FCC Static Will Distort the Spectrum Auction

[Commentary] The Federal Communications Commission is considering modifications to the statutory plan to auction off spectrum that could cause the auction to fail.

The Middle Class Tax Relief and Job Creation Act of 2012 is intended to obtain 120 megahertz of spectrum currently allocated to TV and auction it off to wireless carriers—giving these carriers more capacity to complete cellphone calls and enhance Internet access. In most markets, the FCC will be able to simply "repack" the existing TV stations' six MHZ of spectrum into tighter blocks, freeing up spectrum space to be auctioned off. But in the biggest, most congested urban markets (such as New York, Philadelphia, Boston and Los Angeles), there are too many TV stations to get the needed spectrum through repacking. In those markets, the legislation calls for the FCC to pay stations to go off the air. If the auctions are conducted as Congress envisioned, they will entice broadcasters to sell their spectrum and yield $7 billion in surplus revenue to fund the planned First Responders Network and apply the rest toward reducing the federal deficit. The success of the congressional plan crucially depends on attracting, through the prospect of large payments, enough TV stations to surrender their channels. And that requires a robustly competitive auction among wireless carriers. Unfortunately, instead of conducting a straight-up, unbiased auction to recover TV channels, the FCC has proposed a "scoring system" that assigns different prices to TV stations based on the opinions of FCC staff regarding the value of those stations.

[Padden is executive director of the Expanding Opportunities for Broadcasters Coalition, a group of more than 40 major-market TV stations potentially willing to participate in the FCC's Incentive Auction]