Levin: TV Spectrum Auctions Likely Doomed

An FCC incentive auction of  broadcast TV spectrum will likely "fail" if, as expected, Congress adopts Republican House authorizing legislation, according to Blair Levin, the chief architect of the FCC’s 2010 National Broadband Plan that first proposed the auction.

The legislation, authored by House Communications Subcommittee Chairman Greg Walden (R-Ore.), would grant the FCC authority to conduct incentive auctions — auctions in which proceeds are shared with broadcasters who voluntarily give up their spectrum.

But it also contains provisions designed to protect broadcasters who hang on to their spectrum. And they are what has Levin worried.

"The legislation ties the FCC’s hands in a variety of ways," said Levin, who left the FCC following release of the broadband plan and is now attached to the Aspen Institute. "It opens it up to litigation risk, which then, in conjunction with the other handcuffs, makes it difficult to pull off a successful auction.

"The nature of the bill dramatically increases the probability that there will be less spectrum recovered and less money for the [U.S.] Treasury."

Levin and FCC Chairman Julius Genachowski have been pushing for the incentive auction authority since 2009, believing that much TV spectrum is underutilized and it would be best to auction it off to wireless broadband carriers.

Congress returns later this month and is expected to adopt the Walden legislation as part of a "must-pass" legislative package to extend payroll tax cuts and unemployment benefits.

"I think it is entirely possible for spectrum to pass either at the end of January or in February,” says a broadcast industry lobbyist.

Although broadcasters would get a cut of incentive auction proceeds, the Walden bill intends for most of the revenue to go to the federal treasury and to help fund a nationwide communications network for first responders.

The Walden bill would also require the FCC to make "all reasonable efforts to preserve … the coverage area and population served’’ of broadcasters who eschew the incentive auction.

It prevents any forced relocation to an inferior channel assignment and makes clear that this is a one-time auction with a sunset on the FCC’s authority to repurpose broadcast spectrum.

And the measure would set aside $3 billion to compensate broadcasters for costs associated with "repacking" — the wholesale switching of channels that would occur after the FCC identifies the spectrum it will have to auction and consolidates it into large swatches that can be more easily auctioned.

Such provisions were championed by the National Association of Broadcasters, which from the start has been wary of incentive auctions and how they might impact the broadcasting business.

But Levin said that the protections undermine the intent of the original incentive auction proposal, which was to produce more spectrum for wireless broadband.

Levin is principally concerned about the "reasonable efforts" language, which, he said, "definitely makes the FCC more vulnerable to litigation. Nobody wants to go to an auction when there is the threat of a judge anywhere having the ability of holding it up. I believe a good lawyer could find a way to get the question of  whether the FCC took all reasonable efforts in front of a judge,” he said.

Moreover, Levin said he thinks some broadcasters will use the threat of litigation to their advantage. "If you are designing the auction and a big law firm shows up and says, 'If you don’t take care of my single broadcaster, we are going to find a way to get to court.' That’s a real threat.’’

Levin also said he believes the broadcaster compensation fund is too large and the limit on the number of auctions in unnecessary. "It may be that the FCC determines that it should be a one-time auction, but it should not be decided today by Congress,” he said.

The NAB was not interested in debating the merits of the bill with Levin.

"NAB wishes Blair a Happy New Year and respectfully declines comment,’’ said Dennis Wharton, NAB’s executive vice president for communications.

However, a GOP House Commerce Committee aide accepted the challenge. He said Levin's concerns were overblown.

"We’ve worked with the FCC every step of the way," the aide said. "They don’t seem too worried about these provisions."

"And the CBO [Congressional Budget Office] doesn’t seem terribly worried about them," the aide added. "They think we are going to net $16.5 billion from the auctions. Clearly they still believe that there’s going to be a successful auction.

"Everything the FCC does is subject to some challenge,” he said. "This language is no different than language in almost every piece of legislation. Every piece of legislation says the FCC has to make sure something is reasonable. It’s a balanced way of saying don’t go too far but do your due diligence.

"If anything, I think the broadcasters become more comfortable and less likely to fight this [in court] because they have reasonable expectations of being protected, that we aren't just going to turn them off."