Over the last decade, it has become increasingly obvious that America's spectrum resources are mis-allocated. The proliferation of cell phones, and more recently smartphones and tablets, has given mobile providers a voracious appetite for new spectrum. But a big chunk of the available spectrum is currently occupied by broadcast television stations. With more and more households subscribed to cable, satellite, and Internet video services, traditional broadcast television is looking like an increasingly outmoded use of the scarce and valuable airwaves.
Yet there's no easy way to re-allocate the spectrum to higher-valued uses. Theoretically, broadcasters' licenses are subject to periodic renewal by the Federal Communications Commission. But incumbent broadcasters have controlled their channels for so long that they've come to be regarded as de facto property rights. And needless to say, the politically powerful broadcasters have fiercely resisted any efforts to force them to relinquish their spectrum.
In February, Congress passed legislation instructing the Federal Communications Commission to tackle this problem using a strategy called "incentive auctions." The commission began the formal rule-making process for the scheme on Friday.
Step 3: profit!
The plan has three phases. In the first phase, the FCC will conduct a reverse auction in which it asks broadcasters to tell the FCC how much it would take for the agency to buy them out. Presumably, the least popular (and, therefore, least profitable) channels will submit the lowest bids. By accepting these low bids, the FCC can free up the maximum possible spectrum at the minimum cost.
Second, the FCC will re-arrange the remaining broadcasters so they're clustered together in the electromagnetic spectrum. That will free up contiguous blocks of spectrum that can be put to alternative uses.
Finally, the commission will put the newly-freed blocks of spectrum up for auction. If, as expected, the spectrum is more valuable when used for mobile services than broadcast television, then the FCC should reap significantly more from these traditional auctions than it had to pay for the spectrum in the original reverse auctions, producing a tidy profit for taxpayers.
While the broad structure of the program has been dictated by Congress, the FCC is seeking public input on the details. How should the auctions be conducted? Which broadcast stations should be eligible to participate? How should the spectrum assignments be re-arranged in phase 2? How much spectrum should be set aside for unlicensed uses?
Both public interest and industry groups praised the FCC's initial proposal. John Bergmayer of Public Knowledge pointed out that many broadcast channels were already being viewed primarily via re-broadcast on cable and satellite networks. "It makes little sense to waste spectrum on unwatched signals," he argued in an emailed statement. "The incentive auction approach strikes an appropriate balance by allowing some broadcasters to 'cash out' while putting their spectrum to better use." And he expressed support for the FCC's proposal to set aside some of the newly-liberated spectrum for unlicensed uses.
Bergmayer also praised an FCC proposal to update its "spectrum screen," a set of rules that prevent any single provider from gaining too large a share of the spectrum available in a particular market. The current scheme, he said, "treats all spectrum alike, even though some spectrum bands are better-suited to mobile broadband than others." As a result, he argued, it has become ineffective at preventing Verizon and AT&T from gaining enough spectrum to threaten competition. He urged the FCC to revise the rules to ensure the new auctions don't further entrench the dominance of the largest incumbents.
The proposal also won plaudits from the Consumer Electronics Association. "Additional spectrum is not only key to our national competitiveness, but also needed for creating jobs and spurring economic growth," said the CEA's Julie Kearney. She called it a "great step forward toward unleashing countless innovative products and services."
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