FCC Incentive Auctions

A (Very) Small Glimmer of Hope for Incentive Auction Authority This Year

By David Martin in Washington, DC

In a blog post back in May, Hogan Lovells partner Ari Fitzgerald discussed the push by the White House to drum up support in Congress for giving the FCC authority to conduct incentive auctions. Voluntary incentive auctions would provide a means for current licensees of valuable but underutilized frequencies to be compensated for surrendering all or part of their spectrum, while making it available for high-demand mobile wireless services. TV broadcast spectrum tops the list of bands that would be ripe for an incentive auction.     

There was an expectation that the Joint Select Committee on Deficit Reduction (the “Super Committee”) would include incentive auction authority as part of the deficit reduction package it was scheduled to produce last month, given that the Congressional Budget Office had previously estimated that an incentive auction could raise some $24 billion (net of compensation to existing licensees), representing about 2% of the $1.2 trillion in net savings the Super Committee was tasked with finding. When the Super Committee admitted defeat, however, prospects for incentive auction authority dimmed considerably. But last week, the House Energy and Commerce Subcommittee on Communications picked up the torch by marking up a Republican draft of the Jumpstarting Opportunity with Broadband Spectrum (JOBS) Act of 2011.  After several amendments, the JOBS Act passed the subcommittee on Thursday, although it garnered only one Democratic vote. 

Far from being a just an incentive auction bill, the JOBS Act encompasses a host of other spectrum-related provisions, including most notably one that transfers the 700 MHz D Block to public safety and authorizes at least $5 billion for the construction of a nationwide public safety network. After accounting for the public safety network construction grants and other spending contained in the bill, Republicans expect that an incentive auction of broadcast spectrum would raise about $15 billion that would go toward deficit reduction. 

The D Block transfer to public safety represents a compromise for subcommittee chair Greg Walden (R-OR) and other Republicans who had previously opposed such a move, and it brings the House legislation closer in line with its Senate counterpart, S.911. However, House Democrats criticized the relatively small level of funding provided for public safety network construction (compared to their $11 billion proposal), and criticized the governance structure set up for the D Block, claiming that it will result in a patchwork of 50 state networks rather than a more coordinated network that would result from tasking a single non-profit entity to oversee nationwide network construction.

Democrats also objected to two provisions related to the incentive auction authority. The first would prohibit the FCC from setting aside a portion of any reclaimed spectrum for unlicensed use. Chairman Walden countered that the government should not be in the business of paying for frequencies (i.e., it would have to pay broadcasters to give up their spectrum) that would effectively be turned over for free to benefit the private companies that make unlicensed devices. The second provision restricts the FCC from applying its network neutrality rules to any spectrum licensed through an incentive auction. Rep. Henry Waxman (D-CA) called that provision a “poison pill” that “could bring down the whole bill,” arguing that the Senate would never accept it.