Incentive Auctions: Going Nuclear

Posted by Sam Churchill on

Three incentive auction bills have been introduced in Congress this month. Incentive Auctions would auction off unused television channels and give some of the proceeds to broadcasters.

Under the Administration’s plan, the government would fund a dedicated a $10B, LTE-enabled, first responder broadband network, nationwide. Incentive auctions would raise funds by selling television spectrum.

There are basically two pieces to incentive auctions:

  1. Smaller broadcasters might vacate their dedicated channel and co-habitate on a digitial subchannel on a competitor’s channel.
  2. Currently unused television channels “white spaces” would be sold to the highest bidder (probably big telcos).

Yochai Benkler, Professor of law at Harvard University, says “incentive auctions” threaten the future of wireless innovation. Here’s an excerpt (edited for brevity) from the Huffington Post article.

The proposed spectrum auctions are being promoted under the false premise that boosting mobile broadband, smart grid communications, inventory management systems, mobile payments, and health monitoring requires auctioning exclusive pieces of licensed spectrum.

In reality, these markets are fast developing through unlicensed wireless applications, like WiFi. When the iPhone crashed AT&T’s mobile broadband capacity, the company didn’t buy more spectrum on secondary markets; it used WiFi to carry much of the data. In the past year WiFi traffic on AT&T’s hotspots has tripled.

Today, about half of iPhone and 90 percent of iPad page views are carried over WiFi. Indeed, almost two-thirds of all smartphone and tablet data traffic is carried over WiFi rather than over the carriers’ networks, whose hunger is driving the demand for auctioning TV bands.

In Japan, a good place to see the near future of mobile broadband, the second largest mobile carrier contracted a California firm to roll out 100,000 hotspots as a core strategy for its next generation mobile broadband network.

But it’s not only mobile broadband. When you use your E-Z Pass at a toll booth or Speedpass at the gas station, you use unlicensed technology like WiFi, but in a different band.

As the deficit supercommittee searches every corner to make budgetary ends meet, one solution they are considering, “incentive auctions” of the TV bands, could threaten the future of wireless innovation.

The last Republican and current Democratic FCC chairs presided over the bipartisan creation of TV White Spaces, a policy that permits device manufacturers to expand the capabilities of unlicensed devices by sharing the TV bands with broadcasters.

The TV Band auctions being pushed through the supercommittee threaten to displace these white space devices. As we look at the enormous success of unlicensed wireless strategies across the most dynamic markets, we see that doing so is penny wise, pound foolish.

Not only will auctions burden development of unlicensed strategies, if the last major auction is any indication, they will allow AT&T and Verizon to foreclose competition in their markets.

In the United States, unused “white space” television frequencies are primarily in the UHF band. The White Spaces Coalition consists of eight large technology companies that includes Microsoft, Google, Dell, HP, Intel, Philips, Earthlink, and Samsung. Various proposals, including IEEE 802.11af, IEEE 802.22 and those from the White Spaces Coalition, have advocated different standards for the United States.

Another plan, made up of mostly low-power television stations and backed by Sinclair Broadcast Group. They want a piece of the auction, too. Neither Broadcasters or LPTV operators paid taxpayers one dime to use [OUR] spectrum. Now they want taxpayers to pay THEM. Talk about hubris!

President Obama included authorization for incentive wireless spectrum auctions and spectrum reallocation for public safety as part of his American Jobs Act. Microsoft seems generally supportive of incentive auctions. Others are not.

Here’s an alternative two step plan:

  1. Carriers build out D Block. Carriers – even content providers like Apple, Amazon, Google and Microsoft – may pay for the privileged of building out a shared 700 MHz D-block network — saving taxpayers perhaps $10 billion.
  2. White Space is free. Half the television spectrum might be reserved for “unlicensed” white space. That might save taxpayers billions in Universal Service Fees, now used to subsidize broadband to rural users. Large carriers, willing to pay big bucks for spectrum, will pass on that cost to consumers.

Shared D Block would enhance broadband for everyone. Carriers pay for it, saving $10 billion. With unlicensed “free” white space spectrum (like Wi-Fi), consumers wouldn’t need USF government subsidies – saving another $5 billion. At least $15 billion would be saved to pay off the debt in this alternative approach.

The White House spectrum plan gives first responders their own 700 MHz LTE network. But rural citizens would be locked out of commercial 700 MHz LTE access — and they would be locked out of [free] unlicensed “white space” broadband access.

What kind of deal is that? What’s in it for consumers or entrepreneurs? Nothing.

Large telecom companies may soon eliminate “free” Wi-Fi by installing company owned and operated hotspots. Now big telecoms want to control the new “white space” band. Since “white spaces” can cover several city blocks and penetrate walls, it may represent an even bigger threat to telecom revenue.

The fact is “free” spectrum helped create one of the biggest economic booms in the history of the nation. Congress may sell this golden goose for a quick buck.

Related stories on DailyWireless include; FCC: Spectrum for Sale , NTIA “Finds” 1.5 GHz of Federal Spectrum, White Space Trialed, D-Block Legislation Stalled , Broadband Disability Act, Public Service Radio Convention, Public Safety Net Removed from Debt Ceiling Bill, D-Block Gets a Hearing, National Wireless Initiative, White House: D-Block to Police/Fire, State of the Spectrum, Mobile: Trillion Dollar Industry, White Space War, White Space To Go, White Spaces Get IEEE Standard, FCC Okays White Spaces , White Spaces: It’s The Law, NAB to FCC: White Spaces Illegal, Free White Space Mapping

Posted by Sam Churchill on Friday, October 28th, 2011 at 11:37 am .

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