A coalition of broadcasters is seeking not only to refuse to sell unused spectrum in a potential FCC voluntary auction, but to kill the auction altogether in a bid to disallow their peers to sell their spectrum.  (Source: Corbis)
U.S. FCC pleads Congress to overrule select objections and authorize a voluntary auction

The U.S. Federal Communications Commission and TV broadcasters may be on a collision course that can only be resolved by the U.S. Congress [FCC remarks; PDF].

On the one side you have the U.S. FCC led by Obama administration appointee, Chairman Julius Genachowski [profile], and on the other you have a coalition of powerful TV broadcasters.  Neither party sees eye to eye on "incentive auctions", though a handful of broadcaster support the auctions, with certain stipulations.

I.  Should Broadcasters Get to Veto Their Peers' Right to Freely Sell Spectrum?

The majority of FCC commissioners complain that TV broadcasters are squatting on large tracts of spectrum that could be used for other applications -- like voice and data traffic on mobile devices.

The broadcasters were given much of that spectrum at a time when spectrum was not formally auctioned.  Some of the spectrum was also sold to them at rates well below today's prices.  

But as the spectrum has become more valuable, the broadcasters have looked to hold it more tightly.  In theory this spectrum could be used for future development, but realistically, it's unlike that these broadcaster will significantly increase their usage.

So why are they holding on to it, then? Part of the reasoning is likely due to the appreciation factor.  But broadcasters also argue that their spectrum position is partly out of technical issues.  

Alan Frank, chief executive of Post-Newsweek Stations Inc., a division of the Washington Post Comp. (WPO), complains that even though the spectrum is "voluntary" it creates a situation of compulsory shifting of spectrum.  

He says that some stations may cooperate with the FCC, selling spectrum and shifting their remaining holdings to consolidated "TV" blocks.  As a result, the existing range of spectrum occupied by TV broadcasters would become interspersed with blocks of mobile usage.  Mr. Frank argues these blocks would increase interference on and degrade the strength of TV signals of those who stayed behind.  Thus he argues the proposal is in effect a mandate, not voluntary, due to technical issues.

He states in an interview with Reuters, "We're talking about putting the whole system at risk. We need to start defining not how the auction works, but what this is going to mean for the broadcasters who don't participate in the auction."

That's one perspective.  Chairman Genachowski argues that the technical concerns aren't as severe as some TV providers make them out to be.  Under his leadership, the FCC wants to implement a major spectrum auction that is ostensibly voluntary on the part of television broadcasters.

And he says that giving certain objecting TV broadcasters the ability to veto other broadcasters' rights to sell spectrum they own would run contrary to the principles of capitalism.

He comments, "I believe the single most important step that will drive our mobile economy and address consumer frustration is authorizing voluntary incentive auctions. However, voluntary can't mean undermining the potential effectiveness of an auction by giving every broadcaster a new and unprecedented right to keep their exact channel location."

II. You Can Not Change the Laws of Physics...

Modern mobile devices use over 100 times more data than older models.  As Scotty used to say on Star Trek, "You can not change the laws of physics!"

The problem is that wireless device makers are using up almost all the available spectrum that is capable of being used by lower power devices.  Given fundamental limitations of physics, the wireless device makers now can only turn to try to buy existing allocations.

The FCC wants to patch together 500 megahertz of spectrum to sell.  Much of that has been cobbled together already through repurposing of government holdings.  But the FCC needs 120 more megahertz to meet its objective.

States Chairman Genachowski, "This growing demand is not going away. The result is a spectrum crunch. The only thing that can address the growing overall demand for mobile is increasing the overall supply of spectrum and the efficiency of its use."

He made these remarks before representatives for broadcasting companies at an annual convention in Las Vegas.  His comments were met with mixed reactions.  To be clear some companies, particularly those who are strapped for cash, are thrilled with the idea as the government is doing all the hard work of lining up potential buyers and advertising the available spectrum.  But other broadcasters, in a more comfortable position, are quite upset about the idea.

Ultimately the issue will likely have to be resolved by Congress.  A voluntary auction is a major undertaking, and even were it not for the controversy, the FCC likely lacks the authority to execute such a plan.  Congress, however, could give that authority.

The question now becomes whether Congress will decide to support an auction, allowing interested broadcasters to sell their spectrum.  Alternatively, they could reject the proposal, safeguarding the holdouts from possible interference, allowing the value of their holdings to further increase as available spectrum gets scarcer and scarcer.

People often complain that parties like Verizon Communications Inc. (VZ) have failed to use all the spectrum they've been allocated thus far.  While this is valid, it's widely acknowledged that these chunks will soon be put to use.  Building cell phone infrastructure (towers, backlinks) is an expensive business that costs billions a year in the U.S. alone.  Thus the spectrum will certainly be put to use by wireless carriers, it might just take a little while.


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