Today, the FCC cast a series of votes that set the stage for the incentive auction to move toward its slated March 2016 start.  The results of the votes, however, are a mixed bag and leave significant wireless industry concerns unanswered.

On the one hand, the FCC has finally resolved the protracted debate on the reserve and its triggers, putting to rest at last T-Mobile’s never-ending quest to expand the favors it will receive at auction. That decision was long over-due and essential to moving the process forward, and the Commission was right to reject T-Mobile’s demands.

On the other hand, some of the auction framework proposals adopted today raise significant questions about the value and utility of the spectrum that will be made available at auction.

First, the FCC has reserved for itself significant flexibility to affirmatively create impairments in the new wireless allocations by assigning broadcasters in-band.  In the past, FCC band plans have failed to properly account for existing interference concerns (think 700 MHz), but never in the history of FCC auctions has the Commission chosen to affirmatively create long-lasting and debilitating in-band impairments.  This not only repeats the sins of the 700 MHz band – which remains under-deployed to this day – it doubles down on them. 

Second, the burden of these impairments is being placed on the restricted bidders, reserving the cleanest spectrum for reserve-eligible bidders like T-Mobile in the auction pool least subject to competition.  Category 2 licenses – with impairments of up to 50% — will be placed in the non-reserve, limiting the supply of clean licenses available for AT&T and Verizon in many markets.

Third, the FCC will permit unlicensed uses in the duplex gap that create the potential for interference in the adjacent licensed allocations. The wireless industry – the very entities that are being asked to spend billions of dollars to make the auction a success – conducted and submitted testing that conclusively demonstrated this potential.  The Commission rejected that testing, building guard bands that will effectively interfere with licensed allocations, not protect them, as required by statute.

There are also a host of additional band plan challenges: guard bands that are too small; unlicensed wireless mics directly adjacent to licensed downlink; and the potential for device interference that the FCC’s ISIX tool does not take into consideration. In addressing these items the Commission concludes that each discrete decision will only minimally impact the spectrum being re-allocated. But the cumulative effect is undeniably large, and it will impact bidding valuations and strategies and, ultimately, the revenue raised at auction.

As important as it is that this auction move forward, it’s more important that the FCC get it right.  A failed auction could set back the effort to reallocate more spectrum for the wireless industry for years.  We fear that, in this instance, getting it done has taken precedent over getting it right.

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