More Complex Spectrum Auctions, More Sharing in the Cards, FCC's McHenry Says
Beyond whatever steps the FCC takes to open up the C band to other uses, spectrum issues will become more complicated and challenging, and incentive mechanisms are needed for incumbents, said Office of Economics and Analytics acting Chief Giulia McHenry at an FCBA CLE Tuesday evening. For auctions, take the prohibited communications rule very seriously, said Jonathan Cohen of Wilkinson Barker, who when at the FCC co-wrote rules for the agency's first spectrum auctions. "It would be a death sentence" for a lawyer to be a conduit for prohibited information, he said.
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"There is no more greenfield spectrum," meaning the challenges now will be about transitioning and sharing with existing users, McHenry said. She said the agency will be dealing with "increasingly complicated" bands with increasing numbers of incumbents. She said more attention is needed on dynamic sharing between incumbents and mobile users and on flexible auction design to balance new and incumbent uses.
McHenry briefly recapped on-deck auctions, including the 39 GHz Auction 103, 833 toll-free number auction and the Rural Digital Opportunity Fund allotment. She said the 2.5 GHz band is underused, with existing licenses covering about half the U.S. and little west of the Mississippi River, hence its forthcoming auction for flexible use.
Industry doesn't like the prohibited communications rule, but it has "adjusted to it," Cohen said. He said it had a chilling effect on some forms of business activity. He said a firm can represent competing clients in a spectrum auction. That must be limited to bids and applications and not delve into bidding strategy or representing a client challenging another client’s bid, he said. If a lawyer comes into possession of bidding strategy or valuations for particular blocks, keep that under wraps, he said. "You just don't want to mess around.”
The idea of spectrum auctions dates back to the 1950s. It faced decades of questioning about the value of that route, though there were multiple draft bills during that time, said Charla Rath, ex-Verizon, now co-chair of the Commerce Spectrum Management Advisory Committee.
The authority Congress gave the FCC in 1993 to conduct auctions replaced years of comparative hearings to assign spectrum, and then the lotteries that were used heavily during the cellular license era, said Michael Altschul, retired CTIA general counsel. Lotteries were quicker than comparative hearings, which took years, but often weren't effective at getting licenses into the hands of actual spectrum users, he said. Auctions allowed the wireless industry to take off, said wireless lawyer Michele Farquhar of Hogan Lovells. At least in the early years of auctions, there was "a real tension" between past methods and auctions, with the statute itself forcing the FCC to balance conflicting goals, she said.
Spectrum auctions haven't been as popular in Europe, maybe because the FCC has been more agnostic than European regulators about how the market structure would look at the end, Altschul said. Rath said license structure differences might be at play, with no free flow of license trading in Europe.
Comparing the broadcast incentive auction to the 39 GHz incentive auction, FCC Senior Economic Adviser Evan Kwerel said the broadcast auction approach let the market determine the amount of spectrum to be reallocated and the lease amount needed to pay incumbents. He said it required development of a new auction mechanism. The 39 GHz approach involved the whole band and was simple to implement but there aren't government revenues except from white space that doesn't belong to incumbents, he said.