FCC to vote on proposed incentive auction rules in December

The FCC will vote on Dec. 11 on a detailed set of proposed rules for how the incentive auction of 600 MHz broadcast TV spectrum will be conducted. If the FCC approves the proposals, the rules will not become final and will instead be opened up for public comment.

Essentially, what is happening is that the auction framework the FCC approved in May is being turned into a set of complex rules for how the incentive auction will actually function. The FCC's Wireless Bureau normally develops and moves forward with the rules on its own, but because of the unique nature of the incentive auction, the full commission is voting on the proposal, which is known as a public notice (PN).

The PN sets out proposed rules on a variety of different topics that are going to be central to the operations of the auction, which will consist of two main parts. The first is a "reverse" auction, in which broadcasters agree to sell their spectrum rights. The spectrum will then be moved around or "repacked" based on which stations relinquish their spectrum. Then the FCC will conduct a more traditional "forward" auction in which carriers and other entities bid on the spectrum licenses.

Last month the FCC decided to delay the start of the auction from mid-2015 to early 2016. FCC officials told reporters in a briefing on Thursday that after a significant amount of time for public comment, the FCC will vote on final rules for the auction in time for the commission to start taking applications from broadcasters in September 2015 to participate in the auction.

In the PN, the FCC staff has proposed a methodology for establishing the opening bid prices in the reverse auction. The prices need to be high enough to encourage what one official called "robust" participation among broadcasters but not so high that it takes hundreds of rounds of bidding for the broadcasters to sell their spectrum. Additionally, the FCC needs to take into account laws mandated by Congress that promote the interests of taxpayers in getting fair value for a portion of the spectrum. The opening bid prices will vary from market to market, and will take into account both the stations' impact on the repacking process and on how many people they serve. The methodology also will take into account if a station moves from a UHF channel to a VHF channel.

Additionally, the PN sets out a methodology for establishing the opening bid prices in the forward auction. That will be done along lines similar to other spectrum auctions, such as the ongoing AWS-3 auction. The FCC will assign bidding units for each license based on the weighted population in the license area and will reference how much spectrum in that market has gone for in prior auctions. In areas where spectrum has attracted higher prices in the past, the population will be weighted higher, and vice versa.

Importantly, the FCC's proposals also look at the so-called "final stage rule" for determining when the auction is over. The FCC will need to have raised enough money to pay and relocate broadcasters as well as fulfill other finance obligations. The rules will include specific prices per MHz-POP for the broadcast spectrum that should be reached as well as a clearing target.

However, this is where things get slightly tricky. Unlike in other auctions, the FCC does not yet know how much spectrum broadcasters will give up, so the FCC is looking for a so-called "near-nationwide" clearing target. The target for how much spectrum the FCC hopes to clear will vary from market to market and the target will be influenced by how much spectrum around the country can't be used for wireless broadband because the FCC had to put a TV station in a wireless band. The draft proposes two categories of licenses based on how much population in a given license is subject to interference.

The FCC is also going to look at how all of this will apply to its "spectrum screen" and the "reserve" spectrum the FCC will set aside for smaller carriers to bid on. The PN fleshes out how the FCC would determine the type and amount of reserve spectrum, but an official said it does not take a position on T-Mobile US' (NYSE:TMUS) petition to set aside more than 30 MHz of reserved spectrum.

Additionally, the FCC's public notice will look at the factors that need to be considered to determine final channel assignments for TV stations that choose not to participate in the auction. The FCC wants to make sure as few stations as possible need to actually move, and also wants to minimize interference and avoid channel reassignments that would cost broadcasters a lot of money.

For more:
- see this Broadcasting & Cable article
- see this Radio+Television Business Report article

Related Articles:
Starting in January, FCC officials to hit the road to woo broadcasters to incentive auction
FCC delays start of 600 MHz incentive auction to early 2016
FCC pitches broadcasters to participate in incentive auction, offering billions as a reward
CCA wants FCC to revise rules for triggering 'reserved' spectrum in 600 MHz auction
FCC's Wheeler: Operators need to 'show up' for 600 MHz incentive auction

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