Proposals would authorize FCC to share auction proceeds with broadcasters as part of spectrum re-purposing process

It’s no secret that: (a) the FCC would like to re-purpose already-occupied broadcast TV spectrum for broadband use; (b) many (if not most) of the folks who currently occupy that spectrum are not particularly keen on the idea; and (c) the FCC figures that any broadcaster resistance to spectrum re-purposing might be softened by the siren song of a big payday, with the cash coming out of the proceeds of an auction of the re-purposed spectrum.

The FCC’s problem (also not a secret) is that the Commission doesn’t have the statutory authority to promise any auction proceeds to licensees who relinquish their spectrum.

It’s obviously time (with apologies to Stephen Sondheim) to . . . send in the legislators!

Already, three bills have been introduced this year that would allow the Commission to spread the spectrum wealth around; reports of still more bills in the works continue to surface. (This is in addition to several bills introduced last year.)

First into the mix this year was S.415 (a/k/a the Spectrum Optimization Act). A short and sweet four-page bill from Sen. Mark Warner (D-VA), it would give the FCC the authority to conduct auctions of spectrum that is “voluntarily relinquished by a licensee”, with “a portion” of the proceeds being shared with relinquishing licensees. 

Exactly what portion, you ask? The bill would simply leave it to the Commission to “establish a maximum revenue sharing threshold applicable to all licensees within any auction, unless the establishment of such threshold would increase the amount of spectrum cleared or would increase the net revenue from the auction of such spectrum”. Say what? The bill would also order the Commission to “minimize the cost to the taxpayer of the transition of the spectrum to be auctioned”. That provision could complicate the workability of a suggestion advanced recently by Media Bureau Chief William Lake that the government might also pay for the costs of repacking the spectrum. 

So the Warner bill would give the FCC a carrot (i.e., auction proceeds sharing) with which to induce broadcaster cooperation, even if the size and deliciousness of that carrot are still up in the air. By contrast, it has no provision for a stick with which broadcasters might be threatened into cooperating. Some of last year’s bills would have created a spectrum tax that could have done just that – but the Warner bill says nothing about such a tax.

On the House side, we have H.R.911 (dubbed the Spectrum Inventory and Auction Act of 2011) introduced by Rep. John Barrow (D-GA). This, too, would give the FCC the authority to conduct incentive auctions. But before such auctions could be conducted, the FCC and the NTIA would first have to complete an exhaustive broadband spectrum inventory report which would have to be made public and updated semi-annually. The report would be no walk in the park: it would have to detail federal and non-federal uses of the spectrum and describe (among other things) the types of receivers in use, the geographic distribution of the various uses, and the frequency of use.  

Only after this initial report is completed could the FCC move forward with incentive auctions. As with S.415, H.R.911 would leave the to-be-shared amount of auction proceeds up to the FCC’s discretion. The only guidance on that score is that the sharing should be “in an amount or percentage that the Commission considers appropriate and that is more than de minimis”. 

Importantly, the bill would expressly prohibit the Commission from reclaiming spectrum “directly or indirectly on an involuntary basis”. The bill is silent as to what would qualify as an “indirect” involuntary measure. Nevertheless, the fact that that language is included may comfort some skeptics who expect that the FCC might otherwise opt for non-voluntary strong-arm measures to persuade licensees to give up their spectrum. (Note: no reference to any spectrum tax here, either.)

Back on the Senate side, we have S.455, the Reforming Airwaves by Developing Incentives and Opportunistic Sharing Act – or “RADIOS Act” – co-sponsored by Sens. John Kerry (D-MA) and Olympia Snowe (R-ME). This bad boy weighs in at a much heftier 51 pages. It follows up on a similar bill these two senators co-sponsored last year.  According to Kerry’s website, this year’s edition is “comprehensive spectrum reform legislation to modernize our nation’s radio spectrum planning, management, and coordination activities.”

Much like Barrow’s bill, the RADIOS Act would permit the sharing of auction proceeds while requiring the FCC to complete a spectrum inventory and other similar exercises. However, here completion of the inventory does not appear to be a condition precedent to the incentive auction. The amount of auction proceeds available for sharing would be left to the Commission (“an amount or percentage determined in the discretion of the Commission”), and broadcaster participation would be strictly voluntary. And as with the two bills described above, the RADIOS Act says nothing about spectrum taxes. Interestingly, in the section about incentive auctions, the RADIOS Act requires that the Commission assure that there will be “adequate opportunity nationwide for unlicensed access to any spectrum that is the subject of such an auction.” This is intended to protect the continued availability of spectrum for white spaces devices.

(The RADIOS Act sprawls well beyond these narrow limits, but the description above should answer the immediate questions of folks concerned about the possibility of incentive auctions.)

The RADIOS Act, Warner’s Spectrum Optimization Act, and Barrow’s “Spectrum Inventory and Auction Act of 2011” are the first, but almost certainly not the last, pieces of legislation that have come out of the chute this year. Word is that several other legislators will likely get in the act over the next few months. We understand that at least one of bill will specifically direct that a portion of incentive auction proceeds will be set aside to assist broadcasters relocate to different channels as part of a repacking process.

None of these three bills provides any clear indication – or even basis for speculation – about the amount of auction proceeds that participating broadcasters might expect to get their hands on. Indeed, other than the impenetrably obfuscatory language in the Warner bill, the bills would give the FCC nearly unfettered discretion to make that call. That’s not necessarily good news, but it might be unrealistic to expect Congress to micromanage such things. On the other hand, the fact that none of the bills threatens imposition of a spectrum tax is a hopeful sign, since such a tax could easily be wielded as a threatening economic cudgel to encourage “voluntary” participation in the spectrum re-purposing process.

Of course, Congress’s seeming interest, just right now, in spectrum auction legislation must be counter-balanced against the undeniable fact that, by the end of this year, posturing for the 2012 elections will have begun. As a result, by then prospects for movement on most legislation of any sort will likely be slim. So if we’re going to see the enactment of any new legislation dealing with the overhaul of spectrum regulation, including incentive auctions, it will likely be sooner rather than later.   We’ll keep you updated on these bills, and any new ones that get added to the Incentive Auction Sweepstakes.