The Wireless Incentive Auction: What Will It Deliver?

Wireless Wonk

The Wireless Incentive Auction: What Will It Deliver?

By Barlow Keener, Attorney  |  September 23, 2014

On June 2, 2014, the FCC (News - Alert) released the 3-2 vote, 484-page Incentive Auction Report and Order.  Three weeks later the FCC released the estimated timeline for the auction.

FCC Chairman Tom Wheeler (News - Alert) is all business about getting the Congress-mandated auction approved.  He is sending the message that he is working diligently to keep all the parties happy.  

The forthcoming FCC Incentive Auction is reported to be the most complicated and risky spectrum auction ever attempted. The goal is to transfer 80 to 120mHz of TV spectrum (equal to 20 channels) from TV broadcasting to mobile use. 

What will be accomplished in the process? An estimated $20-$25 billion will go to the government for various uses, including paying for FirstNet, a nationwide, public safety LTE (News - Alert) data network. Mobile carriers will pay for and receive exclusive licenses to use prime spectrum. TV stations now scattered across channels 38-51 (614-698mHz) will either voluntarily go off the air or be moved down into VHF or lower UHF channels. And wireless broadband cloud-direct agile radios, also known as TV white spaces radios, will receive access to new unlicensed spectrum in urban areas like Los Angeles; New York City; Washington, D.C., and regulatory certainty in areas like Nashville. 

The auction is a turning point in the TV industry and for America. Without TV stations selling out, the auction could fail. Chairman Wheeler, in his June 25, 2014, FCC blog encouraged TV stations to keep their chins up.

"Robust participation by broadcasters will be critical to the success of the auction,” he wrote. “The auction is a risk-free, once-in-a-lifetime opportunity for broadcasters, but the decision of whether or not to participate is completely voluntary and confidential. We recognize that spectrum auctions are new for most broadcasters, and that we owe them additional information before the incentive auction. "

           

Mobile carriers are now well into building out LTE located in the $19 billion of spectrum purchased in the 2008 Auction 73 spectrum. The 2008 Auction 73 spectrum is just above the TV incentive auction spectrum in range of former TV UHF channels 52-69 or 698MHz-806mHz.  The new TV incentive auction 600mHz spectrum will begin the uplink portion at 698mHz (Channel 51) and move down to a duplex gap or an unlicensed gap spectrum between the up and downlinks, the downlink portion which will vary based on TV station location and geography, and guard bands between the TV stations and the new 600mHz mobile spectrum.

The new 600mHz spectrum is valuable (worth $20-$25 billion) to mobile carriers for several reasons. It could help them address growing demand for mobile data. The 600mHz spectrum propagates well through buildings and foliage just like UHF TV and public safety two-way radios, allowing mobile services to reach inside buildings and homes and decreasing the infrastructure requirements. And it would mean the cost for base stations will decrease because by harmonizing the U.S. spectrum plan with similar plans in other countries equipment costs for U.S. deployment will gain volume efficiencies. Not only will the carriers spend $18 billion on the new spectrum, but they will also spend an estimated $30-$50 billion building out the spectrum with new small cell base station infrastructure.

The auction will take place in 2015. In 2014, the FCC will determine starting prices (the highest price offered) for the TV reverse auction, how to determine TV market variations like population served, contours, and nearby interference. The TV White Space Part 15 order will be revised to allow cloud-directed agile broadband radios to operate in the repackaged TV spectrum alongside wireless microphones. In 2015, the FCC will finalize which stations can compete in the auction.  In the meantime, many webinars, tutorials, and seminars will be delivered by the FCC to all parties explaining the issues and hearing from the participants. 

The final days of TV broadcasting are upon us. TV stations are being shuffled and shuttered.   Over-the-top video is slowly but steadily replacing over the air broadcasting. Selling based on the spectrum value, as opposed to business value (such as a multiple of revenue or earnings), will be a very tough decision to be made by the TV stations and the public servants of our communities.




Edited by Maurice Nagle

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