Spectrum Bill Recap: Now on to the Auction

WASHINGTON March 8th, 2012 – Last month Congress passed one of the more important pieces of legislation regarding the future of wireless access and innovation in our country. The bi partisan legislation has already garnered support from many of the stakeholders and parties involved. Given that we have not covered this legislation up to date, we are now providing a summary of it.

On February 17th Congress passed the “Payroll Tax Bill”, formerly titled the Middle Class Tax Relief & Job Creation Act of 2012. While the primary focus of this bill is the payroll tax, there are three key provisions in it that are revolutionary for wireless networks in the United States. These provisions were inserted into the bill after the bi partisan wrangling over the payroll tax portion was over, as it became clear that it would pass.

In the first provision, the legislation authorizes an unprecedented release of spectrum through granting the Federal Communications Commission the authority to establish voluntary spectrum auctions for currently licensed, unassigned and government-owned spectrum. The second provision gives the FCC explicit authority to preserve unlicensed TV white spaces and to consolidate white space bands for unlicensed devices. The third provision creates a national interoperable public safety broadband network.

As a consequence of these provisions, there will be significant rectification of the national shortage of spectrum for broadband services. In order to achieve these goals, the legislation creates significant monetary incentives for spectrum rights holders and projects net profit of approximately $15 billion for the U.S. treasury.

Auctions

In the first part of the auction process the FCC has three years to auction off up to 65MHz of spectrum from a series unassigned or government- owned bands.

The second phase of the auction seeks to auction off portions of spectrum bands currently licensed by the TV broadcasters. The legislation gives the FCC the authority to hold incentive auctions where broadcasters would receive payment in return for voluntarily giving up portions of their spectrum allocation. Through a process called a reverse auction, the FCC will receive bids from broadcasters stating the amount that they would accept for giving up the rights to their spectrum. The reverse auction is designed to keep the broadcaster’s asking price low. The FCC will then take the relinquished spectrum and auction it off in regular auction proceeding.

The law asks the FCC to use all reasonable measures to preserve existing coverage for different stations and prevents them from moving stations from UHF to VHF bands and vice versa. Additionally, the legislation has set aside a one-time $1.75 billion dollar fund to cover reallocation costs for stations that have given up spectrum.

Congress did not restrict the FCC’s ability to enforce conditions of net neutrality on new wireless spectrum licenses, a provision that was part of an earlier version of the legislation. They did, however, prohibit the FCC from setting pre-conditions, aside from the basic qualifications for participating, in the auction process. The law does, nevertheless, give the FCC broad authority to craft auction rules in the public interest. The FCC can make “rules of general applicability, including rules concerning spectrum aggregation that promote competition.” Essentially, this will enable them to place caps on the amount of spectrum any one entity could win.

Preserving Unlicensed Spectrum Uses

Unlike prior versions of the bill, the final version gives the FCC explicit authority to preserve unlicensed TV white spaces. Additionally, the FCC can consolidate white space bands for unlicensed devices to promote the most optimal use and create nationwide guard bands between licenses in order to promote innovation and investment in new wireless services.

Public Safety

The Legislation lays out the plan to construct the nation’s first ever public safety broadband network. The bill creates the First Responder Network Authority (FirstNet) which will receive $7 billion in auction revenue and licenses to use the “D Block” as well as adjacent spectrum to build a national interoperable broadband network for public safety personnel.

Congress inserted an opt out clause in the public safety portion of the bill for states that demonstrate their own ability to build a public safety network and connect it to the national network. To ensure interoperability of these networks, the bill creates an FCC technical advisory board to come up with interoperability standards. States that choose to build their own public safety networks can apply for grants if they can show that the networks meet the FCC’s interoperability standards.