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A New Kind of Spectrum Auction for the 21st Century

July 29, 2010 - 0 Comments

If the critical link between radio frequency spectrum availability and the future of the Internet isn’t apparent to you, take a look at what’s happening in Congress. Your representatives have introduced, or are circulating drafts, of nearly a dozen major bills that would have the effect of “re-purposing” radio spectrum.    Mobile broadband users, public safety, and possibly SmartGrid networks could be the beneficiaries of a massive transition of 20th century spectrum uses to 21st century ones.

While most of these bills are not likely to pass this year, they do lay down a marker for when a new Congress convenes in January. 

Today, the leadership of the House Subcommittee on Communications, Technology and the Internet, Representatives Rick Boucher (D-VA) and Cliff Stearns ( R-FL ), joined forces to introduce a bill that would do one very important thing – give the FCC the authority to conduct a so-called “incentive auction.”  In the Senate, Senators Olympia Snowe(R-ME) and John Kerry (D-MA) introduced a broader bill that includes a similar provision.  What’s with incentive auctions?

Simply put, incentive auctions are a tremendous tool to help the FCC transition commercial spectrum from 20th century  uses to 21st century ones, and to do so on a basis that is entirely voluntary to the existing licensee.

Let’s say you run a broadcast TV station, and in your market you are six out of six stations according to the ratings agency.   There’s some likelihood that it has become a difficult task to sell advertising to support your operations.  Your options are to continue to try to coax your business along, find someone willing to buy it, or turn your license in and close down.  Not very appealing, right? An incentive auction would allow the FCC to say “the spectrum you are using is valuable and could be put to work on a new mobile broadband network. It’s your choice, but if you volunteer to auction it, you will receive a portion of the auction proceeds.”  Congressional  action is needed to authorize this because broadcast licenses were given out for free.

The end result  — win-win!  Taxpayers win because spectrum that would not otherwise be monetized can now find its way voluntarily to auction, and auction proceeds can help address federal budgetary needs.  The licensee gets a graceful exit recognizing their contribution of the spectrum asset to the process. Mobile broadband users, including consumers, public safety, businesses, and many others, win because there is now more spectrum to support the exploding use of smartphones, and all the video applications that will be running over them. 

It is important also that the new incentive auction tool that Congress has proposed to give to the FCC not be limited to specific commercial spectrum.  Incentive auctions have broad applicability, and Congressional leaders should be congratulated for recognizing how important they can be.         

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