In a rare fit of bipartisanship, the U.S. Congress has passed a deal that would extend payroll tax breaks and unemployment insurance to millions of Americans. From the technology standpoint, the news isn’t the extension of government benefits or the fact two gridlocked parties managed to get something done: It’s how the legislation would pay for those benefits. The U.S. government plans to auction off some wireless spectrum currently held by television broadcasters to the wireless industry, for a payday worth an estimated $25 billion. The deal promises to help alleviate the spectrum crunch experienced by mobile operators — meaning, beneficiaries of the auction would be able to offer more mobile broadband to more people. Along the way, the legislation also carves off the so-called “D block” of 700MHz spectrum exclusively for use by police, fire, medical, and emergency responders.
Sounds great, right? As Americans fervently embrace mobile technology, the capability to offer more mobile broadband to consumers and businesses will help America stay competitive in the global marketplace. It could even help bring mobile broadband to areas historically under-served by existing broadband technologies. And, as many politicians will happily point out, all these things are potential job creators — particularly important going into a national election when an estimated 13 million Americans can’t find work.
However, this whole idea hinges on the idea that television broadcasters will surrender their current spectrum holdings — at the lowest possible price — so the government can resell and re-allocate it. Why on earth would they do that?
What’s up for grabs?
The basic idea behind the spectrum auction is to reallocate selected spectrum licenses currently held by television broadcasters to mobile operators. The frequency licenses in question range from 572MHz to 698MHz, just below the 700MHz band vacated by broadcast television in the switch to digital TV a few years ago. Although mobile broadband technologies can theoretically be deployed on a vast number of frequencies, the laws of physics and the way the United States has managed spectrum for the last century all play important roles. Many of the frequency bands originally set aside for television broadcasters have a desirable trait: They do a good job penetrating buildings and other structures, meaning many television users would not need outside antennas to pull in their local stations. (Still, “rabbit ears” became a cultural icon — and, yes, we realize this is meaningless to generations raised on antenna-free cable television.) The same idea applies to mobile technology: Putting mobile broadband services in those spectrum areas means the services will work better indoors and in dense urban areas.
The spectrum blocks eligible for auction are currently occupied by 20 UHF channels (numbers 31 to 51). In some cases, local television broadcasters who hold licenses to those channels in particular markets are doing nothing with the spectrum: It’s just dead air. However, the National Association of Broadcasters estimated last year that some 672 stations operate in that spectrum band. That’s well over a third of all the full-power TV stations operating in the country.
The new legislation authorizes the FCC to hold so-called “incentive auctions,” which would enable television broadcasters who voluntarily give up their existing spectrum licenses to participate in the proceeds from the auction of that license. The FCC can also designate narrow frequency bands on either side of allocated spectrum blocks for unlicensed used. These so called “white space” bands can potentially enable a number of useful technologies, including long-range Wi-Fi-like services (they wouldn’t be as fast as short-range Wi-Fi, but could be a tremendous boon in rural areas). Mobile operators could also use white space bands to temporarily ease congestion in urban areas.
If the spectrum auction freed up the maximum amount of spectrum around the country, the frequency landscape would leave enough space for 29 channels of digital television, eliminate UHF channels 31 to 51, and enable mobile and cellular operators to operate in an additional 120MHz of spectrum.
If all goes as planned, the auctions won’t take place for at least another year or two, leaving plenty of time for industry players and regulators to get their ducks in a row.
Mobile operators have widely praised the deal, saying it will help eliminate “spectrum crunch” for deploying mobile broadband services. That not only creates jobs for people the mobile operators employ to build out services, but also enables existing businesses to pursue new opportunities enabled by mobile broadband. Most mobile operators wish the legislation had gone further in allowing the FCC to repurpose broadcast spectrum for mobile use. By some estimates, the wireless industry will be pushing 16 times more data by the middle of 2016 than it was at the middle of last year, and that means mobile operators need all the spectrum they can get just to try to keep up.
The largest mobile operators — namely AT&T and Verizon — are particularly pleased that the legislation specifically bars the FCC from excluding carriers from bidding on spectrum for competitive reasons, although the FCC will be able to set limits on how much spectrum a single company can hold in a particular market. In general terms, this means the spectrum auctions are likely to favor deep-pocketed providers like Verizon and AT&T, which will largely be able to outbid competitors in key markets. However, ownership rules may present an opportunity for struggling T-Mobile, which currently has no clear path to LTE. Sprint may want to make a major play as well, particularly since its partnership with LightSquared to roll out LTE services appears to be in serious jeopardy.
What TV broadcasters think
The linchpin of the whole auction is the notion that television broadcasters will voluntarily surrender their spectrum licenses so they can be sold to broadband operators. The television broadcast industry is still stinging from the government’s forced transition to digital television, which cost the industry an estimated $10 billion. So far, not a single broadcaster has publicly expressed any interest in participating in the spectrum auction. Broadcasters’ chief concern in this process was that they be held harmless by way of this auction: If they don’t want to give up their spectrum, they aren’t required to do so.
Their enthusiasm might be further dampened by the methods through which the FCC has to conduct the proceedings. The legislation requires the FCC to conduct a reverse auction for broadcasters’ licenses, which will presumably create a process by which the government pays as little as possible to to acquire the licenses.
In a way, trying to minimize the amount of money broadcasters rake in from the auction makes sense. Broadcasters typically paid nothing for their UHF licenses. They were given away for free in order to create the public benefit of broadcast television. In exchange for free licenses, the government was able to impose requirements about stations carrying educational and public-interest programming as a result. That helped make Sesame Street part of many Americans’ lives.
However, trying to minimize the amount of money paid to broadcasters through the auction also means the broadcasters have less motivation to sell. Instead, they may find those broadcast licenses become useful bargaining chips with other broadcasters, media conglomerates, and even mobile operators, particularly in a few years when spectrum is even more scarce. The legislation grants the FCC roughly $1.75 billion to compensate stations that volunteer to give up their spots in the broadcast spectrum, but that’s pocket change compared to the $25 billion the government expects to raise from the auction.
The FCC will also have the authority to shift broadcast stations to new channels in order to create larger contiguous frequency blocks for auction. (For instance, a 10MHz block in a key market is potentially worth a lot more than two separate 5MHz blocks.) The legislation also provides for some financial assistance to television stations forced to move to a new section of the television band. But, at least for high-powered television broadcasters, television stations won’t have to go off the air unless they want to surrender their spectrum. The FCC won’t be able to force them to go dark in order to make room for mobile broadband.
And that’s where we find another loser: Low-powered television (LPTV) stations get left out of the deal entirely. They’re not eligible to participate in the spectrum auction, and they are not guaranteed to have a new channel block if the FCC repackages their market. Although few LPTV stations are national network affiliates, they do offer a wide range of programming that’s often not available via traditional broadcast networks, including non-English programming, local content, educational programming, and more. LPTV stations will almost certainly be shut out of the 600MHz UHF block once the auction and spectrum re-allocation is completed.
Public safety network
If there’s one non-controversial thing that comes out of the spectrum auction plan, it’s that some of the proceeds of the spectrum auction will be used to find a new Public Safety Broadband exclusively for use by police, fire, and medical services, as well as emergency responders. The new network will exist in the so-called “Class D” frequency block, and will provide a full 10×10 block for public sector LTE broadband service.
The idea of a national broadband network for emergency services has been deemed a national priority for over a decade, ever since emergency responders to the 9/11 terrorist attacks found their agencies were not able to interoperate thanks to incompatible communications equipment. The same problems have hampered emergency efforts surrounding Hurricane Katrina in 2005 and the BP gulf oil spill in 2010.
The FCC had favored auctioning off the Class D block to private operators with a stipulation that the spectrum’s use had to give give first priority to public safety use over consumer use. The Congressional Budget Office estimated such a sale might bring in another $2.75 billion. However, back when the FCC auctioned off the 700MHz blocks being vacated by analog television, the Class D block failed to sell, meaning the valuable spectrum has just been dead air.
So, instead of collecting money from private companies wanting to operate mobile services in the Class D block, the federal government is going to spend $7 billion to build out and operate its own public safety broadband network in those frequencies. When complete, there’s little doubt this will be a boon to police, fire, and other emergency responders. There’s also little doubt this will be a boon to Motorola, which makes about two thirds of the gear used using the public safety communications market.
Follow the money
The federal government expects to raise about $25 billion through the spectrum auction. About $15 billion of that will go toward paying for an extension in unemployment benefits, while another $7 billion will be allocated to building the public safety network. Roughly another $1.75 billion will be used to compensate television broadcasters for their licenses.
The Public Safety Broadband Network will start rolling out right away, once the legislation is enacted. No existing operators need to be moved out of that spectrum space. However, since the auction won’t take place for another year or two, the National Telecommunications Information Agency (NTIA) will borrow money from the Treasury to begin building out the program.
Whether any of this gets paid for, of course, completely hinges on existing television broadcasters giving up their spectrum. Although government officials are optimistic that many broadcasters will go along, thus freeing up as much as 120MHz worth of spectrum in major markets, some industry estimates have the FCC being lucky to get 60MHz in major markets — with a good portion of that spectrum coming by way of reorganizing existing frequency licenses, rather than the sale or re-allocation of existing licenses. In that case, the spectrum auction may only raise a portion of the estimated $25 billion, mobile operators won’t be able to roll out dramatic enhancements to their broadband networks, and a great many low-power UHF television stations will likely vanish.
But, at least there will eventually be a public safety broadband network.