Broadcasters, Public Interest Groups Lose Fight To Keep TV Stations out of Duplex Gap

The FCC issued a news release on the auction procedures, saying TV stations will be placed in the downlink, uplink or duplex gap “in a limited number of geographic areas where necessary to accommodate market variations in broadcaster participation.” The FCC also established a formula for calculating opening price offers for each eligible TV station based equally on its interference and population characteristics while killing the dynamic reserve pricing formula that would have reduced opening bids for stations that can't be repacked in the TV band, the agency said.

The rules promote transparency for broadcasters and potential wireless licensees, the FCC said. They ensure that broadcasters “receive information about channel vacancies from round to round so that they can assess whether to drop out of the auction based on the likelihood that the current price will continue to decrease,” the FCC said. The rules also ensure wireless companies “receive detailed information on ‘impaired’ licenses in a given area, including the source and location of any interference; and progress reports on the prices of each block, quantity demanded, and how close forward auction bidding is to confirming that the auction can close at the selected clearing target.”

Pai accused the FCC majority of playing politics. “To scrounge up the votes to pass today’s item, the members of the majority made a deal among themselves, leaving Commissioner O’Rielly and I, as well as the bipartisan leadership of the House Energy and Commerce Committee, out in the cold,” Pai said. “The FCC is making it substantially more difficult than it needs to be to have a successful auction.” Pai also said the order puts too many TV stations in the duplex gap. “Under the procedures adopted today, broadcast stations will be sprinkled throughout the wireless portion of the 600 MHz band,” he said. “This will lead to permanent adjacent channel and co-channel interference.”

O’Rielly said the rules approved could doom the auction before it starts.The FCC "continues to proceed down a path, both substantially and procedurally, that I feel places the success of the auction at risk,” he said. “At this point, I can see only one way for success -- if the insatiable need for licensed spectrum far exceeds the roadblocks imposed by wrong-headed decisions.”

O’Rielly said his biggest concern is the market variation rules. The permitted impairment levels “are still too high, especially for the most likely clearing thresholds,” he said. The rules place TV stations in the duplex gap first, downlink spectrum next and then uplink, he said. “Placing stations in the downlink, and even in the duplex gap, will cause significant impairments to the downlink spectrum,” which is the most valuable to wireless carriers, he said. Commissioners were told only late in the game that protecting the downlink spectrum could “tank” negotiations with Canada, he said.

Pai closed with a scathing critique of how the Wheeler FCC does business. Throughout its work on the auction, the FCC has been plagued by the same problem, he said. “It has been absolutely convinced that it has all the right answers,” he said. “As a result, there has been a stunning unwillingness to listen to what anyone else, from Republican commissioners to Democratic congressmen, has to say.” O'Rielly said every attempt he made to offer a compromise on the rules was rejected by FCC staff.

Chairman Tom Wheeler said the order essentially launches the world’s first two-sided spectrum auction, with initial applications from broadcasters and wireless companies expected in about 60 days. Wheeler said he has been involved in spectrum auctions since the first one in 1994 and slammed the “impending doom” predictions on the auction. People have always focused on “worst case” scenarios before an auction even starts, he said.

“We have moved from considering the concept of a spectrum auction to implementing a spectrum auction with this decision today,” Wheeler said. “This is like a very complex jigsaw puzzle except for the fact that nobody has ever put the puzzle together before. You don’t have the advantage of the picture on the top of the box.”

Commissioner Jessica Rosenworcel also defended the order. The FCC was forced to make tough decisions as it moves forward on the auction rules, she said. “We announce the date the auction will begin,” she said. “We delve into the configuration of the 600 MHz band, covering everything from the placement of stations to the dynamics of the duplex gap to the assignment of impaired spectrum. Each issue is novel, packed with consequences, and the product of hard-fought compromise.”

The fight over the rules made some strange bedfellows. “Am sympathetic to @AjitPaiFCC and @mikeofcc on wanting more data and more simulations,” tweeted Public Knowledge Senior Vice President Harold Feld. “I do not think this was handled well.” “@AjitPaiFCC is absolutely right that sprinkling TV in Duplex Gap … is bad policy: a recipe for ongoing interference,” tweeted Michael Calabrese, director of the Wireless Future Project at New America Foundation’s Open Technology Institute.

NAB called the order “a major setback for stakeholders eager for a successful incentive auction.” It “undermines certainty for reverse and forward auction bidders and irresponsibly undercuts the ability of broadcasters to keep" communities informed, an NAB spokesman said. “Despite releasing data designed to demonstrate how only a handful of markets would have TV stations in the duplex gap, the order fails to conform to the Commission’s own numbers.”

House Republicans Concerned

House Commerce Committee Chairman Fred Upton, R-Mich., and Communications Subcommittee Chairman Greg Walden, R-Ore., slammed the order. Congress put its faith in the commission to get the auction rules right, they said. “As Chairman Wheeler derides critics as focusing on the worst-case scenario, our concern is far more troubling -- that the plan adopted today loses sight of producing the best-case scenario.” Wireless carriers and broadcasters are rarely on the same page, they said. “Yet here, where we need both to be not just willing, but enthusiastic, participants, the FCC has chosen to elevate its own political desires above the engineering and economic expertise of the industries expected to contribute spectrum and capital to this auction. While the problems with this approach are many, in short, it prioritizes quantity over quality.”

An AT&T executive said decisions on the auction were a mixed bag. “the FCC has finally resolved the protracted debate on the reserve and its triggers, putting to rest at last T-Mobile’s never-ending quest to expand the favors it will receive at auction,” Joan Marsh, vice president-federal regulatory, said in a blog post. “On the other hand, some of the auction framework proposals adopted today raise significant questions about the value and utility of the spectrum that will be made available at auction.”

CTIA is disappointed the FCC “appears to have ignored the Spectrum Act’s mandate to protect licensed services from harmful interference,” said Scott Bergmann, vice president-regulatory affairs. “By failing to meet this requirement or provide an effective mechanism for resolving complaints, today’s decision potentially exacerbates the uncertainty that forward auction bidders will experience. Congress recognized that certainty and protection from harmful interference are vital to a successful Incentive Auction, which in turn is essential to meeting our nation’s spectrum needs and encouraging the next generation of mobile innovation and investment that will benefit consumers.”

"Based on a remarkably open and fair process, the FCC has adopted compromise auction rules that make no stakeholder, including our Coalition, 100 percent happy,” emailed Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. “As a concession to the shortness of life, it is time to end the debate and get on with the auction.”