"Without appropriate limits," Ham warned, "the two dominant carriers could squeeze out competitors, reducing consumer choice and thwarting the type of innovation that T-Mobile and smaller carriers are introducing to the wireless marketplace today."
Congress authorized the FCC last year to buyback the broadcast licenses of some TV stations and auction them to wireless carriers, which have been struggling to keep pace with their customers' booming demand for mobile data. The government will use the auction revenue to pay for a nationwide first responder network and to reduce the deficit.
Republicans on the subcommittee largely sided with AT&T's call for few limits on auction participation, while Democrats encouraged the FCC to use the auction to promote industry competition.
"It would be folly at best for the FCC to think that it could know better than a true market-based auction the maximum amount the auction could raise," subcommittee Chairman Greg Walden (R-Ore.) said. "A carefully crafted auction that recognizes the value of participation and has the humility to let the market decide the value of spectrum will best serve all of the goals of the legislation."
Rep. Anna Eshoo (Calif.), the panel's ranking Democrat, urged the FCC to follow the Justice Department's advice and enact rules that help the smaller carriers compete.
Democrats also argued that the FCC should set aside a large amount of spectrum for unlicensed use. Unlicensed spectrum can be used by any company for free and powers technologies such as Wi-Fi, Bluetooth and remote controls.
Gary Epstein, the co-lead of the FCC's Incentive Auction Task Force, said the FCC is still planning to hold the auction by 2014, but he expressed little confidence that the agency will meet the goal.
"Whether it happens in 2014, I guess is above my pay grade," he said.
Rick Kaplan, executive vice president of strategic planning for the National Association of Broadcasters, argued that the FCC should ensure that TV stations that choose not to participate in the auction do not have to bear any of the costs of the subsequent reshuffling of frequencies.
Preston Padden, the executive director of a group representing TV stations that want to sell their licenses, urged the FCC to pay the broadcasters based on the value of their spectrum, rather than the value of their business.
Lawmakers and witnesses all agreed on the importance of the auction, which could be the last time that a significant amount of low-frequency spectrum becomes available. Low-frequency spectrum is particularly valuable because it is able to travel farther and penetrate walls.