AT&T makes case for 5G spectrum auction based on financial voucher system

spectrum light (Pixabay)
AT&T submitted a white paper to the FCC outlining how an auction of millimeter wave spectrum could be successfully designed.

Keeping up with its argument that the FCC needs to get moving on 5G spectrum auctions, AT&T is proposing an auction of millimeter wave spectrum that’s based on a voucher system that it says puts incumbent licensees and other potential bidders on a level playing field.

AT&T notes that one of the challenges to a millimeter wave auction, especially in the 39 GHz band, is that incumbent licensees have holdings scattered throughout the band, typically in 50 MHz chunks.

“To make matters even more complicated, incumbents hold different types of geographic licenses that in many cases overlay each other,” wrote Hank Hultquist, vice president of federal regulatory at AT&T, in a blog post. “In order for the auction to be successful, the FCC must find a way to reorganize the band into block sizes that are more favorable for 5G, ideally 200 MHz blocks, and maximize the number of blocks available for auction.”

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The proposal is laid out in a white paper AT&T filed with the FCC that was written by a couple of economists who specialize in auction designs.

The economists propose a two-phase procedure in which the first phase would involve the allocation of generic blocks and the second phase would involve assignment, with contiguity guaranteed. The auction would follow a clock format with uniform price in each geographic service area, and it would conclude with a second-price, sealed-bid assignment phase that would move rapidly.

The proposed voucher system is applicable to the 28 and 39 GHz bands, but the paper focuses on the more complex case of 39 GHz due to the challenges presented by the presence of commercial incumbents with 50x50 MHz paired assignments there.

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The white paper spells out that an incumbent’s voucher is a financial instrument that entitles the incumbent to a gross payment after the auction, or, in some cases, a credit toward its auction payments.

“It specifically does not entitle the incumbent to any amount of spectrum,” the paper states. “Rather, it is up to the incumbent to win any licenses that it wants through the auction. When an incumbent participates in the auction, its net payment in a PEA [Partial Economic Area] is the value of the spectrum it wins (base prices plus assignment payment) minus the gross voucher payment it receives.”

According to AT&T, incumbents would have no advantage in the auction based on the size or frequency assignment of their current holdings, and the proposal provides an “elegant solution to the mish-mash of existing holdings in a way that maximizes the value and usability of the band.”  

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Other industry players agree that an auction should be held sooner rather than later. However, FCC Chairman Ajit Pai has said that while he wants to move forward with a high-band spectrum auction in 2018, the FCC can’t do so until Congress fixes the upfront payments problem.

AT&T says it looks forward to discussing the auction proposal further with all stakeholders and public officials. “It’s critical for our 5G future that we get this right,” Hultquist wrote.

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