Every Federal Communications Commission Chairman has one or two legacy-defining moments in his tenure. For Clinton FCC Chair (and PK Board member) Reed Hundt, it was pushing through the Children's Television programming rules and starting the transition to Digital TV. For the first George W. Bush Chair, Michael Powell, it was the media ownership battles and the adoption of the “four freedoms” that set out the Commission's expectation of consumers' Internet rights.
Current FCC Chairman Kevin Martin will be facing one of those moments in the coming weeks. On Wednesday, the FCC is expected to adopt an order that will begin to set the terms of the most valuable spectrum auction we have yet seen, and likely the last significant auction in our lifetimes. As I wrote about previously, this auction involves 60 MHz of spectrum that broadcasters are to return as part of the digital TV transition. The location (in the 700 MHz band) and characteristics of this spectrum make it ideal for the development of a third, nationwide broadband provider that could compete with the powerful broadband duopoly: telephone and cable companies. Indeed, Congress has made it clear that its expectation is that this auction will lead to the creation of a third broadband “pipe.” But unless the FCC takes a very different course than it has in past auctions, this spectrum will most likely land in the hands of those very incumbents. The result is that instead of competition, the public will probably receive no more than so-called “4G” wireless services, which will be yet another service consumers will have to purchase in addition to their cellphone and broadband services.
The Public Interest Spectrum Coalition, of which we are a part, has asked the Commission for a number of “auction rules” (which determine who can bid and what the rules for bidding will be) and “service rules” (which determine the terms by which the winning bidders will operate) that would govern the 700 Mhz auction. The most important of these include:
Auction Rules
• Anonymous and Package Bidding. Anonymous bidding ensures that incumbents cannot game the system by signaling to other bidders. Media Access Project has just released two comprehensive reports demonstrating how big players gamed the recent auction for Advanced Wireless Services. They can be found here (pdf) and here (pdf). Package bidding allows bidders to buy packages of licenses, rather than individual licenses, which, if done properly, can also help new entrants win licenses.
• Anti-warehousing protections. These protections would provide incentives to license winners to actually build out their spectrum rather than leave it lying fallow simply so that others cannot use it. My USC colleague Simon Wilkie has written a fine report (pdf) demonstrating how incumbent broadband providers warehouse spectrum.
• Limitations on incumbent participation and/or “spectrum caps.” These are to ensure that competitors have an opportunity to win at auction.
Service Rules
• Open Access. The coalition is asking that licensees for half (30 MHz) of the spectrum be required to make that spectrum available to third parties on a wholesale basis. This is similar to a proposal by Frontline Wireless, a company that has Hundt, Former Netscape CEO James Barksdale and Venture Capitalist John Doerr as investors. Frontline is asking for 10 MHz to be licensed as open access. While we support Frontline, we do not think that 10 MHz of open access spectrum is enough for a third broadband competitor to develop.
• Non-Discrimination/Network Neutrality. We are asking that all licensees operate their networks in a manner that “protects the consumer's right to use any equipment, content, application or service on a non-discriminatory basis without interference from the network provider.”
If you want to read the coalition's filings, they are here, here and here.
We understand that on Wednesday, the FCC will make only a few substantive decisions, and instead ask for public comment on a lot more questions concerning the auction and service rules. Right now, our coalition simply wants our proposals to be included in those questions. Regardless of what an individual commissioner thinks of the substance of our proposals, we would like the public to have an opportunity to comment on them. This is easy for the FCC to do, and allows us the opportunity to educate policymakers and the public about the importance of this auction to the future of broadband competition.
As a closing thought, let me take you back a decade to 1997. That was when Congress and the FCC gave broadcasters the spectrum at issue here to transition to digital TV. That spectrum was given to broadcasters, at their insistence, without any payment or imposition of public interest obligations. Indeed, I spent 10 months of my life in 1997-1998 on a Presidential Advisory Committee that made recommendations for such obligations, but they remain in the bowels of the FCC. Although this spectrum giveaway has been characterized by some as only a “loan,” it has been a 10-year, interest free loan from which the public has gotten no return. By adopting auction and service rules that ensure a third broadband competitor, the FCC could give the public a return on its investment. And the Kevin Martin FCC will have left a positive lasting legacy.