FCC spectrum auction to fund payroll tax cut, public-safety network

February 17, 2012

Smartphone users could see a future of fewer dropped calls and zippier video and music downloads because of a government decision Friday to auction off a scarce resource: airwaves.

The massive sale of beachfront-property spectrum is expected to raise as much as $25 billion and help pay for a payroll tax cut. Providing the airwaves to private companies has the potential to enhance the services of existing wireless providers such as Sprint Nextel and Verizon Wireless, or even create new competitors.

The decision was well received by a wide array of parties, including television and radio firms who hold leases to most of these airwaves and could get a cut of the proceeds. The government cannot force these companies to sell, but it is offering $1.75 billion in aid to help them move broadcasts around and free up airwaves for the auction.

“This is going to be the largest block of spectrum made available to the public for mobile broadband purposes in the next few decades,” said Harold Furchtgott-Roth, a former member of the Federal Communications Commission. “Don’t see what else that is out there after this auction.”

Congress also agreed to use $7 billion from the auction to create a public-safety network for emergency first responders, which police and firefighters urgently called for after the Sept. 11, 2001, terrorist attacks.

“Today we made good on that overdue promise,” Vice President Joe Biden said in a statement. “First responders put their lives on the line to protect us every day, and the least we can do is ensure that they have the dedicated bandwidth they need to communicate with each other.”

But the government plan has many potential pitfalls. It could take years — as long as a decade — for consumers to feel the impact of the government’s spectrum push. And many are already experiencing higher monthly cellphone bills and frequent smartphone crashes in big cities because networks can’t handle the flood of Web traffic, e-mails and streaming videos.

The FCC will draft rules for the auction that could pick winners and losers among wireless carriers. If it decides to increase competition and block the biggest carriers, giants such as AT&T and Verizon Wireless are likely to protest to courts, analysts say.

“This could all take many years, and the FCC has never done this before,” said Richard Bennett, a senior fellow at the Information Technology and Innovation Foundation, a think tank. “So the total amount of spectrum that is available for auction is one thing and how much is actually auctioned off is completely a different matter.”

FCC Chairman Julius Gena­chowski has promised to bring more competition into the wireless industry. The government’s 2008 auction raised about $20 billion, and most of the airwaves were bought by Verizon and AT&T. Those companies are building out 4G LTE high-speed Internet networks from those airwaves.

In the upcoming auctions, Congress said anyone can participate. But experts said Genachowski may create rules that prevent AT&T and Verizon from dominating the sale. A spokesman for the chairman declined to comment on how it plans to proceed on auction rules.

“Parties are already arguing over what all this means,” said David Kaut, an analyst at Stifel Nicolaus.

The Obama administration hopes the sale of the airwaves will help fulfill its goal of extending high-speed Internet connections to the farthest reaches of the country, and create jobs in the process.

The airwaves for sale are particularly valuable because of their availability to travel miles and penetrate through thick walls. And it’s been difficult to obtain such airwaves, which, besides broadcasters, are also used by the Defense Department and un­licensed technology such as baby monitors and garage-door openers.

The FCC will have the laborious task of moving around some of these users of spectrum to other airwaves to prepare for the auction.

Cecilia Kang is a national technology reporter, writing about tech and Internet policies at the Federal Communications Commission and Federal Trade Commission and how regulations affect businesses and consumers.
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