the auctions—buy low from broadcasters, sell high to wireless companies—will be used to pay for moving and repacking broadcasters. But the auction money will also be used to fund FirstNet, a national interoperable broadband emergency communications network and, if there is any money left over, to help pay down debt.

Sen. Jay Rockefeller (D- W. Va.), chairman of the Senate Energy & Commerce Committee, has been torchbearer for the emergency network, which was one of the 9/11 Commission’s recommendations over a decade ago. Rockefeller was instrumental in the drafting of the incentive auction bill, along with his then-aide, now-FCC commissioner Jessica Rosenworcel. On the other side of the Capitol, Rep. Greg Walden (R-Ore.), chairman of Communications Subcommittee, helped draft the House version of the bill. Rockefeller is focused on FirstNet, while Walden, a former broadcaster, has talked about holding broadcasters harmless.

Broadcasters’ most stalwart auction defender is arguably John Dingell (D-Mich.), who continues to press the FCC to complete its spectrum coordination with Mexico and Canada. But Dingell is not alone. Dozens of legislators from border states, and some from non-border states, have asked the FCC to resolve those coordination issues.

Another reason Congress is concerned about the fate of broadcasters is that local TV remains a primary campaign ad medium—and at a government-mandated lowest unit rate.

Computer Companies: Spreading Spectrum Wealth

Microsoft and Google spelled out just how important the auction is to them in a filing with the FCC early on in the process: “Our companies offer technologies that span the entire wireless economy—including mobile phones, tablets, mobile operating systems, cloud-based services, machine-to-machine services, maps and gaming.”

That means plenty of licensed spectrum for all that telco-delivered mobile broadband. But it also means all those WiFi hotspots at Starbucks’ the world over.

So, when those companies are talking about wanting a “balanced auction,” as they do when making their pitches to the FCC, it is not balancing the interests of broadcast and wireless, but rather about spreading the spectrum wealth to both licensed and unlicensed services.

Consumer Electronics: The Internet of Things

CEA president Gary Shapiro has been waving garlic at broadcast spectrum holders for years, slamming them as squatters that suck up bandwidth whose higher, better purpose is serving all those computers, tablets and phones his members make by the hundreds of millions.

Yes, they make the TV sets that over-the-air TV viewers buy too. But even those are increasingly monitors for video from satellite, cable, telcos and the Internet.

The CEA has argued for balance in the auctions, but it has also said that the FCC should keep in mind that the ultimate goal is to free up spectrum. The statute instructs the FCC to make “all reasonable efforts” to replicate TV station coverage and interference protections in repacking, but the association likes to remind that strict adherence to replication would “hobble” the FCC’s ability to achieve the overarching goal of…collecting as much spectrum as possible.

Equipment Manufacturers: Eyeing Government Handouts

Here’s where most of that $1.75B relocation fund is going. Last month, the FCC put out a request for more comment on what expenses broadcasters and cable ops think will need to be covered (see Washington Watch).

The FCC’s list was already 14 pages long. While broadcasters will be filing for the money, it will mostly be going to tower companies, transmitter manufacturers and others for everything from re-tensioning a guy wire to rolling out new coaxial cable to air conditioning—that equipment can get hot—to buying new antennas.

All that buying and funding will help close the loop on the implementation of this issue. There is a timetable, but by no means will this be an easy fix. As they say in boxing, the fighting is in rounds.