The Federal Communications Commission has officially pushed plans to auction off 600 MHz spectrum licenses for use by wireless carriers until the middle of 2015, relieving pressure to meet a previous deadline of 2014. The announcement highlights the complex task ahead of the agency to free up these spectrum resources using a controversial incentive auction process.
In an FCC blog post, recently inserted FCC Chairman Tom Wheeler explained the reasoning for the move, noting it was a process he has been focused on since arriving at the FCC last month.
“Having spent most of the last decade helping technology-based companies from the ground up, I know the incredible challenge of taking a cutting-edge product from concept to market on deadline,” Wheeler wrote. “That is exactly what we are doing with the incentive auction.”
Wheeler noted that to make the process work, the agency “must make fact-based policy decisions in an open and transparent manner.” That process will be headed by the incentive auction task force, which is set to provide further details on the timeline and processes for the auction at a January meeting. That task force will then work towards releasing an auction public notice and procedures public notice in the second half of next year.
The incentive auction was proposed in late 2012 as part of the federal government’s plan to meet President Obama’s mandate to free up 500 megahertz of new spectrum for wireless services by 2020.
The auction process is reliant on cooperation from television broadcasters that are being asked to give up spectrum holdings in the 600 MHz band in return for financial compensation. To accomplish this task, the FCC has decided to go with a reverse auction process. That process will include the reverse auction to determine broadcasters’ participation, and then the spectrum repacking must take place. The FCC has warned that “we will not know in advance the amount of spectrum we can make available in the forward auction, the specific frequencies that will be available and, perhaps, the geographic location of such frequencies.”
Instead of the traditional auction model that relies on a single band plan with identified frequencies, a set number of spectrum blocks and a uniform set of geographic area licenses, the new auction framework must be flexible enough to accommodate varying amounts of spectrum in different locations, the commission added.
This uncertainty led many to predict the FCC would be forced to postpone the auction process from its original 2014 timeframe to at least the first part of 2015. Further muddying the waters are plans for the FCC to host two spectrum auctions in 2014, with the first including 10 megahertz of spectrum in the 1.9 GHz H-Band to begin Jan. 22, while the second yet-to-be-scheduled auction will including 50 megahertz of spectrum in the 1.7/2.1 GHz band.
The FCC received general support for the postponement, with many carriers and trade organizations noting the need to make sure the rules for the complicated auction process are ironed out and clear before bidding begins. Many wireless operators have expressed a great deal of interest in participating in the 600 MHz auction process, which places more pressure on the FCC to make sure a wide variety of interests are at least acknowledged.
“While regulatory delay/uncertainty are commonly unwelcome and additional spectrum is needed to accommodate upward-trending data demand on evolving 4G LTE networks, we believe in this case adjustments are amply justified in light of the complexities involved and likelier to produce a positive outcome for the wireless sector,” explained Jeffrey Silva, senior policy director for telecommunications, media and technology at Medley Global Advisors. “By pushing out the incentive auction date and crafting solid bidding guidelines, the FCC can improve chances of generating the level of auction receipts necessary to satisfy policy goals and revenue obligations. Removing an artificial deadline for the incentive auction also lessens the drain on FCC resources otherwise required for other priorities, including the IP transition.”
Those financial obligations include the funding of the FirstNet public safety initiative, which is set to receive $7 billion from auction revenues to help build out a nationwide LTE-based public safety network. Many have noted that FirstNet could see some funding trickle in from revenues generated by the H-Block and AWS-3 auction scheduled for 2014, lessening some of the pressure on rushing the incentive auction process.
Impact on spectrum market
Postponing the auction could also place a greater value on current spectrum assets available in the open market. AT&T is in the process of acquiring Leap Wireless in part to get its hands on Leap’s substantial 1.7/2.1 GHz and 1.9 GHz spectrum licenses, while other operators have been aggressively selling off un-used spectrum resources.
There also remains the issue of spectrum holders like LightSquared, which is going through a bankruptcy process having failed to gain approval for use of its 1.6 GHz spectrum licenses due to potential interference concerns with ground-based GPS systems, as well as Dish Network, which holds more than 30 megahertz of spectrum across various bands and had as of yet found a willing partner in which to build out a network.
Bigger operators may also be forced to re-evaluate their spectrum plans, including Verizon Wireless, which was looking to sell off A-Block 700 MHz licenses, but may now be more apt to hang onto those valuable airwaves.
Silva noted that the short-term need for more spectrum could push the FCC to look more favorably on potential spectrum deals.
“During the pendency of the incentive auction rulemaking, we anticipate the AT&T/Leap transaction should receive favorable (albeit likely conditional) treatment from the U.S. government in 2014,” Silva noted.
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