FCC Discloses Rules for Eagerly-Awaited Spectrum Incentive Auction

The FCC's incentive auction is the first of its kind, and how it should be run has been hotly contested. On May 15, it shared its first established rules.

The Federal Communications Commission (FCC) has shared the rules on which it plans to run its first-of-a-kind incentive auction that will enable television broadcasters to sell their highly-valued wireless spectrum to wireless carriers that eagerly want to buy it.

The rules will serve as a basis on which the FCC will develop and seek additional input and establish the final auction procedures and pre-auction process.

The are four parts to the rules.

The first is a reorganization of the very in-demand 600MHz band on which carriers can offer high-quality mobile phone service deep into buildings.

The new 600MHz band plan "maximizes the value of spectrum to potential bidders and provides both larger and smaller bidders a fair opportunity to acquire spectrum," the FCC said its statement.

The second component has to do with the auction's design, which will consist of a reverse auction, in which broadcasters can relinquish spectrum usage rights and a forward auction, in which the spectrum is made available to carriers.

"The reverse auction will use a descending clock format in which the prices offered to broadcasters for their spectrum usage rights will drop with each successive round of bidding," the FCC explained. "The forward option will use a multiple round ascending clock format in which the prices will generally rise from round to round as long as the demand for licenses exceeds the amount available."

When the auction proceeds meet a reserve determined by the commission, the auction will come to a close.

The third rule specifies what happens after the auction. Within 39 months of the auction, broadcasters will need to completely clear off the spectrum they've sold.

Broadcasters that bid to give up their licenses or to share channels "must cease operations on their pre-auction channels three months from the receipt of their auction proceeds," added the FCC.

The fourth rule, which also deals with the the post-auction process, "will grandfather existing broadcast stations that would otherwise no longer comply with media ownership rules as a result of the auction," according to the FCC statement.

Furthermore, mobile devices will have to be interoperable across the 600MHz band and new licensees will be required to build out to 40 percent of the population in their new service areas within six years of winning the territory and to 75 percent of the population within 12 years.

WiFi Forward, an interest group "working to alleviate the WiFi spectrum crunch," applauded these first guidelines for the long-anticipated auction.

"The FCC has found a compromise that will allow it to auction large bands for licensed wireless services while still permitting innovations in unlicensed technologies in at least three channels in every community in the nation," the organization said in a May 15 statement. "By ensuring that American consumers, businesses, schools, libraries, anchor institutions and local governments will have access to these three unlicensed channels across the country, the FCC has laid the foundation for the investment and innovation needed to develop a new class of 600MHz unlicensed technologies," the statement said.

Consumer advocacy group Public Knowledge also gave the FCC a rather rare and hearty back thump.

"The band plan … gives the American people a win-win-win of more licensed spectrum for mobile services, more open spectrum for 'Super WiFi' devices, while protecting broadcasters and other legacy uses of the TV spectrum," Public Knowledge Senior Vice President Harold Feld said in a statement.

"Open spectrum use such as WiFi already contributes more than $200 billion dollars a year to the American economy, and demand for more open spectrum continues to grow exponentially. The commission's action today provides a way forward to meet this continued demand for better and more powerful WiFi and make possible the kind of innovation in devices and services that have given open spectrum the nickname "the innovation bands," Feld continued.

Noting the still "difficult summer ahead," Feld added that the rules aren't easy to put together and FCC Chair Tom Wheeler deserves some thanks.

"Time and again, resisting pressure to take the easy way out and throw open spectrum under the bus, Wheeler forced all parties and FCC staff to go back to the drawing board to find a way to thread the needle and deliver the 'triple win' of more licensed spectrum, more open spectrum, and a vibrant, free over-the-air television service."

Shortly after taking office, in December Wheeler pushed the auction to mid-2015, citing the complexity of the undertaking.

All parties, Wheeler said at the time, will "spare no effort to ensure that the incentive auction delivers the anticipated benefits to the American people, but also serves as a model for countries around the world."