The FCC shouldn’t impose rules that would limit the participation of the largest carriers in future spectrum auctions, former FCC Chief Economist Tom Hazlett said Wednesday during a presentation sponsored by the Hudson Institute. Legislation approved by Congress last week opens the door to such rules, but only through a separate public rulemaking with general industry applicability (CD Feb 17 p1). Hazlett is a professor at the George Mason University Law School.
The House and Senate passed long-awaited spectrum legislation on Friday as a “pay-for” in the payroll tax cut extension bill. President Barack Obama praised the bill and was expected to sign it into law. The spectrum law (CD Feb 17 p1) authorizes the FCC to conduct voluntary incentive auctions, a recommendation from 2010’s National Broadband Plan. It also sets up national public safety wireless broadband network ten years after one was recommended by the 9/11 Commission.
Congress is poised to approve as early as Friday legislation extending the payroll tax cut, which also gives the FCC authority to hold voluntary incentive auctions of broadcast spectrum. The agreement on the spectrum provisions was a win for FCC Chairman Julius Genachowski who had made a push on the bill one of his top priorities, industry and FCC observers said, and a victory for public safety. A wireless industry official said he expects the FCC to move quickly to start developing rules for an auction, but an actual auction could be four to six years away.
Excluding AT&T and Verizon from spectrum auctions would result in less revenue for the U.S. Treasury and higher prices for consumers, said a paper released Wednesday by the Georgetown Center for Business and Public Policy. The 700 MHz auction showed that “placing conditions on spectrum reduces the value of that spectrum,” said Anna-Maria Kovacs of the center. “The key lesson of Auction 73 is that a neutral auction -- one that is open to all bidders and free of conditions -- benefits consumers and competition, as well as the Treasury.” AT&T and Verizon are “spectrum-constrained” and spending significantly to keep up with customer demand, Kovacs said. “Rationing the spectrum available to the largest carriers by excluding them from the proposed incentive auction is likely to degrade their service, raise their cost, and force them to raise their prices.” Competitors might buy spectrum “at deep discounts” without the top two carriers bidding, but “there is no assurance that they will pass that saving on to consumers,” she said. There are no “obvious new entrants on the horizon” showing interest in buying spectrum to create a new competitive network, Kovacs added.
Capitol Hill spectrum negotiators may be closing in on consensus as Congress nears a vote on the payroll tax cut extension that may include spectrum auctions as a “pay for,” Hill officials and industry lobbyists said Tuesday. House Republicans floated a proposal this week to strip all offsets from the payroll tax bill, but lobbyists said spectrum is still likely to make the final cut after the bill moves through the Senate. “Staff negotiations are ongoing and good progress is being made,” a House Commerce Committee spokeswoman said of the spectrum talks. “Everyone agrees about the important role this legislation can play in supporting job creation and producing savings for taxpayers."
A group of 100 companies, associations and nonprofits urged unlicensed use of spectrum be made available from voluntary incentive auctions. The House-Senate conference working on the payroll tax extension is considering using the auctions to pay for its bill due at the end of the month. “As Congress considers [spectrum] legislation, it must ensure the [FCC] maintains its flexibility as an expert independent agency to make more spectrum available for a diversity of uses and users,” the group said. “It is particularly critical that some of the ‘beachfront’ spectrum located in the television bands remain available for unlicensed services, which are driving innovation, promoting rural broadband deployment, and creating new services in the wireless ecosystem.” The letter’s more-than-100 signers included Google, NCTA, Broadcom, Public Knowledge and the National Telecommunications Cooperative Association. In a separate letter to conferees Monday, Public Knowledge, Media Access Project, New America Foundation and 15 other public interest groups railed against restrictions on unlicensed and other areas under considerations. “The provisions that restrict the application of pro-consumer and pro-competition conditions on spectrum auctions would be a massive step backwards in the evolution of our Nation’s wireless policy,” they said. Besides the unlicensed issue, the groups objected to language in the House bill scaling back the FCC’s net neutrality powers and preventing the FCC from using spectrum screens.
Sen. Maria Cantwell, D-Wash., objected the House spectrum bill, in a letter Friday to conferees on the payroll tax cut extension. Congress should allow the FCC to set aside some spectrum for unlicensed use, she said. Congress should not limit the agency’s authority to design and manage spectrum auctions, she said. Limits on that authority in the House bill would hurt competition and “benefit only the biggest incumbent providers with the deepest pockets,” she said. The House bill inappropriately narrows the definition of “public safety,” limiting which local agencies can use the proposed national network, she said. Cantwell also objected to the bill’s requirement that public safety give back 700 MHz narrowband spectrum, because she said many public safety organizations have built out or are building networks with that spectrum. “Communities that have invested millions in local taxes for their 700 MHz public safety networks will have stranded assets and limited alternatives to migrate to for public safety grade voice, without the benefit of any federal compensation,” Cantwell said. Also Friday, T-Mobile condemned auction eligibility language in the House bill. “Our concern is the auction eligibility language now being considered by Congress will give a significant advantage to the largest companies with the deepest pockets, who will buy any and all available spectrum to the exclusion of competition,” said T-Mobile Vice President Kathleen Ham in a blog post (http://xrl.us/bmrobz). “We all want free markets,” she said. “But the reality is that spectrum supply is not a normal free market since the US Government uniquely controls this fundamental input to our business. It is incumbent upon the government then to ensure that when and if it makes this resource available it does so fairly, ensuring all who want to compete have that opportunity."
Competitors of the top two wireless carriers protested the House spectrum bill for limiting the FCC’s ability to make rules on auction eligibility. Sprint Nextel, T-Mobile, the Rural Cellular Association and five others sent a letter Wednesday to conferees on the House-Senate conference for the payroll tax cut extension. They urged conferees to reject Section 4105 of the House bill (HR-3630) banning the FCC from considering existing spectrum holdings in determining a carrier’s participation in auctions. “The proposed provision would substantially limit the FCC’s ability to promote competition and a competitive wireless marketplace for consumers throughout America,” the competitive carriers said. “It would facilitate spectrum warehousing, inefficient use of scarce spectrum resources, and reduce spectrum auction revenues to the U.S. Treasury.” The provision benefits only AT&T and Verizon Wireless, they said. “Stripping the FCC of its auction design discretion would disserve the public interest by permitting unchecked participation by the two largest, best-funded wireless carriers in future spectrum auctions,” they said. “That would discourage smaller competitors from participating in future auctions thereby reducing auction revenues and limiting wireless competition and innovation.” AT&T Senior Executive Vice President Jim Cicconi disagreed with his company’s rivals. “Any qualified carrier, including those on today’s letter, should have a chance to bid on any spectrum available in an auction,” he said. “This group, however, wants the FCC to stack the deck in its favor. … These companies should be prepared to compete in a fair and open auction, and should stop seeking a rigged spectrum auction that would harm consumers and cost the Treasury billions."
Talk of incentive spectrum auctions in Washington is overblown, Sinclair CEO David Smith said during the company’s Q4 earnings call Wednesday. “Based on what I've seen on the Hill, it’s conceivable there will be no auction any time in the near future,” Smith said in response to an analyst’s question about spectrum bills. “I'm not sure it ever gets into any kind of final legislation because there are fundamental disagreements between the Democrat side and the Republican side about what the final legislation has to say,” he said. Negotiations between House Republicans and Senate Democrats are under way. (See separate report in this issue.)
Sen. Jay Rockefeller, D-W.Va., “compromised” on governance in negotiations with the House on spectrum legislation, the Senate Commerce Committee chairman said Tuesday. Rockefeller agreed to put NTIA in charge of deploying the public safety network, Rockefeller told reporters after Democratic senators’ weekly policy lunch. Rockefeller’s original spectrum bill, S-911, proposed setting up a federal entity called the Public Safety Broadband Network Corp. to govern the network. The corporation would have included federal, state, local, tribal, public safety and private sector members. Meanwhile, the House GOP bill had proposed a state-by-state approach involving a third-party administrator. The House-Senate conference on the payroll tax cut extension is expected to include spectrum auctions as a pay-for provision in the bill due by month’s end. Staffers from the House and Senate Commerce committees are separately negotiating the spectrum piece (CD Feb 7 p9). While not a conferee, Rockefeller has signaled he’s willing to compromise on the spectrum bill as long as the end result is a national network for public safety, a Commerce Committee spokesperson said. The House Commerce Committee didn’t respond to a request for comment. Committee Democrat Doris Matsui of California said she hopes “that any final deal will have a strong governance structure in place.” Matsui didn’t comment specifically on the NTIA approach cited by Rockefeller, but warned that “the lack of a strong governance structure could threaten the achievability of a nationwide public safety network.”