FCC Proposes ‘Incentive’ Auction as Spectrum Solution

by Matt Klassen on October 3, 2012

As wireless carriers continue to fight over the remaining scraps of spectrum in an effort to bolster their own networks, the Federal Communication Commission has come up with a plan of its own, free up spectrum currently owned by TV stations. The problem the FCC has faced of late is such deals being done privately, notably the controversial spectrum deal Verizon recently struck with a cable consortium. So in an effort to restore some balance to the mobile market, the FCC will offer TV stations incentives to auction off their spectrum to mobile carriers.

This proposed ‘incentive’ auction—a world first according to the FCC—will be a multi-step process, one that involves a reverse auction for TV stations that will allow them to set their price for voluntarily relinquishing spectrum, spectrum that is then placed in a pool and entered back into a traditional auction involving mobile carriers.

While such efforts are certainly better than nothing, I would wager that without a comprehensive long term spectrum strategy such auctions will offer only temporary ‘Band-Aid’ solutions, allowing carriers to extend their capacity for a few years, but doing nothing to actually solve the extant spectrum crisis.

As eCommerce Times writer Erika Morphy explains, the FCC’s proposed incentive auction consists of three major parts:

  • A reverse auction allows broadcast television licensees to submit bids to voluntarily relinquish spectrum usage rights in exchange for payments.
  • A reorganization or “repacking” of the broadcast television bands frees up a portion of the ultra-high frequency (UHF) band for other uses.
  • A “forward auction” of initial licenses encourages flexible use of the newly available spectrum.

As mentioned, while such an auction will offer mobile carriers some of the resources needed for network expansion, it will likely only temporarily assuage the spectrum pinch, meaning that in a few short years this new bandwidth will be full to capacity and companies will once again be searching for spectrum solutions.

In fact, with increasingly gluttonous smartphones hitting the market, such a spectrum auction might actually only get carriers back to equilibrium, solving the current need for spectrum but doing nothing for future bandwidth needs or network growth.

The solution to the spectrum crisis, according to market analyst Jeff Kagan, will not be found in an auction, but rather in a radical and comprehensive approach to spectrum as a whole, one, as I’ve mentioned before, that would likely include the government pooling all available spectrum and allowing all companies to access it according to their needs. Such a strategy would then give the competitive advantage to those carriers who excel at customer service, competitive pricing, and device selection, not those who boast hoarding the most market resources.

The problem, of course, is that as they say, possession is nine tenths of the law. Much of the current spectrum was auctioned off to companies like Verizon and AT&T years ago, before spectrum concerns were on anyone’s radar, and neither company is going to be eager to give up what they claim is theirs by right. So while a radical revolution is needed to truly solve the spectrum crisis, I doubt the FCC has enough clout to see it through, leaving us to wonder just how long Band-Aid solutions such as this will hold.

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Written by: Matt Klassen. www.digitcom.ca. Follow TheTelecomBlog.com by: RSS, Twitter, Facebook, or YouTube.

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