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Chairman Pai's Proposed Auction Is Law and Good Policy

Earlier this week it was reported that Federal Communications Commission’s Chairman Ajit Pai would have the agency conduct an auction of the “C-Band” spectrum. While the full Commission will have to vote on this plan, and while the details have not yet been made public, the chairman has chosen the right path for the Commission.
An FCC-led public, open and transparent auction process that creates a level playing field for all interested parties will allocate resources efficiently to the parties that value them the most. Public spectrum auctions led by the FCC are a step toward market-based spectrum management and privatization of public airwaves, even while maintaining needed governance of spectrum.
According to federal law, the American people own the radio waves, the spectrum—or at least own the right to license for use those electromagnetic waves in the U.S. The FCC regulates, by that licensing, those radio waves so consumers can enjoy the services provided without interference from other uses of the airwaves. Again, by law, the FCC is directed to hold an auction so that all potential buyers can submit a bid for the use of the airwaves under the theory that this open system will return the greatest benefits to citizens both in terms of maximizing revenue and putting the spectrum to its highest and best use.
Various parts of the spectrum are better for some applications than others, and the C-Band part is particularly good for wireless technology. The continued transition to wireless communications means a never-ending need for more, and more efficient use of, spectrum. Unsurprisingly, several companies are interested in obtaining a license to use this spectrum.
A group of satellite service providers wants to privately sell off spectrum they have underutilized in the C-Band, changing its use from satellite to terrestrial. But spectrum holders don’t “own” spectrum—they own licenses to use of spectrum. So, what they really have sought to do is resell their satellite licenses outside of the FCC process and convert them to terrestrial use in a private sale where they pocket the money instead of benefiting taxpayers. The move would seem to morph that which is owned by the people into a private asset that can be traded at their whim.
The C-Band holders essentially want to bypass the FCC and create a secondary market for spectrum allocation. Critically, very real technical and practical problems can develop from new, non-licensed or unapproved uses, such as interfering with other services, broadcasts, in the same or other bands of spectrum. So, skipping the FCC process, even if allowed, is not as easy as flipping a switch from one sales method to another.
Make no mistake, secondary markets are valuable and part of the free market universe. But secondary markets require clear ownership and clear rules, and that framework simply doesn’t exist for spectrum licenses, just as it doesn’t for permits to work federal lands or a driver’s license. In fact, under current law and with the infrastructure that is in place, the right framework is the existing open auction framework at the FCC that has been proven to be successful not only in redeploying spectrum but also in properly valuing spectrum for the public benefit. Simply put, there is no free market in spectrum by law.
Perhaps the day will come when a new process could supplant the FCC-led public auction process for re-purposing spectrum. But this aspiration for long-term spectrum policy is not the world we have today.