The FCC’s Incentive Auction proceeding moves forward in earnest today with the filing of opening comments. The stakes are as high as the issues are complex. Freeing up more spectrum is critical to U.S. economic growth and technological leadership. And this auction presents the FCC with the best opportunity it will have for many years to advance that goal.
This is far from a typical auction. In auctions past, the Commission has sold specifically defined frequency blocks to raise money for the U.S. Treasury. In this auction, the Commission must persuade two different sets of auction bidders to participate in two separate auctions designed to create forward-auction revenues that exceed winning reverse-auction bids, plus administrative and repacking costs. If they fall short of these goals, only limited amounts of spectrum will be cleared or, in the worst-case scenario, the auction could fail altogether.
This fact has profound consequences for every decision the Commission must make in this proceeding, from establishing a band plan, to designing the forward and reverse auctions, to establishing the ground rules for participation.
As discussed in our comments, the Commission has already set the stage for success. The NPRM issued by the FCC put forth innovative approaches to managing the complexity inherent in this process, from the organization of the cleared spectrum to the mechanics of the forward and reverse auctions. But as the Commission has readily recognized, the NPRM’s proposals are only a starting point in the search for the best solutions.
In that spirit, AT&T offers a number of recommendations today for building on the FCC’s innovative initial proposals. And here are a few of the key ones:
The Band Plan – In principle, AT&T supports many of the concepts incorporated by the Commission into the proposed band plan, which sought to carefully coordinate blocks of uplink and downlink spectrum across different markets at varying clearing targets. This concept is a key innovation that will allow the Commission to reallocate the greatest amount of usable spectrum while accommodating the twin realities that different amounts of spectrum will be cleared in different markets, and that mobile technologies cannot feasibly support a proliferation of widely disparate band plans from one location to the next. We also agree with some of the other principles underlying the Commission’s proposal. For example, AT&T supports using five-megahertz building blocks, creating a significant amount of paired spectrum, and limiting the size of guard bands to what is technically necessary to avoid interference.
That said, after engaging in a detailed engineering analysis and consulting with our vendors, we believe that certain aspects of the FCC’s initial proposal raise technical concerns (outlined in detail in our comments) that could create the potential for harmful interference and risk auction participation.
To accommodate these concerns, we also offer a modified band-plan framework that retains some of the key characteristics of the NPRM proposal, but with variations that seek to address technical concerns. While many of the details remain to be finalized, this alternative framework incorporates what we believe to be important improvements to the NPRM proposal.
The Reverse and Forward Auctions – AT&T supports the Commission’s proposal to conduct reverse and forward clock auctions. The dual clock auction framework represents an innovative approach to managing the inter-related two-sided nature of an incentive auction. But, as with the band plan, we offer proposals to improve upon the framework outlined in the NPRM.
For example, in the forward auction, we propose that the Commission permit package bidding through all-or-nothing bids for certain groups of complementary licenses, such as the same frequency block in all of the license areas that comprise a metropolitan area or region. Effective package bidding is necessary to capture complementarities that regional and national carriers derive from offering service on the same frequency bands across broader geographic areas and thus to maximize spectrum value and the prospects that the auction will be a success.
AT&T also proposes a “single-pass” reverse auction that would ask broadcasters to indicate, before the forward auction is convened, whether or not they would cede specified spectrum rights at progressively lower price levels for the full range of potential spectrum clearing targets. The reverse auction proposal in the NPRM, in contrast, would stop at the prices necessary to meet only the first, most optimistic clearing target. And, if the subsequent forward auction revenues were insufficient to cover those prices (and repacking costs), the broadcasters would have to be reconvened for another reverse auction (and so on), introducing unnecessary and unwanted complexity, delay and potentially sub-optimal repacking arrangements.
This auction represents an historic opportunity for the Commission, the industry and the country. The complexities are significant and unprecedented, but the challenges must be met. We look forward to working with the FCC to outline the path that will lead this country to a successful 600 MHz incentive auction.