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Sen. Snowe Warns Genachowski on “One-Sided” Spectrum Auction Plan

By | November 17, 2011
      [Satellite News 11-17-11] U.S. Federal Communication Commission (FCC) Julius Genachowski’s plan to raise $25 billion in potential deficit reduction through spectrum incentive auctions during the next ten years has come under criticism from one of the plan’s original supporting voices in the U.S. Senate.
         In a letter to the FCC published Nov. 17, Sen. Olympia Snowe (R-Maine) told Genachowski that she felt certain elements of his plan were over-ambitious in terms of their ability to cut federal deficit costs. “Unfortunately, there has been a disproportionate amount of focus on incentive auctions as being the principal elixir to addressing the industry’s need for spectrum while other more important mechanisms, like fostering greater technical innovation and implementing more robust spectrum management, seem to be discussed more like footnotes,” Snowe said in the letter.
         In March of 2011, Snowe and Senate Communications Subcommittee Chairman Sen. John Kerry (D-Mass.) co-sponsored the Reforming Airwaves by Developing Incentives and Opportunistic Sharing (RADIOS) Act that authorizes incentive auctions and requires the FCC and U.S. National Telecommunications and Information Administration (NTIA) to conduct a spectrum inventory. Under the act, the FCC can determine how much to compensate broadcasters for giving up their spectrum in order to prevent speculation in re-issuing licenses.
         U.S. broadcasters have argued the FCC should have first inventoried the spectrum it had before concluding that it needed to reclaim 120 Mhz more from broadcasters. Kerry and Snowe agreed, saying that the bill would determine actual use and occupancy rates for the spectrum to provide its relative value to the public.
         In a recent speech at the U.S. Chamber of Commerce, Genachowski emphasized his $25 billion target figure as its potential impact on deficit reduction. The Joint Select Committee on Deficit Reduction, which was created by Congress after this past summer’s debt ceiling crisis, is charged with finding $1.5 trillion in debt saving over the same period. Snowe reminded Genachowski that the possible funds raised by his incentive auctions would only account for 1.7 percent of the committee’s goal.
         Some special interest groups had produced even more ambitious figures in terms of the auction’s ability to generate profit. Earlier this year, Navigant Analyst Jeffrey Eisenach sharply criticized a research estimate submitted by the CTIA Wireless Association (CTIA) and the Consumer Electronics Association (CEA) to the FCC that claimed incentive auctions for 120 MHz of broadcast spectrum would generate gross revenues of at least $36 billion and net revenues of $33 billion to $34 billion.
         Eisenach’s argument was not so much concerned on the dollar figure presented in the CEA/CTIA study, but rather the lack of available data necessary to calculate revenue returns on spectrum auctions. “The revenues that might be produced by such an auction are, at present, unknowable with any degree of precision,” Eisenach told Satellite News. “No one has proposed a specific design for an incentive auction, nor prescribed the nature or magnitude of the incentives that would be offered to current spectrum licensees to cause them to voluntarily proffer their spectrum.”
         Eisenach said that the analyst community has yet to see any solid ground for placing dollar values on spectrum auction proceeds. ““Even if the precise design of the auction were known, and the ‘split’ between the government and current licensees had been decided, the history of spectrum auctions teaches one primary lesson — that history is a poor guide when it comes to spectrum auctions. Thus, the hedonic price regression model employed by CTIA/CEA, which is based on data from prior auctions, is imprecise.”
         On the technical side of the argument, Snowe highlighted innovation and more efficient spectrum management as alternatives to free up more airwaves for wireless devices and prevent interference issues. “I believe one of the problems contributing to the recurrence of these interference disputes is the lack of clear receiver performance guidelines,” said Snowe in her letter to the FCC. “The RADIOS ACT, which Senator Kerry and I introduced includes provisions addressing these important issues. The legislation provides more spectral efficiency and interference immunity of device receivers and tasks the FCC and NTIA to conduct an interference sensing study to provide greater predictability in the determination of harmful interference.”
         Snowe added that the FCC must address issues like harmful interference and receiver performance, as they have become a critical focus for certain companies in the private sector. “The escalating demand for this finite resource presents significant challenges,” she said. “Disputes among licensees regarding potential harmful interference are occurring with greater frequency. Just in the past few years, interference disputes have arisen between various parties such as MVDDS/DBS, AWS-1/AWS-3, WCS/SDARS and more recently with LightSquared and GPS.” 
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