In the Middle Class Tax Relief Act of 2012, Congress made provisions to secure up to $7 billion to fund the deployment of the first nationwide public safety broadband network, or FirstNet. This funding, however, only becomes available upon the successful implementation of the broadcast TV incentive auction, which to succeed must generate proceeds far in excess of the costs associated with paying broadcasters to give up their spectrum, the costs of relocating the remaining broadcasters, and the administrative costs of running the auction. Indeed, the incentive auction cannot be considered successful unless it raises sufficient revenue to fund FirstNet, as recently recognized by five FCC Commissioners at a Senate hearing.
Last week, in a letter to the FCC, the Public Safety Alliance (PSA), a partnership of the nation’s leading public safety associations, offered its voice on this important issue. It too recognized the critical need to adopt incentive auction rules that will generate sufficient revenue to allow public safety to build FirstNet, the construction of which is long overdue given the broad support for this critical effort. As the PSA highlighted, “the goal of using the auction proceeds to deploy FirstNet depends upon a successful auction that realizes the full value of the repurposed broadcast spectrum.” An open auction that permits all bidders to participate is the only way to achieve full spectrum valuations for the spectrum licenses to be auctioned. If some of the most likely bidders are restricted by rule from participating in the auction, or are limited in what they can bid on, the amount of revenue generated by the auction will be curtailed.
Some are arguing that the Commission should engineer the auction rules to ensure that Sprint and T-Mobile (both of whom chose not to participate in the last major auction for 700 MHz spectrum) win spectrum. If the incentive auction rules are manipulated to essentially set aside spectrum for these or other providers, less revenue will be generated. Broadcasters, fearing they will not receive top dollar for their spectrum due to that set aside, will contribute less spectrum to the auction. This will, in turn, jeopardize the entirety of the auction including the critical goal of raising the billions of dollars necessary to fund FirstNet, a result that would harm all consumers by depriving our first responders of the tools necessary to fight 21st century threats and protect our country. As the PSA reminded us, “the upcoming incentive auction represents the best and perhaps only chance for the next several years to raise the billions of dollars necessary to fund FirstNet.”
Indeed, the set asides and restrictions proposed specifically by Deutsche Telekom’s U.S subsidiary, T-Mobile, would drastically limit the amount of spectrum AT&T and Verizon could bid upon at auction thereby effectively guaranteeing T-Mobile the ability to obtain substantial amounts of spectrum at an artificially low cost subsidized by US taxpayers. While that subsidy proposal might permit T-Mobile’s parent company, Deutsche Telekom, to build more broadband in Europe, it will do nothing to protect American citizens at home where we work and live because it would mean less spectrum being auctioned and less revenue to pay off our national debt and finance a long overdue national public safety network. And that’s the best case scenario – where the set asides and subsidies do not doom the auction altogether.
Moreover, Deutsche Telekom’s subsidiary is essentially arguing for a restriction placed on top of the already existing spectrum screen (which has been in place for more than a decade). That screen requires rigorous analysis whenever any carrier acquires more than 1/3 of the available mobile broadband spectrum in a particular market. While that screen needs to be updated to include all of the approximately 600MHz of spectrum the FCC proclaims is suitable for mobile broadband purposes, the screen itself exists to serve the purposes of ensuring there is no competitive foreclosure of spectrum assets necessary for a competitive market. The T-Mobile proposal serves no similar legitimate competitive purpose and instead is designed solely to benefit itself and Deutsche Telekom in the marketplace – and at the expense of U.S. consumers and taxpayers, and also potentially at the cost of not being able to build a first responder broadband network.
In considering auction rules, the Commission should adhere to the statutory mandate to conduct an open and competitive auction that allows all bidders to fully compete. The carriers that place the highest value on the spectrum will win the licenses, and history tells us that all carriers can be successful. In the last major auction in which T-Mobile participated, it won more spectrum than either Verizon or AT&T. This approach offers the best prospect for a successful auction that meets all of Congress‘s stated goals, including freeing up the maximum amount of spectrum for mobile broadband use, reducing the deficit, and funding a nationwide public safety network. It also would ensure all the consumer benefits that will flow from putting spectrum to its best and highest use.