Incentive Auction Overview

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What are Spectrum Incentive Auctions?

Incentive auctions are a voluntary, market-based means of repurposing spectrum by encouraging licensees to voluntarily relinquish spectrum usage rights in exchange for a share of the proceeds from an auction of new licenses to use the repurposed spectrum.

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Broadcast Incentive Auction: From Idea to Law

“Congress should consider expressly expanding the FCC’s authority to enable it to conduct incentive auctions in which incumbent licensees may relinquish rights in spectrum assignments to other parties or to the FCC.”

“As recommended in the FCC’s National Broadband Plan, legislation is needed to allow the FCC to conduct “voluntary incentive auctions” that enable current spectrum holders to realize a portion of auction revenues if they choose to participate.”

“…the Commission may encourage a licensee to relinquish voluntarily some or all of its licensed spectrum usage rights in order to permit the assignment of new initial licenses subject to flexible-use service rules by sharing with such licensee a portion…of the proceeds…from the use of a competitive bidding system...”

National Broadband Plan

(Mar. 2010)

President’s Nat’l Wireless Initiative

(Feb. 2011)

Spectrum Act (Feb. 2012)

Notice of Proposed

Rulemaking (Oct. 2012)

“The FCC issued a Notice of Proposed Rulemaking on October 2, 2012, which launches the process which will leverage the collective expertise of the leading authorities in telecommunications, computer science, engineering, economics and law, as well as members of the public at large, to craft the best possible incentive auction.”

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Broadcast Incentive Auction: Objectives

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Broadcast Incentive Auction: Design Goals

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Broadcast Incentive Auction: Key Components

Reverse AuctionReverse Auction

Forward AuctionForward Auction

Broadcasters•Offer to relinquish spectrum usage rights

Broadcasters•Offer to relinquish spectrum usage rights

Mobile Broadband Providers

•Offer to purchase spectrum licenses

Mobile Broadband Providers

•Offer to purchase spectrum licenses

IntegrationIntegration

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1. Broadcaster Options

2. Reverse Auction Design

3. Repacking of Broadcast Stations

4. Forward Auction Design

5. 600 MHz Band Plan

6. Integration of Forward and Reverse Auctions

7. Unlicensed Use/TV Whitespaces

Auction Design Considerations

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Three Basic Design Elements

• The NPRM discusses three basic auction design elements for both the Reverse and Forward Auctions as well as the assignment stage of the Forward Auction1. Bid Collection2. Assignment / Winner Determination3. Determining Payment Amounts

• The NPRM includes Appendix C, prepared by auction experts proposing one possible auction design

• The Commission has also released a Supplement to Appendix C, prepared by its auction experts, that provides additional details about several of the Forward Auction proposals discussed in the NPRM

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Incentive Auction Decision Tree

Reverse Auction

Forward Auction

Maximum Opening Bids

Minimum Opening Bids

Initialspectrum clearing target (# channels)

Initialspectrum clearing target (# channels)

No

Yes

Close AuctionClose

Auction

Reduce spectrum clearing target,

continue auctions

Reduce spectrum clearing target,

continue auctions

Ascending clock stopping rule: Stops for a license category when there is no excess demand for that category. (The stage ends when all clocks have stopped.) 

Reverse auction: Winning bidders paid last offer they accepted, channels assigned to others

Forward auction: Winning bidders go to assignment stage to be assigned specific frequencies

Closing Rule Met?

Descending clock stopping rule: Stops for a station when it either has exited or must be cleared to achieve the clearing target. (The stage ends when all clocks have stopped.

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Eligibility for Participation in the Reverse Auction

Who is eligible?

• Spectrum Act authorizes full power and Class A stations only– Primary interference protection

– Ceded in exchange for auction proceeds

Who is not eligible?

• Station whose license is expired, cancelled or revoked• LPTV and translator stations

– Interference protection is secondary to full power and Class A stations, and new wireless services

Three ways to participate: Go off air

Channel share

Move from UHF to VHF

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Participate and Stay on the Air: Channel-Sharing

Stations share single transmitter and antenna

• Pairing through private negotiations• Capital infusion from contribution of

spectrum• OpEx and CapEx savings

Each station is licensed portion of 6-megahertz channel

• Two stations on a channel share 19.4 Mbps• Can allocate bandwidth dynamically as

needed

Each station remains a primary FCC licensee

• Call letters, channel guide number (PSIP), other indicia of station identity remain

• Includes all current licensee rights (e.g., must carry)

Current: 12 MHz for Broadcasting

6 MHz

Channel 17

6 MHz

WXXX

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WYYY

Channel

6 MHz

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Former 17

Former 21

Potential: 6 MHz for Broadcasting 6 MHz for Auction

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Participate and Stay on the Air: UHF to VHF

Station contributes a UHF channel in exchange for auction proceeds and the promise of a VHF channel

Retain 6 megahertz

Can still multicast

Retain must-carry rights

Coverage area may have more interference

Mobile broadcast more difficult

Current: 6 MHz in UHF

Future: 6 MHz in VHF

Overview of Repacking and Interference Issues

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Repacking

FCC is looking to recover contiguous blocks of spectrum (contiguous channels) on a nationwide or market-wide basis

Broadcast service will continue after the auction:

–Stations not participating

–Stations not purchased in the auction

Stations remaining on the air will be repacked into channels remaining for TV use

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Legislative Mandates and FCC Goals

• “the Commission shall make all reasonable efforts

to preserve, as of [February 22, 2012], the coverage area and population served of each broadcast television licensee, as determined using the methodology described in OET Bulletin 69”

• Transition expeditiously to:o minimize viewer disruptiono Make recovered spectrum available sooner

• Minimize channel change requests

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What is OET-69 ?

Interfering Station

B

Green = coverageYellow = no coverageRed = Interference

Green = coverageYellow = no coverageRed = Interference

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Effect of Repacking

2121 5050

Potential for service loss from co-channel interference

2121

Service POP A (New)

Service POP A (New)

Station on Ch 50

receives new

allotment on Ch 21

ChannelChange

Service Impacts Service

POP A

(Old)

Service POP A

(Old)

Service POP B

(Old)

Service POP B

(Old)

Interference (POP C)

New interference must not reduce population coverage by more than 0.5%

2121

Service POP B (New)

Service POP B (New)

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Interference Protection Constraints

• Operating U.S. Stations (Full-power and Class A) as of February 22, 2012

• Land Mobile operations on UHF television channels• Protected television stations and allotments in

Canada and Mexico near the common border respect international commitments

• Radio Astronomy and medical telemetry• Offshore Radiotelephone Service

Reconfiguring the UHF Band – Wireless Band Plan

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Incentive Auction NPRM

• Flexible framework rather than fixed band plan– Amount of spectrum not known until conclusion of auction, depends on final results of

both reverse and forward auctions

• Generic 5 MHz blocks– Location not known, so must promote fungibility, including the use of guard bands

• Building blocks– Bidders bid on one or more building blocks– Mechanism to contiguously assign a winner’s blocks in a license area

• Market variation– Allow limited variation in band plans across areas– May increase amount of spectrum returned by preventing border markets or other

markets with poor clearing from limiting nationwide clearing

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Geographic Exclusions

• Market variation means that some frequencies have both TV and wireless• These services need to be geographically separated, that is, wireless can

only be auctioned at a sufficient separation from TV• The areas in which wireless can be offered based on interference

calculations will not necessarily align with license areas such as EAs• These exclusions will apply only to the blocks that are not cleared

nationwide• Level of coordination with Canadian and Mexican TV stations has a major

effect on the extent of geographic exclusions• How much of a license area should be clear to be auctioned?• Can bidders specify how exclusions impact their bid for an area?

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Broadcast Incentive Auction: Process

Rulemaking Pre-Auction Auction Post-Auction

Bidding &

RepackingPayments LicensingNPRM

Stakeholder Input

Report & Order

Stakeholder Input & Final Procedures

Application to Participate

Mock Auction

Incentive Auction Process Timeline

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