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FCC plans broadcast airwaves auction to free up space for wireless services

FCC plans broadcast airwaves auction to free up space for wireless services
The complicated auction of airwaves has been described by FCC Chairman Tom Wheeler, above, has having “more moving parts than a Swiss watch.” It could fail if not enough broadcasters are willing to sell. (Chip Somodevilla / Getty Images)

Federal officials this week are expected to finalize a groundbreaking plan to entice some TV stations to give up their valuable airwaves to help address the exploding demand for mobile Internet access.

In turn, the Federal Communications Commission would auction off the rights to those airwaves to providers eager to offer more and faster wireless services.

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The goal is to produce winners all around: faster streaming and downloads for data-hungry consumers, more high-quality spectrum for wireless companies, cash for broadcasters from the auction and billions of dollars in licensing fees for the federal government to help reduce the budget deficit.

But there's a catch.

The complicated two-part auction, to be held in March, has never been tried before, and it could fail if not enough broadcasters are willing to sell. Congress has given the FCC only one shot to get it right.

The stakes are high as demand for wireless services increases and the best airwaves to carry them have been long held by broadcasters.

"Every new iPhone release pushes the boundary further," said Harold Feld, senior vice president at digital rights group Public Knowledge, which supports the auction initiative.

"As Scotty used to say on Star Trek, 'You cannot break the laws of physics, Captain.' Eventually you run out of capacity for mobile broadband," he said. "Since you can't create more of it, that means you've got to get it from somewhere."

The hope is that a potential payoff of hundreds of millions of dollars will persuade TV station owners, particularly those that are struggling to make a profit, to abandon their audience and sell their valuable spectrum and go off the air.

In some cases, a broadcaster might opt to sell its spectrum and then strike a deal to stay on the air by sharing a channel with another broadcaster, though that would limit the ability of both to offer multiple over-the-air digital streams. Or a broadcaster could get less money by moving to a less desirable channel that would limit over-the-air viewership.

The effort to get more spectrum from broadcasters could have particularly significant ramifications in Los Angeles. As part of the auction, the FCC would eliminate most unused channels and squeeze broadcasters into a smaller band of the airwaves.

The region's unique geography might make it difficult to squeeze all the TV stations wishing to stay on the air into the remaining broadcast spectrum.

A proposal by the FCC, to be voted on Thursday, could lead to a TV station being put into a portion of the airwaves that could lead to interference problems for some broadcasters covering live events — as well as for some users of wireless services.

It's one of the reasons the auction has been described by FCC Chairman Tom Wheeler has having "more moving parts than a Swiss watch."

On the surface, the idea of the so-called broadcast incentive auction is simple: entice individual TV stations to surrender their slice of the airwaves by offering to share some of the money the federal government gets from the sale.

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If it works, the incentive auction could be a model for allocating rights to water and other scarce resources, said Phil Weiser, executive director of the Silicon Flatirons Center for Law, Technology, and Entrepreneurship at the University of Colorado.

"It's very important for us as a country to get this right," he said. "And if we do, the world is watching and will follow us."

Broadcast airwaves are the highest quality, which is why TV stations got them decades ago when there were few other uses.

That low-frequency spectrum carries signals deeper into buildings, making it desirable in cities, and farther, providing better coverage in rural areas.

Broadcasters initially were resistant when Congress voted in 2012 to authorize a one-time incentive auction.

But the idea has picked up support, particularly after an FCC airwaves auction that ended in January demonstrated strong demand and brought in a record $44.9 billion.

The Congressional Budget Office estimates the broadcast auction could raise as much as $40 billion for the federal government.

A full-power TV station in L.A. could receive as much as $570 million for its spectrum in the auction, according to an FCC estimate.

"It's giving broadcasters a once-in-a-lifetime opportunity to monetize their spectrum," said Preston Padden, a former Walt Disney Co. executive who heads a coalition of 87 TV stations interested in selling their spectrum at auction under the right circumstances. "It's a golden opportunity."

Members of the group, called the Expanding Opportunities for Broadcasters Coalition, choose to remain anonymous, he said. But, he added, several are in the key markets of Los Angeles and New York.

Fox Television Stations Inc., Univision Communications Inc., Ion Media Networks Inc. and Tribune Media Co., which combined own nearly 200 stations, have publicly told the FCC that they're interested in participating in the auction.

But successfully pulling off the auction will be extremely tricky.

The FCC must pay enough for the airwaves in the first part of the auction to persuade broadcasters to sell — but not more than wireless companies would bid to win the right to those airwaves in the second part of the auction.

Adding to the complications, the FCC wants to use the auction to improve competition among wireless carriers. Right now, AT&T Inc. and Verizon Communications Inc. control most of the prime wireless spectrum.

So Wheeler, a Democrat, wants to reserve some of the airwaves for bidding only by other providers, such as T-Mobile and Sprint Nextel Corp. But that move could limit how much money the auction raises, and Republicans have criticized the approach.

On top of that, the FCC would reorganize the broadcast airwaves to reduce their overall size and free up more spectrum for wireless services.

Moving around all those channels could cost as much as $3 billion for new transmission towers and other equipment. Broadcasters are concerned the government has set aside only $1.75 billion to pay for it — potentially leaving TV stations to cover the rest.

To free up more spectrum for auction, Wheeler has proposed to move a TV station if necessary in Los Angeles and several markets in the Northeast and near the Canadian border into a slice of spectrum reserved for wireless microphones, Wi-Fi and mobile downloads.

Broadcasters, public interest groups and technology companies such as Google Inc. and Microsoft Corp. oppose that plan, and several lawmakers have warned the FCC against taking the step.

It's just one of many complexities that make the auction's fate unclear.

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"Everybody assumes because the wireless carriers have a lot of demand they will come with very large checkbooks and there will be enough money to incent the broadcasters to sell," said Patrick McFadden, who handles spectrum policy for the National Assn. of Broadcasters.

"But none of us know how many broadcasters are actually going to participate," he added. "Everybody wants it to work, but there's no guarantee it will succeed."

Twitter: @jimpuzzanghera

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