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October 23, 2013

Speakers: Restrictions on Verizon, AT&T Would Complicate Incentive Auction

  TR Daily

By Paul Kirby

The FCC’s imposition of bidding restrictions on Verizon Wireless and AT&T, Inc., in its incentive auction would further complicate what is expected to already be the world’s most complex spectrum sale, several speakers said today at the Institute for Policy Innovation’s annual Communications Summit in Washington.  An attorney for TV stations, meanwhile, said the FCC should not adopt provisions that throw “broadcasters under the bus in order to be sure the auction closes.” 

“We need to keep the rules … as simple and as open as possible,” said Bret Swanson, president of Entropy Economics LLC.  He suggested that restricting the amount of spectrum Verizon Wireless and AT&T could bid on could result in lower revenues and perhaps result in the collapse of the sale.  Proponents of such rules have suggested that restrictions could actually increase auction revenues by encouraging more parties to bid.

“For some of us, it’s starting to look almost like European-style competition policy,” added IPI President Tom Giovanetti, the moderator of a session on spectrum issues.  “At least for us, it’s a little bit troubling.” 

Charla Rath, vice president-wireless policy development for Verizon Communications, Inc., agreed that the FCC should not make the auction more complicated by imposing restrictions on the two largest wireless carriers.  “We’re worried about it,” she said.

Ari Meltzer, an associate at Wiley Rein LLP who represents the Expanding Opportunities for Broadcasters Coalition, which says it represents about 70 TV stations interested in participating in the incentive auction, said that “if there’s uncertainty as to whether the auction is actually going to succeed,” broadcasters are “going to think twice about even going into the auction in the first place.”

Mr. Meltzer also said the FCC should not “score” the value of TV stations that decide to participate in the auction.  “We believe that the auction can succeed and will succeed if left to market devices – if there’s not interference with how the auction is going to work,” he said.

John Hane, counsel at Pillsbury Winthrop Shaw Pittman LLP who also represents TV broadcasters, said his clients are concerned that the FCC will take actions that are not in the best interests of stations - even if they help ensure the auction closes.

“The fear that broadcasters have is that the FCC will do a number of things to try to squeeze … more spectrum out of the auction that they don’t have to pay for and indirectly squeeze broadcasters, who will not discover this until after the auction is closed and then … it’ll be difficult to persuade a court to overturn the entire auction because of subtle technical details,” he said.

Mr. Hane said that he only knows of a handful of broadcasters that oppose the auction, but he said that is because of the way the FCC has gone about moving toward an order in the proceeding.  He said there is “an abiding sense that the FCC is not being very forthcoming about what it’s doing or might [be] doing.”  He said the Incentive Auction Task Force seems to want flexibility to take actions that he said could hurt broadcasters.

Mr. Hane also expressed concern that the FCC could make mistakes if it rushes actions in its incentive auction proceeding.  The agency has set a goal of adopting an order in the proceeding this year and holding the auction by the end of next year.  Mr. Hane noted that Congress gave the FCC 10 years to conduct a broadcast spectrum incentive auction.

“This is by far the most complex spectrum auction that has ever been attempted anywhere on the planet,” he said. “We have a lot of very, very smart people working on it, but there are many, many more paths to failure and only a fairly narrow set of paths to success. … What is the rush to do this in two years when you have a 10-year window and you have so many failure points.”

Mr. Hane also complained that “the FCC has given absolutely no thought to transition issues,” both in terms of the auction and longer-term ones involving TV stations.  He said the Commission should provide broadcasters the same spectrum flexibility it affords wireless carriers, which he said would help facilitate mobile TV offerings. 

Ms. Rath agreed that the Commission must take the time necessary to make sure the auction is conducted correctly.  “It is going to be complicated,” she said.  “I don’t think they should rush this, but I’m also worried when I hear, you know, we can take 10 years.”  Mr. Hane said he was not suggesting the FCC take the entire 10 years.

Ms. Rath said that in addition to bidder eligibility, an issue she said she would hope the FCC would signal its intention on in short order after the arrival of FCC Chairman-designee Tom Wheeler, a second major matter is the band plan.  Verizon and T-Mobile US, Inc., have advocated a plan that would free up two 35 megahertz channels – a proposal that has been conditionally endorsed by AT&T.  “The band plan is huge,” she said, saying she thinks FCC officials are “very close” to deciding on one.

As to how many broadcasters are likely to want to participate in the auction, Mr. Hane wouldn’t venture a guess.  But he said some might find that their spectrum is not worth enough to surrender.


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