On 28 September 2012, the Federal Communications Commission announced the opening of a rule making proceeding that will implement procedures for the spectrum incentive auctions described in sections 6402 and 6403 of the Jobs Act. The FCC describes the incentive auctions as market-based, but based on the law itself, I can see nothing market-based about these auctions.
For one thing there are the false signals that will be sent from a mandated reverse auction. The reverse auction gives broadcast TV license holders a chance to announce the prices at which they may be willing to let their broadcast spectrum be made available at. The spectrum will then be made available for competitive bidding by wireless carriers.
This is where I have a problem with Congress and the law. The reverse auction sends the market for spectrum licenses the wrong signals. Once a carrier engages the FCC in a competitive bid for spectrum, there will be a risk of overbidding for the precious resource. There is nothing in the law that says the competitive bidding price offered by a wireless carrier should not be allowed to exceed the price sought by the TV broadcaster.
The only way to claim a market-based bidding process is to allow wireless carrier and TV broadcaster to communicate and negotiate a price for selling and acquiring spectrum. Congress and the FCC should not run the risk of inefficient prices eventually sliding into consumer prices.