FCC approves rules for spectrum auction

The Net neutrality proposal may have been the headline news at the Federal Communications Commission's meeting on Thursday, but it wasn't the only important vote the FCC conducted there.

The commission also voted to approve rules governing the upcoming spectrum incentive auction. This auction, which will sell valuable low-band spectrum from TV broadcasters to wireless broadband providers, could help determine the competitive landscape of the wireless industry for decades to come.

Once again, the FCC approved the rules in a 3-2 vote that was split along party lines with Democrats in the majority. The most controversial part of this proposal was the fact that the FCC plans to set aside a portion of the wireless spectrum in the auction for smaller competitive carriers.

This approach is designed to ensure that the two largest wireless operators, AT&T and Verizon, don't buy the bulk of the spectrum. And it is expected to give competitors, such as rural operators and smaller national wireless companies like Sprint and T-Mobile a better chance of acquiring this valuable spectrum.

But as part of a compromise to appease larger carriers who were outraged that the FCC proposed limiting their access to spectrum in the auction, the FCC reduced how much spectrum it will set aside in the reserve part of the bidding process. Instead of setting aside nearly half the spectrum in markets where the bidding process hits its predetermined reserve price, the FCC has now reduced the amount of spectrum set aside.

This revision to the original proposal, which was strongly criticized by AT&T, is considered a win for the large carriers, AT&T and Verizon. And it's a blow to smaller national rivals Sprint and T-Mobile.

Still, T-Mobile said it is satisfied by the FCC's efforts to promote competition.

"T-Mobile appreciates the FCC's vote today moving ahead with the incentive auction and spectrum aggregation proceedings," Kathleen Ham, vice president of federal regulatory affairs for T-Mobile said in a statement. "While we would have preferred the FCC to reserve more spectrum for competitive carriers, we are hopeful the auction rules will enhance competition and benefit consumers."

The Competitive Carrier Association, which represents rural wireless operators, was also pleased with the proposed rules.

"Creating a spectrum reserve will allow every carrier, large and small, the opportunity to bid in the auction, which is critically important given the superior propagation characteristics of low-band spectrum," head of the association Steven Berry said in a statement.

Spectrum is the lifeblood of the wireless industry, and the spectrum to be sold in this auction is especially valuable because it is at a low frequency. The spectrum, which is currently used by TV broadcasters, sits in the 600 MHz band and is particularly valuable because wireless signals can propagate over longer distances and it allows signals to penetrate through obstacles more effectively. This makes deploying next generation services like 4G LTE more cost-effective, especially in rural areas. It also helps improve in-building coverage.

The rules also put in place "reasonable" guard bands that can be used for unlicensed wireless use. Depending on how much spectrum the auction gets from broadcasters, the guard bands could consist of between 14 to 28 MHz of spectrum available for unlicensed use. The FCC also made it possible to use 6 MHz in channel 37 in markets where incumbent services aren't using the channel for Wi-Fi and other unlicensed uses.

Google applauded the FCC's efforts in coming up with a band plan that would allow for some unlicensed spectrum use.

"The FCC had a challenge in designing its plan for an auction of TV broadcast spectrum, and we're pleased that it is supporting both licensed and unlicensed uses," Aparna Sridhar, Google Policy Counsel, said in a statement. "While the plan doesn't provide as much unlicensed spectrum as we recommended, it should provide just enough unlicensed spectrum to attract investments in equipment and operations in the new band."

The National Associations of Broadcasters, which lobbies on behalf of TV broadcasters, said it was disappointed in the rules. And the group accused the FCC of not fulfilling the obligations outlined in the legislation authorizing the auction. Specifically, the NAB said that the FCC had planned to use interference software that would jeopardize hundreds of TV stations and millions of over-the-air-TV viewers. And the group complained that the FCC would not compensate fully all the TV stations that will be required to move as the agency consolidates or packs the spectrum to make way for the mobile operators.

"We are disappointed that today's vote fails the mandate of Congress to hold harmless those broadcasters who choose not to participate in the spectrum auction," NAB Executive Vice President of Communications Dennis Wharton, said in a statement. "Simply put, a deeply-divided Commission chose not to fulfill required obligations under the Spectrum Act."

The two Republican commissioners. Ajit Pai and Michael O'Reilly were also disappointed with the outcome of the order. And they voted against it.

With respect to the broadcast issues, Commissioner Pai said that the plan could hurt non-participating broadcasters and rural Americans, since some translators will be required to relocate or shut down. He said the FCC could have done more to mitigate the effects the auction will have on communities.

"As is too often the case, rural America could be left behind," he said.