Keeping the Incentive in Incentive Auctions

[Commentary] What if the Federal Communications Commission held a broadcast incentive auction and no one came? That’s a distinct possibility if the Commission does not heed the advice that a coalition of television stations filed recently with the agency.

The CC must encourage as many broadcasters as possible to participate, since without broadcasters there is no spectrum to auction. The FCC must also maximize the amount of money it raises, since the FCC will need to compensate the broadcasters that relinquish spectrum and reimburse broadcasters that relocate, with $7 billion left over for public safety and preferably more to help with the deficit.

The Expanding Opportunities for Broadcasters Coalition, representing more than 40 stations in the top dozen markets, listed three critical elements for a successful auction.

• First, the Commission must not artificially limit the potential compensation to broadcasters. This is, after all, an incentive auction, and it would be foolhardy to limit the incentives from the get-go. The market forces of the auction will apply competitive pressures on the compensation broadcasters require and determine the prices wireless carriers are willing to pay while still maximizing broadcaster participation.
• Second, the Commission must not exclude potential wireless bidders. Closing the auction to certain carriers would reduce competitive pressures and likely suppress the final bid amount, leaving crucial revenue on the table.
• Third, the FCC must auction all the airwaves it clears rather than giving some away for unlicensed use. Freeing the spectrum will come with appropriate but considerable cost, and the FCC needs not only to cover that cost but earn a healthy return if it is going to meet the legislation’s objectives.