The Competitive Carriers Association is urging the FCC to reconsider its rules for triggering when bidding for next year's planned incentive auction of 600 MHz broadcast TV spectrum will split into "unreserved" airwaves and "reserved" spectrum set aside for smaller carriers.
Specifically, the CCA wants the FCC to discard an "as-yet undefined dollars per MHz-POP reserve price" for triggering the reserved-spectrum bidding. The FCC has set that threshold for creating the reserved spectrum blocks in addition to an aggregate reserve price that must be met to cover all of the costs of the auction, as designated by law.
Essentially, the CCA is arguing that the per MHz-POP reserve price is unnecessary and will actually increase the risk that the auction will fail and that smaller carriers will get shut out of bidding for spectrum by Verizon Wireless (NYSE: VZ) and AT&T (NYSE: T). Under current rules, the FCC has agreed to set aside up to 30 MHz of reserved spectrum for smaller carriers to bid on in the "forward" part of the auction, depending on how much spectrum broadcasters relinquish in a given market in the "reverse" portion of the auction. However, setting aside those reserved spectrum blocks is highly conditional.
An FCC spokesman declined to comment on the petition.
In its filing, the CCA notes that there is "nothing intrinsically wrong with reserve prices," which the FCC typically uses to allow for a later reauction if prices fall far below expectations. The CCA also noted that there is nothing wrong with setting a reserve price in per-unit terms instead of an aggregate price.
However, the CCA contends, "the $/MHz-POP reserve price is independent of--and in addition to--the aggregate reserve price that the Commission adopted to ensure the incentive auction covers all expenses required to be raised under the Spectrum Act, including, among other things, paying for broadcast station purchases, the $1.75 billion in broadcast relocation expenses and any administrative expenses, as well as the option of satisfying any remaining First Responder Network Authority ('FirstNet') funding."
As a result, the CCA wrote, adopting an additional per MHz-POP reserve price "does not safeguard 'market' value, but risks preventing willing buyers and sellers from reaching an economically efficient equilibrium price, contrary to the stated reason for creating the $/MHz-POP reserve price in the first instance."
In its filing, the CCA argues that the FCC has not articulated "a satisfactory explanation for adopting two reserve prices rather than one. Nor does it provide a rational connection between the facts found concerning the risk of anti-competitive foreclosure and its decision to adopt a $/MHz-POP reserve price in addition to the already-substantial aggregate reserve prices."
Crucially, according to the CCA, the FCC has not considered "the inter-relationship between the reverse and forward auctions and fails to account for the risk of auction failure as a result of an improper reserve price."
"No one is arguing that the Commission should not set a reserve price for this auction that allows the federal government to recoup enough money to compensate exiting broadcasters, reimburse relocation expenses, and pay other statutorily required amounts (including funding any remaining FirstNet obligations)," CCA President Steve Berry said in a statement. "The trouble is, there is currently no certainty that competitive carriers will be able to access the reserved spectrum. Because of the unique nature of this 'once-in-a-lifetime' opportunity, CCA wants to ensure the FCC has fully considered the risks associated with the additional reserve trigger."
- see this CCA release
- see this CCA filing
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