C-Band Alliance Details 3.7-4.2 GHz Auction Plan
The C-Band Alliance (CBA) is proposing a sealed-bid combinatorial second-price auction process for clearing 180 MHz of the 3.7-4.2 GHz band. The auction design -- now being discussed with the FCC -- is the last of the major components of its band-clearing plan put before the commission, the CBA told us Tuesday. That follows its transition (see 1904090067) and band plan.
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CBA auction architect Auctionomics said past FCC auction models all have problems making them unworkable for a C-band spectrum rights sale. It said an incentive auction wouldn't work since the band is shared spectrum among the satellite operators. It said a clock auction and simultaneous multi-round auction are both subject to the exposure problem where a bidder runs the risk of not getting all the markets it wants, or too much, and possibility of collusion among bidders. It said combinatorial auctions fix those problems but in the past have typically had too many options and alternatives to be workable.
This design "is quite sensible," emailed Peter Cramton, University of Maryland economics professor and auctions expert. "It will perform well with respect to the objectives. The auction will be faster and easier than prior auctions, yet highly efficient."
This proposal "should be dead on arrival [as] it's obviously designed" to ensure national mobile carriers get the vast bulk of the licenses, emailed Michael Calabrese, director of the Wireless Future Program at New America. He said the "gigantic" licensing areas and use of combinatorial, sealed-price bidding will exclude small ISPs, cable companies and other potential market entrants. He said the recommendation violates Communications Act Section 309(j), which covers competitive bidding. "Only a public auction with the lion’s share of revenue returned to the public is within the FCC’s authority to authorize," he said. New America is part of the Broadband Access Coalition proposing a rival band-clearing plan.
CBA's 5G model would have bidders simultaneously submit sealed bids. A price is determined by the "second price" method where the winning bidder in competition over a single license doesn't pay the amount of its bid for that license but the bid amount of the next-highest bidder. CBA expects and "invite[s] FCC oversight" of the process. The alliance said the FCC likely would have a point of view on limits on total blocks going to a bidder, and that would be incorporated into the auction.
National bidders could bid for uniform amounts of spectrum in all partial economic areas and not risk winning only some spectrum blocks, and also bid for incremental spectrum. Bidders interested in fewer PEAs could bid on packages without risk of winning only some blocks or winning uselessly small amounts. Participants such as rural wireless service providers could bid on as little as 20 MHz in one PEA. In docket 18-122 ex parte posting Tuesday, CBA recapped a meeting with FCC staffers including Wireless Bureau Chief Donald Stockdale and Office of Economics and Analytics acting Chief Giulia McHenry laying out the auction details. Intelsat and SES, two of the group's four members, and CBA also met with aides to Chairman Ajit Pai on auction structure issues.
This new regime "is significant for moving the debate forward" and opening the door to the FCC finishing its rulemaking this year, New Street Research emailed investors. It said the auction design "appears to be fair to all and sensitive to the needs of divers interests." It said AT&T and Verizon likely will be supportive because they will be able to bid for uniform amounts of spectrum around the U.S. without risk of winning only some of the blocks. It said the CBA plan doesn't set a cap on bidding to limit how much any one bidder can buy, but the FCC likely will set one.
The list of the group's supporters is growing. CBS, Discovery, Disney, Fox, Univision and Viacom, in meetings with aides to Pai and Commissioners Brendan Carr, Geoffrey Starks and Jessica Rosenworcel, and agency staffers including Office of Engineering and Technology Chief Julius Knapp, said only the CBA plan takes seriously the idea of preserving video distribution over the band. The programmers said a critical part of the plan is that only 200 MHz of the 3.7-4.2 GHz band would be reallocated. The American Consumer Institute, Competitive Enterprise Institute, Lincoln Network, R Street Institute, TechFreedom and American Enterprise Institute scholars said the proposal is a particularly efficient and timely route to opening up spectrum for 5G.