The Federal Communications Commission (FCC) has begun filling in some details about how it will run its first-ever incentive auction.
Planned for mid-2015, the auction will reallocate low-band spectrum—or, spectrum below 1GHz—that has been given up by television broadcasters and is particularly valuable to wireless carriers for its ability to penetrate (and so offer strong mobile phone service) deep inside buildings and so-called "urban canyons."
To prevent one or two carriers from "being able to run the table at the auction," and because two carriers (Verizon Wireless and AT&T) currently control the majority of low-band spectrum, FCC Chairman Tom Wheeler said in an April 25 blog post that he has proposed a "market-based reserve" for the auction.
Wheeler explained that all auction participants will be welcome to bid on any license area, and that when the auction begins, all bidders will be bidding, and there will be no reserved spectrum at the initial stage.
When the auction reaches a "'trigger' point," however, the "reserve eligible" bidders—those that don't already own significant amounts of low-band spectrum—who are still bidding will then bid for reserved spectrum against only other reserve-eligible bidders. During this time, participants not eligible for the reserved spectrum can keep bidding on not-reserved spectrum.
Only when all bidding stops will the bidding be over.
"The net effect of the market-based reserve, therefore, is to promote a robustly competitive auction with all parties vying to establish a fair market price," Wheeler continued. "Only when the auction reaches the trigger point will bidders split into two groups."
He concluded, "As a result of this design, it will not be possible for one or two bidders to sweep the auction. At the same time, we will maintain a vibrant and competitive bidding process to assure the spectrum is priced at a realistic market valuation."
What Wheeler has yet to clarify is whether the FCC will set a cap for how much overall spectrum any single carrier can purchase during the auction.
Verizon and AT&T have told the FCC that a purchase cap could limit how much money the auction could raise, while T-Mobile and Sprint have argued that a lack of a cap could damage competition in the industry.
Unlicensed Use Spectrum
As part of the auction, the FCC also plans to make available, on a nationwide basis, more unlicensed use spectrum, for uses such as WiFi. As more Americans turn to WiFi, the available spectrum has become congested, Wheeler said in an April 18 blog post.
"Opening up more spectrum for unlicensed use provides economic value to businesses and consumers alike," said added.
Wheeler concluded that new policies come with risk. But "risk is the partner of reward. I will continue working … to minimize the risk and maximize the reward of the Incentive Auction. I am confident we will get this right, and the rewards will be great for all Americans."
On May 15, the FCC will host an Open Meeting, during which it will discuss key policies and rules for the incentive auction; a report that seeks to modify the FCC's policies regarding the aggregation of spectrum; and the proposal of new rules to protect the open Internet, or net neutrality, as the subject is also known.