There’s No Question: FCC Has Authority to Structure a Competitive Auction
Steven K. Berry, President & CEO, CCA
Rebecca Murphy Thompson, General Counsel, CCA
May 13, 2014 – As the Federal Communications Commission prepares to adopt rules for an upcoming incentive auction, CCA strongly supports the FCC’s proposed plan to reserve spectrum for competitive carriers – a plan that is firmly based on law and on good public policy. The FCC has been auctioning spectrum for more than twenty years based on statutory authority from Congress, however, this upcoming auction will be the first of its kind. The 600 MHz spectrum to be sold will help carriers meet growing demand for mobile broadband services, increase competition for wireless services, and encourage high speed mobile buildout, particularly in rural America. The stakes are high, so high that AT&T and Verizon are now questioning the FCC’s authority to adopt its auction proposal. Fortunately for consumers, the Commission has the authority and an established record necessary to move forward.
When Congress first authorized competitive auctions over 20 years ago, it recognized that auctions were a much more efficient vehicle for license assignment and would provide value to American taxpayers. At that time, Congress was rightly concerned that a few companies were in a position to walk away with all the licenses. Accordingly, Congress directed the FCC to establish spectrum auction rules—including eligibility and auction methods—to (1) promote “economic opportunity for a wide variety of applicants, including small businesses, rural telephone companies, and businesses owned by members of minority groups and women;” (2) “ensure that small businesses, rural telephone companies, and businesses owned by members of minority groups and women are given the opportunity to participate in the provision of spectrum based services;” and (3) avoid “excessive concentration of licenses.”
That directive has not changed. Indeed, Congress recently reaffirmed the FCC’s authority to “adopt and enforce rules of general applicability, including rules concerning spectrum aggregation that promote competition.” The Commission, following the direction given to it by Congress, has proposed rules for the upcoming incentive auction of licenses in the 600 MHz band that will promote entry into the marketplace and expansion of wireless services by small and minority-owned businesses, while also preventing dominant carriers from aggregating large swaths of low-band spectrum. Specifically, the proposed incentive auction rules will reserve a limited number of licenses for any carrier who does not already hold significant low-band spectrum. Look at the statute – the FCC clearly has authority to adopt this rule. There’s no disputing it.
Nor can it be said that the Commission—having such authority to act—has done so in an arbitrary manner. On the contrary, the record is replete with evidence that low-band spectrum is unique. Multiple parties, including CCA, have shown that low-band spectrum has the unique ability to penetrate building walls and travel great distances far more efficiently than high-band spectrum. As Commissioner Rosenworcel said, “[T]he 600 MHz band is as good as it gets. These airwaves can sound almost heroic—they can leap over tall buildings and go through walls like they are not even there. They are pretty super . . . .” The U.S. Department of Justice has similarly explained that low-band spectrum is an essential component of any carrier’s spectrum portfolio because of the improved coverage it provides and the economies of scale it brings. Low-band spectrum is also important for fulfilling important public safety goals, such as facilitating a nationwide, interoperable public safety network, and making sure that wireless customers can provide 911 with accurate location information in times of emergency. The FCC’s proposed auction rules are necessary and justified to promote an equitable allocation of low-band spectrum licenses, and anyone who claims that “all spectrum is created equal” does so in contradiction to the weight of the evidence and the laws of physics.
Moreover, the FCC isn’t adopting rules solely for the benefit of one or two providers. Some have claimed that the proposed rules are designed only with Sprint and T-Mobile in mind, but there are more than 100 wireless carriers in this great country. We should want every one of them to have access to spectrum. Again, the Department of Justice recognized that “a lack of low-frequency spectrum may also impair the ability of a local or regional carrier to provide an additional, significant, competitive option in particular local areas.” As just one example of this, nTelos—the country’s seventh largest wireless provider serving 468,000 subscribers throughout Virginia and West Virginia and in parts of Maryland, Ohio, Kentucky, North Carolina and Pennsylvania—currently holds no licenses for low-band spectrum. The proposed reserve ensures that dominant holders cannot shut out non-dominant bidders, like nTelos, who want to expand services, usually in rural America.
Under the FCC auction proposal, the largest carriers are still allowed to acquire significant amounts of spectrum. Apart from being able to bid on unreserved spectrum in every market in the country, under the rules as proposed today AT&T will still be able to bid on reserved spectrum in almost two-thirds of U.S. markets. As the Public Interest Spectrum Coalition (PISC) recently emphasized, the FCC’s proposal to reserve at least 30 MHz of spectrum in each market for competitive carriers is not the Commission “picking winners and losers.” Rather, contrary to AT&T’s and Verizon’s claims, such limits will give the public access to real choices from competitive providersby ensuring the dominant carriers do not completely foreclose their rivals from bidding on and winning licenses for essential spectrum resources. This is neither arbitrary nor capricious.
By all accounts, this auction involves the last large tranche of spectrum below 1 GHz that will be made available to commercial wireless providers for the foreseeable future. The Communications Act gives the FCC the right, but also the responsibility to design auction rules aimed at ensuring that all carriers can acquire the spectrum they need so that all consumers continue to have ample choices.