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FCC chief promises simpler rules for upcoming wireless auction

Chairman Tom Wheeler tells TV broadcasters he's heard their concerns about the 2016 sale of wireless spectrum and is willing to make changes so the auction will be a success.

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FCC chairman Tom Wheeler tells broadcasters at the NAB Show 2015 that he has heard their concerns on the upcoming spectrum auction and the new rules will be simpler than first proposed. Marguerite Reardon/CNET

LAS VEGAS -- Federal Communications Commission Chairman Tom Wheeler told TV broadcasters Wednesday that rules for next year's incentive auction will be much simpler than first proposed.

During a speech at the broadcasters' annual convention, he told TV station owners and broadcast network representatives in the audience that he has heard their concerns about the agency's proposed rules for the spectrum auction slated for early 2016 and that the rules for the auction will reflect those concerns. The agency took comments on proposed rules last year and will vote on a final set of rules for the auction in the coming months.

"Based on the public input in response to the public notice, the commission will, in the next few months, consider a 'procedures public notice' adopting final rules and auction procedures," he said. "Let me give you a hint where we are heading: we want to make broadcaster participation more accommodating."

He went on to say that the auction, which allows broadcasters to voluntarily sell their wireless spectrum to mobile broadband providers, will only be successful if broadcasters are "informed and have confidence in the rules and the process."

Wheeler's comments come after a year of tension between broadcasters and the FCC over the auction that will allow broadcasters to resell their valuable low-band wireless spectrum to wireless broadband providers who say they need the additional spectrum to expand their network coverage to deliver 4G LTE services. Congress authorized the voluntary auction in 2012.

Large players such as AT&T have already committed to participating in the auction as well as smaller wireless operators like T-Mobile and the satellite TV provider Dish Network. This auction is particularly important to T-Mobile, which has said it will use the low-band 600MHz spectrum to build its network in rural and suburban areas.

But since Wheeler last spoke to broadcasters a year ago at this same convention, the FCC proposed rules that the broadcast industry said were too complicated and could harm broadcasters, especially for those who decide not to participate in the auction. The industry's trade group, the National Association of Broadcasters, sued the FCC over the proposed rules in September. Both the FCC and NAB are awaiting the outcome of the court case. But Wheeler said he is hopeful that "the court will dispose of that suit in a way that will allow both of us to move forward."

Wheeler said broadcasters should be encouraged by the FCC's AWS-3 auction, which concluded in January. That auction generated more than $41 billion in proceeds for the federal government and it got new spectrum in the hands of larger wireless operators like AT&T and Verizon, which are using the mid-band spectrum to add capacity to 4G LTE networks in urban areas.

A 'risk-free' opportunity

Some, such as AT&T, say they hope broadcasters don't have an unrealistic expectation for high bids. Wheeler indicated that broadcasters should feel confident that their wireless spectrum will offer them a once-in-a-lifetime opportunity to score a high dollar figure for their spectrum without any risk.

"This opportunity is risk-free," he said. "You decide whether to participate after seeing the opening bid price being offered and you have the flexibility to drop out in any subsequent round."

Wheeler did not offer many specifics about how the FCC is altering the rules to address broadcaster concerns. But he did say that the agency plans to offer a more flexible implementation of channel sharing, which allows broadcast stations to squeeze onto the same spectrum channels in an effort to free up spectrum that can be resold in the auction. The proposed rules for such channel sharing required broadcasters to sign commitments to channel-share forever and also required them to strike sharing deals before the auction begins.

The official rules, which will be released within the next few months, will be much more flexible, Wheeler said. Specifically, the new rules will allow stations to strike sharing deals both before and after the auction has concluded. Parties will also be able to enter into channel sharing agreements for fixed terms.

"We like channel sharing so much, in fact, that we're proposing to allow channel sharing between stations regardless of whether they participate in the auction next year or not," he said, "although those that decide to channel share outside of the auction context will not be able to collect auction proceeds."

Preston Padden, the head of a coalition of broadcasters interested in participating in the auction, said he is encouraged by the FCC's willingness to adapt the auction rules based on input from the industry.

"By greatly liberalizing the channel sharing rules, Chairman Wheeler, the commissioners and the FCC staff demonstrate once again that they are wonderfully responsive to constructive broadcaster input into the auction rules," he said.

He added that he is confident that the FCC will also resolve other issues that broadcasters have with the auction.

The design of this auction is the most complicated the FCC has ever undertaken, and includes a reverse auction in which broadcasters will offer up spectrum they want to sell and a forward auction in which mobile broadband operators will purchase licenses. As part of the process, broadcasters will be paid for their participation in the auction. The broadcasters that don't participate in the auction will then be "repacked" or moved to channels that are grouped together in order to free up space for the mobile services to operate.

Smith said that how the FCC repacks or moves broadcasters not participating in the auction will be the trickiest part of the entire process. Congress has stipulated that $1.75 billion can be used to reimburse broadcasters who must move their channels as part of this process. Broadcasters say they are concerned the money will not cover the entire cost. And it is calling on the FCC to ensure the process is managed in such a way to ensure all broadcasters are reimbursed fully.

"Repacking goes right to the heart of the economic issue of this auction," he said. "That's going to be the really difficult piece."

Wheeler tried to reassure the audience that he has heard this concern as well.

"We have proposed procedures," he said, "to make the most effective and efficient use of the $1.75 billion that Congress authorized to reimburse stations for the costs of moving to their new channels."

Gordon Smith, head of the NAB, said he is also encouraged by the agency's responsiveness to the industry's concerns.

"Simplifying the rules will go a long way," he said.