Congress Seeks Winning Design for Proposed Spectrum Auctions

WASHINGTON, June 2, 2011 – The Subcommittee on Communications and Technology explored legislation Wednesday that would encourage the voluntary participation of broadcast companies and wireless providers in spectrum auctions.

“There is a looming spectrum crisis, and we must get additional spectrum into the marketplace,” said Rep. Doris Matsui (D-CA)

Witnesses before the subcommittee testified if a solution is not adequately devised, increasing consumer demand for mobile broadband products potentially threatens to overcrowd spectrum to the point where it is unusable and innovation is stifled.

“Today, the United States is the world’s clear leader in wireless broadband,” said Chris Guttman-McCabe, Vice President of Regulatory Affairs for CTIA-The Wireless Association during his prepared remarks. “Although the United States is home to just 4.6 percent of the world’s population and 5.8 percent of global wireless subscribers, the U.S. claims 20.4 percent of global high-speed wireless broadband (3G and 4G) subscribers.

“The growth in the demand for mobile broadband and the corresponding need for additional spectrum has been well-documented both by the government and respected private sector parties like the Yankee Group, CODA, and Kleiner Perkins,” said McCabe.

Subcommittee members and witnesses alike expressed the need to design legislation for successful spectrum auctions.  The subcommittee and the witnesses agreed that voluntary incentive auction that would benefit consumers, broadcasters, the government and the general economy.

“Authorizing the FCC to conduct incentive auctions should be the foundation of our spectrum policy efforts,” said Rep. Henry Waxman (D-CA). “We should take full advantage of the FCC’s world-class expertise on auction design and give the agency the ability to work with auction experts to set up the best possible incentive auction.”

“Spectrum legislation presents a tremendous opportunity to promote wireless broadband, spur economic growth, create jobs, and generate significant revenue for the American taxpayer,” said Subcommittee Chairman, Rep. Greg Walden (R-OR), in his opening remarks.

Walden, a former radio broadcaster, while acknowledging the need for smarter spectrum policy, did not seem to agree that incentive auctions were the only answer.

“I would like to see a partnership between broadcasters and wireless companies on spectrum,” said Walden after the hearing. “Part of the reason we held this hearing was to tease out the new technologies. HDTV has only been out for two years, and the companies have put in a lot of work. Now they’re starting to explore what else you can do with that spectrum and mobile TV is certainly a piece of that.”

Witnesses from broadcast companies expressed support for a broadband solution as called for in the National Broadband Plan, but also voiced their concerns. Broadcasters wanted assurance that they would be protected in the potential legislation.

“There is only so much that the laws of physics will allow us to do without crippling our capability to serve our local communities now and in the future,” said Todd Schurz, President and CEO of Schurz Communications.

Schurz outlined four points to serve as a baseline for protecting broadcasters.  Broadcasters, he said, should not be forced to inferior spectrum bands, nor should they be subject to increased interference.  Additionally, if broadcasters are repacked they should not bear the cost and after repacking their signal footprint should not decrease.

Repacking is a means by which broadcasters are moved to different spectrum bands and compressed to free up more contiguous spectrum.

Broadcasters also hope to gain from the increased spectrum demands of consumers.

“To borrow a sports analogy, you go where the puck is going,” said Bert Ellis, President of Titan Broadcasting. “This is where the consumer is going, and we want to be able to go there as well.”

At a time when the U.S. budget deficit is the talk of the town, voluntary incentive auction legislation could provide a method to reduce the budget deficit; the U.S. Treasury would reap the majority of the money from the auctions.

“The FCC incentive auction would likely generate large revenues for the government, perhaps in the range of that generated by the 700 MHz auction [in 2008], which generated close to $19 billion,” said Duke University Dr. Michelle Connolly, an economics professor at Duke University. “More importantly for the overall U.S. economy, it will help move a scarce resource to a more valuable use to our economy and society.”

Connolly cautioned, however, that the auction rules must provide a measure of certainty to licensees and the public.

“As important as the impact of rules imposed on the spectrum being auctioned, is the impact of uncertainty. Rules that increase uncertainty for bidders will also lead to lower bids,” said Connolly.

Every party involved, however, regardless of whether they would participate in a voluntary incentive auction, expressed certainty that meeting the needs of the American consumer was central to their service or proposal.