The Battle for Bandwidth: The FCC Proposes Auction to Transfer Airwaves from TV to Wifi

Tuesday, October 2, 2012 by Kaitlin Powers

On Friday September 28, the Federal Communications Commission (FCC) issued a release announcing that it unanimously approved a proposal to shift use of public airwaves currently allocated for broadcast television to the realm of high-speed wireless broadband networks. The FCC is now seeking comments and additional suggestions by those in the industry before finalizing the proposal.

The FCC proposal would auction the existing space to mobile service providers and return a portion of the proceeds to the television broadcast companies. The government will first conduct a voluntary reverse auction to buy back some amount of spectrum from television broadcast companies before reorganizing the spectrum for distribution among television broadcasters and for auction to wireless broadband providers. The FCC also plans to use the reorganization to satisfy a 9/11 Commission recommendation to set aside airwaves for nationwide correspondence between public officials during emergencies. The auction is currently scheduled for June 2014, and the proposal currently states that bidders will not know in advance which frequencies or geographic areas will be available for bid at the time of the auction.

Supporters of the proposal tout the potential for the increased airwave space to facilitate the development of new smartphones and tablets for improved mobile capability. However, opponents of the proposal suggest that the auction, in its current format, may favor only the largest carriers, namely AT&T and Verizon Wireless, leaving the smaller companies farther behind and less competitive. Additionally, some question whether television broadcast companies will get a fair price for the broadcast spectrums. Other commentators note that many television broadcast companies believe their available spectrum is limited enough already and that space which has been given away in the past (without compensation) has not yet been fully put to use by wireless broadband providers.

During previous auctions for spectrums, smaller mobile carriers have alleged that there is inequity in the licensing process since larger carriers may negotiate to decrease interoperability between different spectrums and may decrease the incentives for mobile device companies to make hardware compatible with the spectrums of the smaller carriers. The FCC appears to be attempting to remedy this by preventing bidders from learning of the spectrum frequency or location in advance, but this may further disincentivize smaller carriers from bidding since they may not be able to build a cohesive business strategy around sprawled spectrums.

Commentators suggest several remedies for the potential inequity such as capping the amount of spectrum or capping the value of spectrum any particular entity can license via the auction. The FCC has previously attempted to cap spectrum space of any one company, but commentators suggest these efforts have fallen short. Smaller carriers also argue that capping the amount of spectrum without inquiring about its value is an unfair and arbitrary limitation.  

Ultimately, the FCC must be careful to avoid any actions which may create antitrust concerns for the larger entities and work to create an auction and licensing system that properly inspires competition and equity.