May 8, 2017 at 5:00 am ET
Last month, wireless carriers made down payments to secure valuable spectrum licenses from the recently concluded Federal Communications Commission broadcast incentive auction. With almost $20 billion in gross proceeds and more than $7 billion generated for the U.S. Treasury, the incentive auction was the second-highest grossing spectrum auction in FCC history.
Given that wireless providers have invested more than $240 billion in American wireless broadband facilities since 2007, and North America’s mobile industry contributed $710 billion to the economy in 2016, the additional 70 MHz of licensed spectrum now available for flexible commercial use is great news for American consumers, innovation and the continued economic growth driven by the wireless broadband revolution.
I had the great fortune of serving as a commissioner at the FCC when the 2012 Spectrum Act was signed into law and when the FCC began planning for the incentive auction. At the time, everyone knew that the process of crafting the first two-sided spectrum auction would be complicated, full of surprises and rife with uncertainty. The commission and all of the public servants who worked tirelessly to bring this additional spectrum to auction deserve our thanks and praise for a job well done.
Now, with the intent of learning from this experience and applying its lessons to the development of future auction rules, we have the opportunity to look back at the auction results and assess whether anything might have been done differently. One choice in particular should receive further reflection and analysis – the decision to reserve up to 30 MHz of spectrum for all carriers other than AT&T and Verizon.
At the time, the commission worried that even if AT&T or Verizon didn’t need the spectrum, the companies had incentives to buy up licenses simply to foreclose competitors from gaining access. When the auction results were announced, however, many were surprised to learn that the three largest winners in the incentive auction were T-Mobile, Dish and Comcast, and that 95 percent of auction revenues were generated by companies other than AT&T and Verizon. That means that companies eligible to bid on the reserved spectrum acquired nearly all of the spectrum available – even the spectrum not set aside for them. The set-aside was not necessary to ensure that a variety of participants acquired spectrum, and may have reduced auction participation as well as proceeds for the U.S. Treasury.
The lesson learned is that regulatory humility and the power of the free market are the best approaches to auction policy. As the FCC crafts rules for future auctions, it should allow spectrum to go to its highest and best use based on a competitive auction open to all participants. Flexible light-touch rules make for the best policy to ensure American consumers and taxpayers are the real winners during the wireless broadband revolution.
In the short term, Mobile Future supports the commission as it continues the process of clearing the newly auctioned spectrum and making it available for American mobile consumers as quickly as possible, and urges the commission to move with alacrity in its proceedings to make available the additional spectrum necessary to support next generation 5G services.
Robert McDowell is chief public policy advisor for Mobile Future, an association of businesses, nonprofit organizations, and individuals dedicated to advancing innovation and investment in wireless technology and services. He is also a partner at Cooley LLP and served as a commissioner at the FCC from 2006 to 2013.
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