Allow Incentive Auctions

Recommendation #27

FCC Chapter: 5.4

Status: Completed

Congress should consider expressly expanding the Federal Communications Commission's authority to enable it to conduct incentive auctions in which incumbent licensees may relinquish rights in spectrum assignments to other parties or to the FCC.

Congress should grant the FCC authority to conduct incentive auctions to accelerate productive
use of encumbered spectrum.

In an incentive auction, incumbents receive a portion of the proceeds realized by the auction of their spectrum licenses. This sharing of proceeds creates appropriate incentives for incumbents to cooperate with the FCC in reallocating their licensed spectrum to services that the market values more highly.

Incentive auctions can come in different forms. For example, in a "two-sided" auction, the FCC could act as a third-party auctioneer for the private exchange of spectrum between willing sellers and buyers, similar to a fine art auction.

Alternatively, the FCC could offer a revenue-sharing enhancement to the existing spectrum auction system, in which some
portion of revenues generated by an auction are shared between the U.S. Treasury and incumbent licensees who agree to relinquish their licenses.

Although sharing auction proceeds through incentive auctions means that some funds paid for spectrum will not go to the U.S. Treasury, incentive auctions should have a net-positive revenue impact for a variety of reasons: accelerated clearing, more certainty about costs, and the ability to auction adjacent spectrum that, due to technical rules, is not currently licensed.