House Holds Hearing on Incentive Auction Implementation

Earlier today, July 23, the House Energy and Commerce Committee held a hearing entitled “Oversight of Incentive Auction Implementation.” Despite featuring a variety of different views on how the FCC should structure and regulate the upcoming broadcast spectrum incentive auction, everyone still reached the conclusion that this auction is not only the most complex we’ve ever seen, but also has the highest stakes. The wireless industry is already feeling the effects of the infamous spectrum crunch, and action must be taken sooner rather than later to ensure that everyone has enough spectrum to function at a decent level. As such, there is little to no room for mistakes.

Witnesses included Rick Kaplan, Exec. Vice President, Strategic Planning of the National Assoc. of Broadcasters; Gary Epstein, Senior Advisor and Co-Lead, Incentive Auction Task Force of the Federal Communications Commission; Preston Padden, Executive Director of the Expanding Opportunities for Broadcasters Coalition; Kathleen Ham, Vice President, Federal Regulatory Affairs of T-Mobile US; Harold Feld, Senior Vice President of Public Knowledge; and Joan Marsh, Vice President, Federal Regulatory of AT&T.

Chairman Walden opened up the hearing by defending the broadcasters that would be participating in and/or impacted by the auction, particularly during the repacking process. Walden demanded that “broadcasters must remain viable after the auction,” particularly those stations in areas with special needs, such as a rural area’s continuing need for translators.

Walden also cautioned against the FCC imposing conditions that would result in high, unnecessary fees and end up staving off competition. He called it “folly at best” for the FCC to think they can promote greater participation through regulations than the free market itself.

However, not everyone thinks that a regulation-free marketplace would be fair. Some Congressmen and witnesses expressed concern over the country’s two largest wireless carriers, AT&T and Verizon, winning all the spectrum that would be up for auction. This has prompted suggestions of placing limits on the amount of spectrum one company can acquire at auction, which was echoed today by Rep. Waxman and T-Mobile VP Kathleen Ham. However, it must be noted that, while AT&T and Verizon do have the most consumers, they do not have the most spectrum. Sprint, in fact, leads the pack with well over 150 MHz of spectrum. Sprint and T-Mobile did not even choose to participate in the last spectrum auction. So, as AT&T VP Joan Marsh asked: Why do they have a greater need to win at auction than others?

Another issue that would affect participation is the proposed scoring tactics that would determine how much the FCC would pay a broadcast station in exchange for spectrum. Expanding Opportunities for Broadcasters Coalition’s Preston Padden was especially wary of this proposal, stating that it is “foolhardy to limit incentives from the get-go.” He continued to add that the FCC is buying spectrum, not TV station businesses, so scoring would be irrelevant and unfair. Instead, the same high, initial prices must be offered to all stations in the same market.

Of course, there was more to this hearing than T-Mobile’s unfair auction limits (which you can read more about here) and FCC scoring. A rather large spotlight was placed on local broadcasters, particularly how they will fare post-repacking.

Public Knowledge’s Harold Feld suggested that the FCC create a national unlicensed spectrum band that would host a variety of ad hoc unlicensed networks, many of which have proved their values in the aftermath of disasters such as super storm Sandy and the current tragedy in Moore, Oklahoma.

Rick Kaplan of the National Association of Broadcasters made sure to place an emphasis on the impact the auction will have on the broadcast industry. He warned that the FCC must ensure that extra fees characteristic of its infamous “voluntary” conditions will not be imposed on broadcasters left on the air post-auction. Kaplan joined Chairman Walden in asserting the need for translation services and low-power TV for rural, mountainous districts. The FCC must also take special care that all stations, even after repacking, should serve the same areas and the same population as before—a popular mandate from the Spectrum Act enacted last year.

Public safety was also a popular issue in the discussion, as the auction is expected to generate up to $7 billion for programs such as First Net and next-generation 911 services. The revenue is also expected to go towards deficit reduction.

Thankfully, the FCC is, as the Commission’s own incentive auction task force co-leader Epstein said, “committed to an open, transparent, and inclusive process.” It has been publishing several Public Notices encouraging public input, and, according to Epstein, so far has received and considered over 460 comments.

Digital Liberty encourages the FCC to make the right decisions and allow for a truly free market incentive auction in which everyone has an equal chance of winning spectrum. This kind of situation will encourage the most companies and broadcasters to participate, generating the greatest amount of competition. As a result, the government will raise more revenue and make more room for innovation. If done correctly, everyone—the wireless and broadcast industries, the government, consumers—would stand to benefit in some way.