FCC Offers Plan to Auction Off Broadcast Space to Accommodate Mobile

Called an “incentive auction process,” the FCC would ask the nation’s 1,783 stations to sell off their channels’ space, affecting mostly smaller, independent stations

The Federal Communications Commission on Friday proposed its rules for a plan to repurpose broadcast television spectrum for mobile broadband.

Called an “incentive auction process,” the FCC would ask the nation’s 1,783 stations to sell off their channels’ space in the broadcast spectrum — and, in effect, stop broadcasting.

That space would then be auctioned off to wireless companies like AT&T and Verizon to meet the growing demand for channel space for smartphones and other wireless communications devices.

Participation in the plan is voluntary. Broadcasters who agree to sell their rights to their channels would get a share of the auction proceeds.

Also read: House Clears Way for Spectrum Auction, But Bill Faces Senate Veto

The auctions, authorized by Congress in February and slated for 2014, would provide more channel space for consumers for their smartphones, tablets and other broadband wireless devices.

But at the same time, they could sharply reduce the number of local broadcast TV stations available for viewers. The stations considered most likely to join the process, and perhaps benefit financially, would be the smaller independent, foreign-language and religious broadcasters.

Under one plan being considered by the FCC, the agency would cut back the number of TV channels currently available nationwide for broadcasting by about 40 percent after the auctions.

Also read: Genachowski: Cable Companies Aren't the Bad Guys in Spectrum Fight

Currently the broadcasters operate on about 50 channels in the spectrum. After the auctions are completed, the agency hopes to pack the remaining broadcasters into 30 channels. That “repacking” would open about 20 channels for use by wireless.

FCC officials said the incentive auction is the first of its kind in the world.

“Demand (for spectrum for broadband services) is rapidly exceeding supply, and it’s not going to go away,” FCC Chairman Julius Genachowski said during an FCC meeting Friday morning unveiling the agency’s auction plan. “The spectrum crunch is a major looming headache for consumers,” Genachowski added.

Also read: Obama Moves to Free Up Mobile Spectrum Space

“It makes little sense to waste spectrum on unwatched (TV broadcast station) signals, and the incentive auction approach strikes an appropriate balance by allowing some broadcasters to 'cash out' while putting their spectrum to better use,” added John Bergmayer, senior staff attorney for Public Knowledge, a public interest advocacy group, in a statement.

In its approval of the incentive auction, Congress specified three major actions: a “reverse auction” in which broadcast licensees submit bids to voluntarily relinquish spectrum usage rights in exchange for payments; a reorganization of the broadcast television bands in order to free up a portion of the ultra-high frequency (UHF) band for other uses; and a “forward auction” of initial licenses for flexible use of the newly available spectrum.

The auction itself will include bid collection, determination of which bids are accepted and determination of payment amounts to winners.

The FCC is inviting comment on all these issues. 

According to the FCC, smartphones use 35 times more spectrum than traditional cellphones, and tablets use 121 times as much spectrum. “This consumer demand puts a tremendous strain on the nation’s invisible infrastructure in ways that require innovative new approaches to spectrum policy in order to spur continued economic growth, and help maintain America’s global leadership in mobile,” it said in its release explaining the auction process. 

Incentive auctions are one way to satisfy this consumer demand, it said. “The Commission expects a healthy and vibrant broadcasting industry to thrive after the auction, with expanded business opportunities for multi-platform growth in a more robust mobile ecosystem.” 

In addition, it said, the auctions are expected to deliver enormous benefits for the American people and the U.S. economy. “The mobile apps economy barely existed in 2009 but today, it supports nearly 500,000 jobs.  The wireless industry contributes about $150 billion annually to U.S. GDP – and that number is growing.”

Because the government owns the spectrum, any money left after the auctions would go to the U.S. Treasury. This could raise more than $33 billion for the U.S. Treasury, according to a joint study last year by CTIA—The Wireless Association, and the Consumer Electronics Association.

But financial analysts told TheWrap that to generate that much cash, FCC officials will have to talk owners of TV stations in major U.S. markets, where the need for broadband spectrum is the greatest, to pull the plugs on their operations.

“If there’s a stampede of stations ready to voluntarily get out of the business, we have not heard the hooves,” Dennis Wharton, a spokesman for the National Association of Broadcasters, told TheWrap.

Wharton also said he was concerned that the agency’s “repacking” could result in “severe interference for the vast majority of TV stations choosing to remain in business.”

Analysts said it is unclear how many broadcasters will participate in the voluntary auctions, because the broadcasters are holding their cards close to the vest.

“If you’re thinking of doing this, you’re thinking your business is not looking too good going forward,” David Kaut, an analyst for Stifel Nicolaus, a financial firm told TheWrap.

The FCC’s auction proposal is open to public comment. The agency hopes to announce final rules for the auctions next year, FCC officials said during their meeting.