Setting the stage for the commencement of incentive auctions next year, the FCC adopted a Report and Order yesterday by a 3-2 margin that sets forth the framework for reverse auctions of 600 MHz band spectrum to be surrendered voluntarily by television broadcasters and for forward auctions of reclaimed spectrum to the wireless industry. Also, in a separate but related order, the FCC revised its rules on mobile spectrum holdings, enacting, among other things, bid limits for forward auctions of reclaimed 600 MHz spectrum that set aside a portion of the 600 MHz channel assets in each market for auction participants that hold less than one-third of the low-band spectrum in such markets. In summary, the incentive auction rules are divided into four parts that cover (1) reorganization of the 600 MHz band to accommodate unlicensed operations and the repacking of remaining broadcast operations, (2) reverse and forward auction process and design, (3) post-auction transition of all incumbent broadcast operations, and (4) channel sharing and other post-transition regulatory issues. With respect to forward auction set-asides, the FCC will reserve up to 30 MHz of spectrum in each market for carriers that hold less than one-third of licensed spectrum below 1 GHz. Under the rules, the agency will apply the spectrum reserve once the auction reaches a yet-to-be-determined revenue level that is sufficient to fund the $7 billion public safety “FirstNet” network and to compensate broadcasters who surrender their spectrum through reverse auctions. The 30 MHz reserve assumes that broadcasters will surrender at least 70 MHz of 600 MHz spectrum in each market. If broadcasters give up less spectrum, the reserve will be reduced accordingly. Unrestricted bidders will also be eligible to bid on all available spectrum in each market, whether reserved or unreserved. Voicing confidence that “the wireless industry, including providers of all sizes, will rally around the rules,” FCC Chairman Tom Wheeler explained that the spectrum set-aside “will make sure that consumers are more likely to benefit from increased competition in all parts of the country.” Although FCC Commissioners Ajit Pai and Michael O’Rielly complained in dissenting statements that the rules manipulate the market by curtailing the activity of bidders such as Verizon and AT&T, Competitive Carrier Association President Steve Berry lauded the set-aside as “critically important” to small and regional carriers “given the superior propagation characteristics of low-band spectrum.”