AT&T Won't Sit Out Incentive Auction; Auction Task Force Examining DRP, Impairment

LAS VEGAS -- Despite its large outlay in the AWS-3 auction, AT&T will participate in the 600 MHz auction, said AT&T Vice President Federal Regulatory Joan Marsh at a panel on the TV incentive auction at the NAB Show Monday. “AT&T has never sat out a major auction, we won’t sit out this one,” Marsh said. That affirms predictions by Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden, who also spoke on the auction at multiple panels Monday.

The incentive auction will draw huge participation from both wireless companies and broadcasters and collect $84 billion, Padden said. Padden, Marsh, NAB General Counsel Rick Kaplan and Matthew Berry, an aide to FCC Commissioner Ajit Pai, discussed dynamic reserve pricing and the AWS-3 auction at a session Monday, while the Incentive Auction Task Force’s Vice Chair Howard Symons spoke at a session Tuesday. Commissioner Mike O’Rielly spoke at both events.

The industry “needs to be careful not to overestimate” the value of 600 MHz spectrum because of the AWS-3 auction, O’Rielly cautioned shortly before Padden’s auction prediction. AWS- 3 “may have inflated expectations,” he said. Though the low band spectrum of the incentive auction was previously seen as being especially desirable, the AWS-3 auction's sweeping success has exploded that perception, Marsh said. “We paid 18 billion for mid band,” Marsh said. It’s dangerous to try to use the AWS-3 auction as a predictor of the incentive auction, Berry said. Before the AWS-3 auction, predictions of how it would go “were all wrong,” he said. The incentive auction should be conducted with caution, and procedures that might discourage participation should be eliminated, Berry said.

Marsh, Kaplan, Berry and Padden all agreed that the auction’s dynamic reserve pricing scheme (DRP) is one such procedure that should be removed from the auction plan. “There’s something here for everyone to hate,” Marsh said. AT&T opposes DRP because it leads to partially impaired wireless spectrum. Spectrum impaired by a broadcast station has no prospects for being eventually cleared, Marsh said. Spectrum impaired because of cross-border interference from Canada or Mexico could eventually be cleared by policy changes in those countries, but that’s not the case for spectrum shared with a broadcaster, she said. Though the auction rules suggest a 20 percent threshold for how badly spectrum sold to wireless companies can be impaired, the rules offer no justification for that figure, O’Rielly said. Impairment is “a natural outflow of not having foreknowledge of participation,” Symons said.

“This is a scheme to pay broadcasters less than market price,” Berry said of DRP. “I have not met one person outside the FCC who thinks it makes any sense.” The opposition to DRP is so universal that it’s likely the FCC will change it, Kaplan said. “I hope we abandon it,” said Berry. O’Rielly also said the commission should eliminate DRP. The pricing scheme is intended to prevent overly high prices being paid to “holdout” broadcasters that occupy strategic chunks of spectrum, Symons said Tuesday. He agreed with DRP’s opponents that comments against DRP had been “robust” and said the task force is considering the matter and its effect on broadcaster participation.

The auction is likely to be held in 2016, as FCC Chairman Tom Wheeler has said, unless it's slowed by litigation, said Padden. Along with the NAB’s court challenge -- which is still awaiting a decision in the U.S. Court of Appeals for the D.C. Circuit -- the auction could face court battles from wireless carriers unhappy about reserve spectrum, low-power TV licensees or undervalued broadcasters, Padden said.