Hearing Examines Implementation of Incentive Auction

WASHINGTON, July 24, 2013 — The House Subcommittee on Communications and Technology held a hearing Tuesday on the upcoming spectrum auction, focusing primarily on possible restrictions on larger carriers and efforts to ensure that broadcasters are treated fairly.

The question of whether or not to impose restrictions on AT&T Inc. and Verizon Communications Inc. dominated much of the conversation.  While none of the witnesses advocated for entirely excluding the carriers, Harold Feld, Senior Vice President of Public Knowledge, recommended a “no piggies” rule that would prevent any one bidder from purchasing what he considers to be too many licenses.

T-Mobile Vice President of Regulatory Affairs Kathleen Ham supported Feld’s rule, citing the importance of spectrum to all mobile carriers.

“Spectrum is the air we breathe,” she said. “Without it, we cannot compete, and we cannot innovate.”

However, Joan Marsh, Federal Regulatory Vice President of AT&T, pointed out that T-Mobile has been running advertisements claiming that its networks are less congested than those of AT&T and Verizon, implying that T-Mobile has no pressing need for additional spectrum beyond the need of any other carrier. She also noted that Sprint, which also stands to benefit from restrictions on the two larger carriers, has a larger spectrum portfolio than both AT&T and Verizon.

Ham, however, argued that lower band spectrum was especially important to be able to compete due to its greater ability to penetrate physical obstacles. Marsh disputed the high value that Ham placed on these bands of spectrum. Although she acknowledged that its penetrative ability is an asset, she stated that bandwidth and capacity of spectrum is far more important.

Rep. Henry Waxman, D-CA, asked the panel about whether to allow a hypothetical situation in which a single bidder purchases all available spectrum licenses within a market. While Feld and Ham answered no, Preston Padden, Executive Director of the Expanding Opportunities for Broadcasters Coalition said that the regulators should defer to the market forces of the auction. Marsh added that such an outcome was highly unlikely, with past open and free auctions still resulting in diverse winners.

The subcommittee also considered the revenue impacts of restrictions on spectrum concentration in the auction. Money raised by the auction has already been allocated to a number of uses, including developing a first-responder network, reducing the deficit, and covering the moving costs of broadcasters displaced by the repacking of spectrum.

Ham argued that the restrictions would raise revenue by encouraging numerous bidders to participate in the auction. However, Marsh argued that limiting the ability of AT&T and Verizon to participate would reduce the revenue. Gary Epstein, Senior Advisor and Co-Lead of the Incentive Auction Task Force of the Federal Communications Commission, remained neutral on the subject, saying that it is a complex issue that the commission is still evaluating.

The subcommittee was also concerned with the treatment of broadcasters in the auction. Rick Kaplan, Executive Vice President of Strategic Planning for the National Association of Broadcasters, laid out three criteria that the FCC should try to meet to make the auctions successful for broadcasters.

He argued that broadcasters who remain on the air should not be harmed in the form of changes in coverage areas or excessive costs in moving to a different band of spectrum. Kaplan also urged the FCC to ensure that other critical services such as low-power translators remain unharmed.

Finally, Kaplan emphasized the importance of preventing interference as a result of the auction. Particular concerns were raised about areas bordering Mexico and Canada. Epstein assured the subcommittee that the FCC was working to solve those issues and would try to provide as much certainty as possible by the time of the auction.

The issue of fair prices for broadcasters was a major concern for Padden. He asserted that payments to broadcasters for their spectrum must be large enough to attract a significant number of sellers. Padden also criticized as irrelevant the scoring that the FCC has been using based on the station itself. He noted that broadcasters are selling the spectrum, not the station, so the quality of the station should have no bearing on the price offered.

Epstein promised that the FCC would take all these viewpoints into consideration and has in fact already received and reviewed over 460 comments on the auction.

“We’re committed to an open, transparent, and inclusive process,” he said.