By a 3-2 vote marked by dissents by both FCC Republicans, the FCC adopted a public notice at its December open meeting that requests comment on procedures to govern incentive auctions of 600 MHz broadcast television channels to the wireless industry starting in 2016.
The FCC’s action represents a departure from the agency’s customary practice in which a public notice setting forth procedural rules for a particular auction is issued at the bureau level several months in advance of the auction start date. Owing to the unprecedented structure of the incentive auction, for which the basic framework was approved by the FCC in May, the agency decided it should first request comment on how that framework should be implemented. Deadlines for submission of comments and reply comments are January 30 and February 27, 2015, respectively, and the FCC is expected to use these comments in formulating final auction procedures to be outlined in a future public notice.
Specifically, the public notice proposes usage of a dynamic reserve pricing (DRP) procedure during the initial “reverse” auction process. The FCC believes this approach will “facilitate price competition in all markets by offering high opening prices to every broadcaster, and letting the auction process determine the final prices.” Under the FCC’s plan, the opening price “will equally weight the station’s impact on the repacking process due to the interference it produces and the amount of population it serves.” In accordance with the DRP framework adopted by the FCC in May, broadcasters would be asked if they would accept lower prices in areas that lack bidding competition (i.e., areas where there are bids by fewer stations than what is needed to meet initial spectrum clearing targets). If a broadcaster refuses to accept reduced prices in such areas, and if that broadcaster cannot be reassigned to a channel in the repacked television bands, the FCC may assign that broadcaster a channel in the wireless portion of the 600 MHz band. For UHF broadcasters that opt to keep their licenses and move to low VHF-band spectrum, the FCC proposes an opening price of between 67% and 80% of the opening price for fully relinquishing their spectrum. Opening prices for UHF broadcasters that move to high VHF channels would fall between 33% and 50% of the full relinquishment amount.
Meanwhile, with respect to forward auctions of cleared 600 MHz spectrum to the wireless industry, the FCC proposes to calculate minimum opening bids on bidding units that would be determined in “weighted population using an index of relative prices from previous auctions.” Licenses would be offered in two categories that depend upon the extent to which available spectrum would be impaired (i.e., populated with television broadcast licensees whose operations have been relocated to the wireless portion of the 600 MHz band.) The first category would consist of markets with up to 15% impaired “pops,” and Category 2 would include markets with impaired pops of between 15% and 50%. The public notice also concludes tentatively that a “near nationwide” spectrum clearing target would be achieved when impairments affect “less than 20 percent of the U.S. population.” Comment is also requested on a variety of other issues that include (1) the amount and type of reserve spectrum to be made available to bidders that control less than one-third of the sub 1 GHz-band wireless spectrum in a given market, and (2) factors that the FCC should consider when making final broadcast television channel assignments.
Dissenting against the item, FCC Commissioner Ajit Pai joined Commissioner Michael O’Rielly in warning that the proposed DRP would “only increase impairments and market variation.” In reply, FCC Chairman Tom Wheeler emphasized that the agency is merely “seeking comments on proposals [and] not making final decisions” at this stage. The National Association of Broadcasters, meanwhile, promised it would “work with the Commission to ensure the auction is done right” and “can be done without adopting a variable band plan and without cutting corners in ways that harm broadcasters.”