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Spectrum Auction Controversies Revived

Disagreements center on whether projected $15B sales figure is realistic

Lawmakers are reviving the debates that nearly stalled spectrum auction legislation cleared by Congress earlier this year as the Federal Communications Commission begins to implement that law.

The spectrum auction, approved as part of the payroll tax cut extension (PL 112-96), could generate an estimated $15 billion for the federal government over the next decade. But disagreements arose at a House Energy and Commerce subcommittee hearing Wednesday about how that money will be spent and whether the auction will even succeed in generating it.

The FCC is at the beginning stages of designing the spectrum auction, which will allow broadcast television stations to sell surplus or unwanted spectrum voluntarily to the government so that it can be repackaged and sold to wireless carriers for broadband use. The agency is accepting public comments on its initial proposal, which asked more questions than it answered about the auction’s structure.

Communications and Technology Subcommittee Chairman Greg Walden, R-Ore., said the agency’s suggestion in that proposal to set aside unlicensed spectrum in “guard bands” — the spaces in between licensed spectrum designed to reduce interference — could compromise the auction’s revenue potential.

“Every megahertz of broadcast television spectrum the FCC doesn’t auction means less revenue to fund prerogatives already determined by this committee and this Congress,” Walden said.

He urged the FCC commissioners, who testified at the hearing, to review whether they can get by with smaller guard bands to avoid what he estimated would be at least a $7 billion loss in potential revenue from “fat” guard bands. That money could be used toward public safety broadband networks and upgrades to the nation’s 911 service, to which the law directs some of the auction revenue.

Ranking member Anna G. Eshoo, D-Calif., countered that the law passed earlier this year already struck a delicate balance on the issue of unlicensed spectrum, which she says is a key way that the government can promote broadband innovation. Unlicensed spectrum was used to develop wireless networks and Bluetooth devices, and proponents say it could be used to blanket cities with wireless Internet access.

In a letter sent to the FCC on Tuesday, Eshoo and Rep. Darrell Issa, R-Calif., urged the agency to promote unlicensed spectrum. The technology could generate an estimated $16 billion to $37 billion annually for the U.S. economy.

When Congress was debating the auction legislation, Eshoo and Issa reached a compromise that would authorize the FCC to use guard bands for unlicensed use rather than auctioning them off.

“Nowhere in the act does it require the FCC to auction guard bands,” Eshoo said. “Attempts to rewrite the law through the rulemaking process should be rejected by the commission and will only serve to delay the release of new spectrum.”

FCC Chairman Julius Genachowski and Democratic commissioner Mignon Clyburn agreed that unlicensed spectrum should be prioritized, while Republican commissioners Robert McDowell and Ajit Pai echoed the concerns raised by Walden and other GOP lawmakers that money could be left on the table if too much spectrum is set aside for unlicensed use.

Republican lawmakers also questioned the structure of the auction, saying elements of the FCC’s current proposal may prevent the government from maximizing revenue from spectrum sales.

They warned that the commission should not set caps that limit which broadband providers can purchase the spectrum sold back by broadcasters to the federal government. Such caps could prevent dominant wireless companies AT&T and Verizon from buying up as much spectrum as they would like, but caps could also reduce the number of bidders and the revenue generated in the auction.

Rep. Lee Terry, R-Neb., said current laws already protect consumers and encourage competition, adding, “Many commenters have argued there should be no spectrum cap.”

But Rep. Henry A. Waxman, D-Calif., ranking member on the full committee, said the FCC “must have the authority to write rules that aim to avoid the concentration of spectrum in the hands of just a small group of companies.”

He noted that both the issue of unlicensed spectrum and bidder eligibility were sticking points for Congress when lawmakers were writing the auction legislation.

“I am troubled by attempts by some to relitigate issues that were resolved earlier this year,” Waxman said. “After-the-fact spin that unfairly twists the language of the law deserves little weight.”

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