By a 3-2 vote along party lines, the FCC adopted a public notice yesterday which establishes bidding, spectrum clearance, channel repacking and other procedures for the agency’s  first-ever incentive auction of broadcast television channels to the wireless industry. The notice  sets forth procedures for selecting 600 MHz spectrum clearing targets (i.e., the amount of  repurposed broadcast spectrum to be offered to wireless carriers) and also establishes a formula  for determining opening price offers for each eligible TV station. Calculations for forward auction  opening bids, upfront payments and bidder eligibility will be based on the assignment of a specific  number of bidding units to each spectrum block. Two spectrum block categories will be established  for the forward auction: Category 1 (i.e., blocks with potential interference issues or other  impairments that affect up to 15% of the population of a partial economic area or “PEA”), and  Category 2 (blocks with impairments that affect at least 15% and up to 50% of the PEA population.)  In addition to affirming previously- proposed average price and spectrum benchmarks that would  trigger the implementation of auction final stage rules, the notice also sets a 20 MHz cap on the  amount of reserve spectrum that any reserve-eligible entity may acquire in PEAs with populations of  500,000 or under.

With respect to TV stations that opt to remain on the air, the notice authorizes the auction system  to relocate such stations to the 600 MHz wireless uplink or downlink bands or to the “duplex gap”  that sits between these bands “in a limited number of geographic areas where necessary to  accommodate market variations in broadcaster participation.” With the goal of compensating for TV  stations that are relocated to the duplex gap, the notice also seeks comment on proposals to  “preserve an additional vacant channel for licensed wireless microphones and unlicensed devices in  such geographic areas.” Final TV channel assignments will be determined by optimization techniques  that attempt to (1) maximize the number of stations that remain on their pre- auction channels, (2)  minimize aggregate new interference to individual stations, and (3) avoid reassignments for  stations that carry high anticipated relocation costs.

FCC Chairman Tom Wheeler characterized the procedural notice as “a good, balanced, logical solution  to an incredibly complex, never-tried solution.” Broadcasters and wireless carriers, however,  joined FCC Commissioners Ajit Pai and Michael O’Rielly in protesting the FCC’s decision to relocate  certain TV stations in the duplex gap.   As Pai warned in a dissenting statement that the   duplex gap decision will result in “an extraordinary amount of impairment,” the National  Association of Broadcasters lamented the ruling as “a major setback” that could impact the success of the auction.