Last week while speaking at a spectrum conference, Gary Epstein, Chair of the FCC’s Incentive Auction Task Force observed that progress on the incentive auction can be compared to climbing a mountain. With the rules complete and as we move toward the auction start date, the collective group of auction climbers are essentially now at base camp awaiting the final ascent to the summit, which will begin March 29. But as everyone who has read Jon Krakauer’s “Into Thin Air” knows, the ascent to the peak is one of the most dangerous parts of the climb and the descent can also be lethal.
With the quiet period about to commence, as we sit at base camp, I offer a few final thoughts on the auction.
Surely we can all agree that much has been accomplished – perhaps more than many thought possible. The auction rules are firmly in place, the FCC has been releasing a steady stream of data file formats, applications are being filed and workshops are underway to educate auction participants. The FCC auction team has climbed tirelessly to reach this point and all the stakeholders impacted by the auction have climbed tirelessly along with them.
Yet base camp anxieties remain. We are less than 60 days from the start of the auction and forward auction bidders still have had no direct access to the new and complicated software package that will control this auction. Practice rounds with the software are essential and while the FCC has made clear bidders will get practice rounds, it appears that we won’t get them until after the auction opens and the initial band plan is released, which likely means not until May. That will give us little time to incorporate the learnings from the practice round before bidders are qualified and the official mock auction begins. And it’s unclear what will happen if software glitches during the practice rounds raise questions about the path to the summit.
We here at AT&T have also been vocal about our concerns around the post-auction repacking plan. Our analysis suggests that after a successful auction, on average, over 800 stations will need to move to a new channel assignment. While the actual post-auction station count could be larger or smaller, it’s pretty clear that the repacking will be a big, complicated, challenging lift. And the challenge won’t stop at our borders – while the U.S. repacks, our Canadian and Mexican neighbors will need to repack with us or our border markets could be frozen.
The FCC has established a 39-month deadline to complete the repacking but there is no analytical framework behind that deadline. A recent analysis from NAB argues the repacking could take much, much longer than the time allotted by the FCC. And history provides multiple cautionary tales on this issue – the DTV transition took over a decade and merited three legislative extensions and the 800 MHz rebanding process that has also taken a decade is still not complete at the borders.
Post-auction the FCC will need to move quickly to put in place an effective, efficient and optimized repacking plan that charts a rational course to get the repacking done and imposes realistic but enforceable deadlines. The risk of repacking delays will be born almost exclusively by the new 600 MHz licensees, who will have surrendered billions for their new licenses and who will want access to those licenses as expeditiously as feasible. We simply don’t have a decade to get the repacking done.
And one final word about the much-debated auction reserve. Regardless of how you feel about it from a policy perspective, the reserve will add a lot of complexity to an already complicated auction. During the final stage, the auction will split into two pools and within those pools there could be multiple auction products. Demand will need to move between the reserve and non-reserve pools consistent with a complicated set of rules that will play out differently in more than 400 unique license areas in a software interface that we are told must be manipulated manually every single auction round for every single affected market and product. Tracking and reacting to this as the auction progresses will not be an easy exercise for any participant.
Make no mistake – we are strapping on our climbing gear and readying our oxygen tanks. When the time comes to leave base camp, we will be ready to continue to climb. The question is what surprises the mountain will hold for us before the climb is concluded.