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Getting the Incentive Auction Right

by: Tom Wheeler, FCC Chairman

April 18, 2014 - 11:32 AM

Few FCC policies have generated more attention than the Incentive Auction. “Groundbreaking,” “revolutionary,” and “first-in-the-world” are just a few common descriptions of this innovative approach to making efficient, market-driven use of our spectrum resources.

Such attention is warranted. The Incentive Auction is a once-in-a-lifetime opportunity to expand the benefits of mobile wireless coverage and competition to consumers across the Nation – particularly consumers in rural areas – offering more choices of wireless providers, lower prices, and higher quality mobile services.

Spectrum is a finite public resource, and refers to the public airwaves that carry all forms of wireless communication Americans use every day. Twenty-first century consumers in both rural and urban areas of our country have a seemingly insatiable appetite for wireless services, and thus, for spectrum.

Getting the Incentive Auction right will revolutionize how spectrum is allocated. By marrying the economics of demand (think wireless providers) with the economics of current spectrum holders (think television broadcasters), the Incentive Auction will allow market forces to determine the highest and best use of spectrum.

More immediately, the Incentive Auction will deliver tremendous benefits for U.S. consumers across the country.

In developing such an auction, we must also be guided by the rules of physics. Not all spectrum frequencies are created equal. Spectrum below 1 GHz – such as the Incentive Auction spectrum – has physical properties that increase the reach of mobile networks over long distances. The effect of such properties is that fewer base stations and other infrastructure are required to build out a mobile network. This makes low-band particularly important in rural areas. A legacy of earlier spectrum assignments, however, is that two national carriers control the vast majority of low-band spectrum. As a result, rural consumers are denied the competition and choice that would be available if more wireless competitors also had access to low-band spectrum.

Low-band physics also makes this slice of spectrum essential in urban areas, since it permeates into buildings better than does high-band spectrum. With more and more Americans opting for wireless-only connectivity, they should not run the risk of being unable to place a 911 call from the interior of a building just because their wireless company has the wrong spectrum.

While many factors go into determining the quality of wireless service, access to a sufficient amount of low-band spectrum is a threshold requirement for extending and improving service in both rural and urban areas.

As part of the Incentive Auction process, we will also make available on a nationwide basis spectrum for unlicensed use (think Wi-Fi). With the increased use of Wi-Fi, this spectrum has also become congested. Opening up more spectrum for unlicensed use provides economic value to businesses and consumers alike.

Whether television broadcasters participate in the Incentive Auction will be purely voluntary, but participation in the Incentive Auction does not mean they have to leave the TV business. New channel-sharing technologies offer broadcasters a once-in-a-lifetime opportunity for an infusion of cash to expand their business model and explore new innovations, while continuing to provide their traditional services to consumers. We will ensure that broadcasters have all of the information they need to make informed business decisions about whether and how to participate.

Yesterday, I provided my fellow Commissioners a draft Report and Order that will determine many significant issues and policy decisions related to the Incentive Auction. The Commission will also make additional decisions to implement details pertaining to the Incentive Auction in the coming months.

Reaching this stage is a major accomplishment, and was only possible thanks to outstanding work of public servants from across the FCC.

A policy that has never been tried before comes with the perception of risk. We all know, however, that risk is the partner of reward. I will continue working with my fellow Commissioners, FCC staff, and all other interested parties to minimize the risk and maximize the reward of the Incentive Auction. I am confident we will get this right, and the rewards will be great for all Americans.

Updated: April 18, 2014 - 12:33 PM
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