Spectrum Auction Legislation Passes Senate Commerce Committee

With wireless Internet traffic expected to increase 26-fold over the next few years, the Senate Commerce Committee yesterday approved the Public Safety Spectrum and Wireless Innovation Act, sending the divisive legislation on to the full Senate for consideration. The bill further stokes the ongoing battle across industry sectors over how best to apportion spectrum and who should bear the burden of reallocation, addressing in one bill issues surrounding both the public safety D-Block spectrum and broadcast spectrum reallocation.

The cornerstone of the new legislation is the establishment of controversial “incentive auctions,” where television broadcasters and other licensees will voluntarily cede some of their existing spectrum inventory to the FCC in exchange for a share of the auction proceeds. The Act would also compensate broadcasters that retain their spectrum but agree to be “repacked” to adjacent channels, potentially freeing up new swaths of spectrum for public use. Auction income would be used to fund the construction and maintenance of a nationwide wireless broadband network dedicated to public safety services. Any surplus revenue obtained from the auctions would go to the U.S. Treasury targeted for deficit reduction. The Act further allocates 10 megahertz of spectrum known as the D-Block for the creation of the public safety broadband network and would permit public safety officials to lease capacity on their network subject to certain restrictions.

Lawmakers proposed nearly 100 amendments designed to address a number of unresolved issues present in the legislation, and the future of the legislation is uncertain. Critics contend that the D-Block spectrum should be auctioned to commercial broadband providers as required by current law. According to the Act’s detractors, commercial providers remain better equipped to rapidly develop wireless networks which could then be shared with public safety organizations. Experts have already voiced concerns that the financial strains placed on local governments will limit the funding to public service organizations necessary to build out broadband networks. Opponents of the bill noted that nearly $13 billion in federal funds and 100 megahertz of spectrum has already been allocated to public safety with no development of an interoperable network. By auctioning the D-Block, the FCC would give private industry the incentive to develop robust wireless networks, especially in rural areas.

Some industry observers question the government’s estimates of the revenue expected from the incentive auctions, arguing current valuations overestimate the amount of participating broadcasters and the value of available spectrum. Broadcasters and other spectrum holders also charge satellite television and wireless carriers with amassing large quantities of unused spectrum and have argued that Congress should require an inventory of current spectrum use before going forward with the incentive auction plan. Reports suggest that future wireless demands may be met through existing technology such as antennae designed to transmit signals more efficiently and small area “femtocell” networks, which can offload wireless network traffic to a wired network installed in a home or office. The FCC’s “repacking” plan could lead to a domino effect of interference issues as relocated channels interfere with stations in neighboring markets. Spectrum innovators have urged that TV White Spaces technologies, newly emerging unlicensed devices and networks that use vacant broadcast channels, would be foreclosed by the reallocation and repacking of broadcast spectrum. An amendment to the bill by Sen. Maria Cantwell (D-WA), which allows the use of auction funds to maintain portions of spectrum for unlicensed public use, is said to potentially address some of these concerns and drew praise from public interest groups. Many lawmakers and broadcasters have also argued that the voluntary incentive auctions will eventually transform into an FCC-led takeover of spectrum. Most politically damning, the bill has also been characterized as a “spending bill,” leading to potential issues with House Republicans, and it is also expected that various Senate Republicans will place holds on the legislation questioning its cost impact.

Despite opposition from a number of quarters, the White House praised Committee Chairman Sen. Jay Rockefeller (D-WV) and ranking member Sen. Kay Bailey Hutchinson (R-TX) for taking a preliminary step to satisfying the President’s pledge to expand wireless coverage to 98% of Americans as part of the National Wireless Initiative. The wireless industry similarly welcomed the bill, characterizing the incentive auction plan as “critical” to satisfying growing customer demand for wireless broadband. Some organizations, however, expressed concern that the Act fails to afford the FCC sufficient flexibility to efficiently manage the auctions.

Sen. Rockefeller hopes to speed the legislation to a vote in the Fall, prior to the tenth anniversary of the September 11th attacks.