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Incentive auctions: Preparing for the Avalanche of Data

It’s begun!  The US Federal Communications Commission (FCC) today launched an important new proceeding that, together with a lot of hard work and some policy leadership, will allocate much-needed radio spectrum for broadband.  Called “incentive auctions,” the concept is relatively simple – ask the broadcasters how much they want for their licenses, decide which broadcaster “bids” to accept, repackage that spectrum and auction it off to mobile carriers.

We at Cisco know first-hand the pressures our carrier customers face, as consumers continue to adopt more and more powerful mobile computing devices – phones, tablets, laptops and more.  Cisco’s Visual Networking Index has illuminated for policymakers the dimensions of the transition by consumers to data and video.  In the US, Cisco projects mobile data will increase 16 times from 2011 through 2016, to 1.7 exabytes per month, up from an estimated 0.2 exabytes per month in 2012.

All those packets use radio spectrum, and as we’ve seen this year from the acceleration of deal-making among holders of spectrum, there is a scramble on to find enough spectrum to ensure that consumer demand can be met.  Even with these deals, carriers must have more spectrum, and the next place where it will be found is the UHF television bands.

Incentive auctions represent the first time a regulator will create a market mechanism to allow broadcasters to exit their spectrum in exchange for compensation, permitting the FCC to repurpose that spectrum for mobile broadband.

Among the key issues to watch:

  • Will the FCC be able to keep this proceeding on track to culminate in auctions in 2014?  By then, spectrum needs will be critical.
  • How quickly will the FCC articulate clear and comprehensive rules that will allow broadcasters to make an informed judgment about whether to participate?
  • Has the FCC correctly implemented Congressional direction to permit unlicensed use in guardbands to the extent technically reasonable to present interference to adjacent bands? Have they proposed too much unlicensed? Not enough?
  • And one issue Congress will be watching closely. Does Congress think that the sum total of the FCC’s proposed rules mean that the FCC will realize enough money to fund the new public safety broadband network at $7 billion, in addition to deficit reduction?

The undertaking begun today is huge. The FCC, which invented spectrum auctions back in the 1990s, will now call “incentive auctions” to life.  They are the world’s experts on these topics and there will be a lot of detailed conversation in the next months. Cisco, carriers and consumers will be watching.

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