FCC bullish on airwave auction

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The Federal Communications Commission (FCC) is growing bullish as it nears the end of an extended effort to convince television broadcasters to sell off their airwaves in an auction.

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The sale could be a boon for wireless carriers like AT&T and Verizon, and officials see the auction as crucial to bolstering the infrastructure used by smartphones and other mobile devices.

FCC Chairman Tom Wheeler took a strong stance in an appearance recently at CES, the sprawling Las Vegas trade show that draws industry representatives and reporters.

Wheeler predicted it would be the “world's largest spectrum auction that has ever taken place.”

"I think it is safe to say that you are going to see a spectrum extravaganza — OK? — that you are going to see lots of interest in selling the spectrum and lots of interest in buying the spectrum, and that that is going to be transformational,” Wheeler added.

His remarks cap a lengthy effort to get broadcasters to sell their spectrum, the frequencies that carry over-the-air signals and are crucial to the delivery of wireless broadband service to smartphones.

Television stations face a Tuesday deadline to apply to participate, and officials have been aggressive in trying to shore up broadcaster confidence in the auction's never-before-tried model to reallocate their spectrum to the wireless industry.

On March 29, broadcasters who have applied to participate must commit to doing so, and the commission will begin a complex process to shift spectrum licenses from broadcasters to wireless operators. 

Each spectrum license has been assigned a starting price. From there, the commission will offer lower and lower bids until they have the spectrum needed at the lowest price possible.

Then, they’ll conduct a standard auction for the licenses where wireless carriers bid against one another for access to the airwaves.

Many elements need to come together for the auction to be successful. Licenses need to be made available in the right geographical markets, for example, and the software that is used in the run up to the sale can’t experience any unexpected glitches.

None of the years of preparation for the auction will matter, though, if buyers and sellers don’t show up.

Because broadcasters have never before been asked to sell their spectrum in this way, the commission has campaigned hard over the last year to bring them to the table. That effort included hiring an investment banker, Lawrence Chu, to make the case for the auction to broadcasters.

Chu and FCC officials traveled around the country to markets where the commission hopes broadcasters will give up their spectrum. They delivered presentations to potential sellers and held confidential meetings with them to answer their questions about the auction.

“Sometimes there are markets that may be obvious, like New York, but sometimes there may be markets like Scranton, which may not seem as obvious but because of the uniqueness of the way that daisy-chain effect happens it does create a lot of value there,” said Chu, now a managing director at the investment bank Moelis & Company, referring to the idea that certain markets must participate in order for other, often larger, markets to also release spectrum.

Chu said the roadshow pitched the auction as “a unique opportunity that broadcasters couldn’t create on their own” because of the way that the FCC can repack spectrum to make it more attractive to wireless providers.

After spending much of last year pitching broadcasters on the benefits of the auction, the commission refocused its efforts to educate them about the procedures for applying and participating in the auction. Behind the scenes, the team planning the auction has been focused on making sure that broadcasters have everything they need to fill out their applications, an FCC official said.

Constant throughout has been Wheeler’s confidence in the auction and certainty that it will start on time.

“I think part of his enthusiasm is genuine. It’s like, this is a unique opportunity — one of perhaps the last opportunities on the horizon to see a sale of the sort of beachfront, low-band spectrum,” said Doug Brake, a telecom analyst with the Information Technology and Innovation Foundation. “But at the same time, I think there’s also a great deal of benefit to encouraging both sides of the auction to come to participate.

“And so I think there’s a little bit of salesmanship in his enthusiasm.”

Wheeler's enthusiasm has been steadfast.

He was asked at CES to envision the worst case scenario for the planned auction.

"Oh, that it all blows up and we were wrong," Wheeler said.

"But I'll go to the bookies here in Vegas and put my money down against that."