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Administrative pricing for spectrum not a good idea

The Digital Policy Institute at Ball State University just completed a webinar on the broadcast television reverse spectrum auction that the Federal Communications Commission will hopefully have rules promulgated for. Wireless carriers have been on edge about the uncertainty surrounding the rulemaking for the auctions. The scuttlebutt out of the webinar is that former acting chairman Mignon Clyburn was able to get out a draft order that is currently being circulated. It is speculated that Ms. Clyburn intended to have rules drafted by the end of the year and ready for 2014. Again, this is all speculation, but would add to her legacy if it were true.

Meanwhile, carriers have been expressing concerns about the latest proposal by T-Mobile to score television stations on a market-by-market basis. The scoring would take into account relative values of low-band and high-band spectrum and the population covered.

Scoring a television station market as low means less revenue for that station from the auction. If the revenue is lower than what the station determines is the value for its license, there may be a disincentive to participate in the auction. Result: less access to needed spectrum as consumers drive continued demand for mobile devices.

This restriction is as bad as limiting how much spectrum AT&T and Verizon can bid for. It amounts to “administrative pricing”, a term that came out of today’s webinar. Should an administrative agency determine what the value or price is for a swath of spectrum or should that be left up to a market-based auction process as intended by Congress? Even with a nine percent approval rating, Congress has this one right.

Administrative pricing means further delay to get to a conclusion on price that will not reflect the actual market participant’s desires; their ability and willingness to demand and supply licenses. How long would we have to wait on an order from the FCC that declares the appropriate value of spectrum while technology and mobile device demand drives up the value of the spectrum? Let’s not pretend that there is anything dynamic about FCC decision making. It is mostly static and does not blend well with the dynamism that we see in a competitive wireless market.

Administrative pricing should be avoided.

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Jamal Simmons adds to argument as to why Congress made right call on auction flexibility

Posted February 20th, 2012 in Congress, spectrum auction and tagged , by Alton Drew

Scale. Scale. Scale. Jamal Simmons hits it on the nail head in his blog post on The Podium last Friday. If the national broadband plan to get broadband into unserved households is to have a chance, it means that consumers will need reliable access. Reliability encourages adoption, and greater adoption means a more valuable network for both the consumer and producer. Allowing AT&T and Verizon to bid was the correct move by Congress.

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Payroll extension and spectrum auctions don’t mix

The Wall Street Journal reported today that some lawmakers would like to use proceeds from spectrum auctions to pay for portions of the payroll tax extension package. They would like to see some of the bid money going to offsetting the renewal of unemployment benefits and upward adjustments Medicare payments to health care providers.

The irony of the proposal is that some of these same lawmakers wish to draft legislation that would keep large wireless carriers such as AT&T and Verizon from participating in volunteer incentive auctions where carriers could bid on spectrum licenses given up by broadcasters. Keeping out the large carriers poses two problems.

First, like I’ve blogged about before, keeping out large carriers reduces the chance that spectrum is being put to its best use. Carriers willing and able to pay premium cash for the licenses would be left out.

Second, if you leave out the big guys with the deeper pockets, it means less money being used to offset Medicare payments and jobless benefits.

The notion that Congress would use these monies to fund welfare programs is not sound. Congress, who should be well aware of the limited availability of spectrum, should instead let these funds stay with the Federal Communications Commission. These funds could be used to leverage incentives for deploying more broadband infrastructure, a much better approach to growing the economy than funding jobless benefits.