NAB Suit Could Delay Incentive Auction, Wheeler Warns CCA, CTIA

After the CCA remarks, FCC officials declined additional comment and Wheeler held his hands up in a “who knows” gesture when asked about the future of the auction.

A segment of the broadcast industry represented by NAB is not a “fan” of the auction, Wheeler said. The lawsuit NAB filed could keep the auction from coming off when planned, he said. “We're not going to be finished with the filings in court until just before Christmas,” he said. The suit also “sows insecurity” about the auction, he said: Some broadcasters could ultimately say they won’t offer spectrum because of all the uncertainty. “The NAB suit is what the NAB suit is,” he said. “We will deal with it.” Wheeler said he’s “positively convinced” the FCC did what it was told to do by Congress.

NAB is disappointed Wheeler “is pointing fingers in the auction process, especially at NAB,” said an association spokesman. Discussions have been continuing with the FCC, the spokesman emailed. “We have been encouraged recently by exchanges with the FCC staff. Apparently, the Chairman seems to want to use NAB as a boogeyman -- something to shoot at if his legacy auction fails. At this point, however, if things go south he has no one to blame but himself. We continue to be engaged with [whoever] wants to see this auction succeed for all involved."

Wheeler told Berry his members need to make clear that they're very interested in bidding in the incentive auction. Berry responded, “We've got a roomful of interested bidders and they're going to show up.” Small carriers need low-band spectrum, Berry said. “Somebody has to put a stake in the heart of this … rumor that the wireless industry isn’t interested,” Wheeler said.

Wheeler again issued a warning about the NAB suit during a speech to CTIA. “The effect would be to delay the auction, notwithstanding NAB’s claims to the contrary,” he said. “We are confident the courts will find that we have carried out the mandate of Congress and the NAB’s arguments are groundless."

CTIA President Meredith Baker said there’s no question that carriers will go big in the upcoming AWS-3 and TV incentive auctions. “We hear that the wireless carriers may sit out these auctions,” she said. “Really? Given our track record and our growth trends, I'm incredulous that anyone claims with a straight face that operators won’t bring billions of dollars to every future auction.”

Wheeler also told CTIA he sees little give in his position on the importance of keeping in place four national wireless carriers. Wheeler said he and the Justice Department raised concerns about a potential combination of Sprint and T-Mobile. “I know that achieving scale is good economics, and that there is a natural economic incentive to accrue ever-expanding scale,” Wheeler said. “We will continue to be skeptical of efforts to achieve scale through the consolidation of major players."

The U.S. wireless market is a success because of competition, Wheeler said. At one point, some looked down on the U.S. because it didn’t have a standard air interface for wireless, he said. “At the time, I kept saying that our competition would present results better than the government standards of Europe -- and it did.” But Wheeler said the FCC is not afraid to step in and regulate where necessary.

"The absence of meaningful competition invites government regulation,” Wheeler said. “We have more than a hundred years of experience with this model. … And here is the history-based takeaway: What industry does to create a robust and competitive market has a bearing on how government responds."

Wheeler also touched on net neutrality, telling CTIA the FCC is looking closely at whether the agency should impose on wireless the same rules faced by wireline. “One of the constant themes on the record is how consumers increasingly rely on mobile broadband as an important pathway to access the Internet."

Many companies say they follow 2010 FCC net neutrality rules even since they were overturned by a federal court in January, Wheeler said. “I am confident those endorsements are genuine, but the American people want assurances,” he said.

Earlier, Baker urged the FCC to maintain a light regulatory touch on wireless regulation. Baker is a former FCC commissioner. “Our light-touch regulatory approach must remain in place for us to stay global leaders,” she said. Mobile providers have always supported an open Internet, and wireless shouldn’t face more regulation just because the sector is thriving, she said.

Wheeler also told CCA he’s paying close attention to T-Mobile’s petition for clarity of the agency’s data roaming rules and is anxious to see what the Wireless Bureau will recommend. The FCC may consider an enforcement advisory, he said. “I don’t know whether you've noticed, but we've got a new approach to enforcement at the FCC,” he said. “There’s nothing standing between you and your members bringing a complaint to us under the existing rules right now."

'Not a Roadblock'

NAB’s legal challenge to the TV incentive auction is more likely a blip than something that would derail the auction, industry officials said Tuesday during a CCA session on the auction.

"It’s not a roadblock,” said Joan Marsh, AT&T vice president. “On complicated issues like this, I think the best solutions will be found at the commission, not in a court.” Jeff Marks, Alcatel-Lucent senior counsel, said if the U.S. Court of Appeals for the D.C. Circuit hadn’t agreed to hear the case on an expedited basis, the auction would go on as planned. “They have an uphill battle,” he said of NAB.

"Litigation is litigation; you have to address it,” said T-Mobile Vice President Kathleen Ham, saying litigation is fairly common surrounding auctions. But Ham questioned what the broadcast association was up to. “This is, really, about NAB losing some membership,” she said. T-Mobile hopes the auction will start next year as planned, though she warned other litigation could follow. “The commission is certainly lining things up,” she said. “They're doing everything they can to keep things on track.”

Mobile Future Chairman Jonathan Spalter said the FCC should still be able to hold the auction sometime in 2015. The start will probably slip for a few months because of the litigation, said Ben Moncrief, C Spire vice president-government relations. “I don’t anticipate this going into the following year.”

Getting spectrum to market is a “long-term effort” that requires much more than just holding an auction, Ham said. “There’s a lot of work to be done after the fact,” she said. “The sooner we can get going on that, the better.”

How the FCC assigns licenses after the auction in an assignment round is a critical question, Marsh said, “It’s unclear” whether the process will be “revenue neutral” and whether carriers will have to bring more money to the table “to say we want those two [blocks] but we don’t want those two,” she said. “The less fungibility that exists between the blocks, the more important potentially that assignment round becomes.”

The FCC’s definition of impairment is also key, Ham said. “Some people might be willing to take a license that’s, I don’t know, 20 percent impaired.” Marsh noted that in the 700 MHz auction, the A-block with its impairments sold for about half as much as the B-block. “If the FCC can define the impairments, we can value it,” she said. But Ham also said she’s very optimistic the incentive auction will be a success. “The commission is doing a lot of work on this; they're moving forward.”

Moncrief said he remains optimistic about the auction outlook. For competitive carriers, proof of success is that at least four carriers in every market walk away with usable spectrum from the auction, he said. Marks said it’s a good sign that the FCC is diving in on an issue-by-issue basis, through a series of orders, following a framework. “That was the smart way to do it,” he said. “It gives people some things locked in place in this most complex auction ever held anywhere in the world.”