WASHINGTON-The Federal Communications Commission’s decision to delay until June 7 the auction of broadcast spectrum has raised questions about the agency’s motives and intentions.
The spectrum, freed up as a result of TV broadcasters transition from analog to digital technology, is known as 60-69 because of its place on the TV dial. There is a total of 60 megahertz available. Congress allotted 24 megahertz to be used for public-safety operations and 36 megahertz for commercial uses and said all the revenue from the commercial wireless auction must be in the bank before Oct. 1.
Bidders in the June 7 auction for the 30 megahertz will bid on two licenses in six economic areas. One license will be a block of 20 megahertz (a pair of 10 megahertz blocks), and one block of 10 megahertz (a pair of five megahertz blocks). The FCC will allow bidders in the auction to win both licenses in each area.
The FCC originally told Congress it would begin this mandated auction no earlier than April 25. It later set the date for the auction for May 10. On March 17, it delayed the auction to the June date. But why?
The official answer from the FCC in its public notice was “to provide additional time for bidder preparation and planning.” But many sources question this, noting the FCC has yet to release rules for the scheduled re-auction of C- and F-block personal communications services licenses which it said it would do before short forms for the 700 MHz auction were due. In addition, a private company, Spectrum Exchange Group L.L.C, requested the auction be delayed by a month to give it time to run a private auction to move broadcasters from the 60-69 spectrum.
“Parties have expressed that more time would be useful. After we reviewed our auction schedule, we determined we could move the date and still meet our commitments to Congress. The C-block issues are separate but as you know the commission is moving forward on those expeditiously,” said an FCC spokeswoman.
No rules yet for C-block
Senior FCC staff said in New Orleans that the agency would decide whether to restrict bidding in the scheduled re-auction to small businesses-known as designated entities-and those who do not exceed the spectrum caps, before short forms in the 700 MHz were due.
“The chairman’s goal is to resolve that issue before people have to file short forms for 60-69,” said Ari Fitzgerald, wireless legal adviser to FCC Chairman William Kennard.
The FCC is under growing pressure from large wireless carriers to waive DE and spectrum cap restrictions for the July re-auction.
Due to the delay, short forms for the 700 MHz auction are now due May 8. Since these forms were originally due April 10 this gives the FCC an extra month to decide these issues.
The delay in the C-block re-auction rules makes it difficult for bidders in the 700 MHz auction to prepare. Many of the petitioners are expected to participate in the 700 MHz auction especially if they are not allowed to bid for licenses in the C- and F-blocks.
But it is not only bidders in the 700 MHz auction that are impacted. DEs that do not want the FCC to change the rules for the re-auction are also left wondering what the FCC will do.
“It is a little unsettling for the small companies with the uncertainty surrounding these licenses,” said Dan Pegg, senior vice president for public affairs with Leap Wireless International Inc.
The FCC announced Jan. 12 that it was canceling NextWave’s licenses and would re-auction them July 26. The FCC’s rules on re-auctioning the NextWave licenses will be unnecessary-if the U.S. Court of Appeals for the Second Circuit agrees with Bankruptcy Judge Adlai S. Hardin Jr. that the licenses cannot be canceled because they are subject to the bankruptcy automatic stay.
Private auction company asks for more time and gets it
Spectrum Exchange Group filed comments on March 10 asking the FCC to delay the auction for one month. On March 17, the regulatory agency did just that.
The private auction would occur the first week of June so that bidders in the June 7 700 MHz auction would be able to determine how much they are willing to pay for a license, based on what they have agreed to pay to relocate the broadcasters.
“It enables bidders in the FCC auction to enter the auction knowing exactly what it will cost to clear the spectrum,” said Lawrence Ausubel, Spectrum Exchange co-president.
The idea of using private auctions to clear incumbent broadcasters from TV channels 59-69 was first presented to the FCC late last year. The idea, however, is not without its flaws and the FCC would have to make some rule changes to make the plan feasible.
The first rule change would require mandatory relocation. This would require recalcitrant broadcasters to move to available spectrum if a broadcaster not located in channels 59-69 was willing to vacate for that purpose. Channel 59 also must be vacated because of broadcast protection rules.
For example, if channel 61 was unwilling or unable to move but channel 48 was willing and able to move. Channel 48 would be bid for at the private auction. Using the reverse auction concept where the lowest bidder wins, prospective wireless licensees would bid to pay the relocation and DTV transition costs of the broadcaster-in this case channel 48-once a winner is chosen, then the winner would pay to move channel 48 and then channel 61 would move to channel 48.
The second rule change would require cable operators to continue to carry channel 48-or any of the broadcasters in 60-69 that agree to transition to DTV-after the broadcasters cease over-the-air transmission under the cable operators must-carry obligations.
“We are not requesting anything new or anything special. We simply want there to be no artificial incentives for [ultra-high frequency] broadcasters to continue over-the-air transmission,” said Ausubel.
The FCC’s Cable Services Bureau is currently considering must-carry rule changes for the digital environment but these rules have not yet been presented to the commissioners and no target date for a vote has been established. It is therefore unlikely these rules would be voted on before Spectrum Exchange would conduct the private auction.
