On November 12, members of the Federal Communications Bar Association (FCBA) gathered in Washington, DC, to commemorate 25 years of spectrum auctions at the Federal Communications Commission (FCC). Hosted at Hogan Lovells LLP, the event featured current and former FCC staff members and industry lawyers, who discussed the history and future of spectrum auctions. The FCC’s leadership and strong record of innovation in administering spectrum auctions was a recurrent theme of the program.
The Beginning of Spectrum Auctions
The first panel focused on the early days of spectrum auctions at the Commission. Mike Altschul, former General Counsel for wireless industry trade association CTIA, offered a brief history of spectrum policy and regulation, beginning with the Radio Act of 1912 and ending with the Omnibus Budget Reconciliation Act of 1993, which authorized the Commission to use competitive bidding to award spectrum licenses. Evan Kwerel, Senior Economic Advisor in the FCC’s Office of Economics and Analytics (OEA), then explained the economic benefits of auctions (a swifter license assignment process and a reduction in windfalls to parties that previously would acquire licenses via lottery or some other means with no intention of providing service) and described the many innovative auction formats the FCC has designed over the years. The simultaneous multiple round auction format, for example, is now used worldwide. Michele Farquhar, partner at Hogan Lovells and former head of the FCC’s Wireless Telecommunications Bureau, noted that the FCC’s enthusiastic embrace of spectrum auctions fueled innovation and the rapid growth of the wireless industry, even as the Commission struggled at times to balance conflicting policy priorities. She also highlighted seminal court decisions addressing the FCC’s auction authority and efforts to encourage entry by smaller and rural bidders.
Lessons Learned over the 25 Years
During the second session, the panelists focused on lessons learned during the past quarter century. Margaret Wiener, Chief of the FCC’s Auctions Division, described a process of ongoing evolution in response to changing statutory authorizations and requirements and technological progress. She also described a culture of continuous improvement and a commitment to increasing access. Jonathan Cohen, a partner at the law firm of Wilkinson Barker Knauer, who worked on the first FCC spectrum auctions, offered practical lessons from the practitioner’s perspective. Chief among these were the importance of knowing the bidding rules for the auction, the service rules for the spectrum, and the contours of the prohibited communications rule.
Current Innovations in Auction Design
The event featured closing remarks by Giulia McHenry, Acting Chief of the FCC’s Office of Economics and Analytics. She described the Commission’s strategic vision in establishing the OEA to expand and better integrate the use of economics and data into rulemakings and proceedings and to better position the FCC’s Auctions Division to support the use of auctions as an allocation or assignment system for FCC benefits throughout the FCC. She emphasized that the use of auctions is no longer limited to the FCC’s Wireless Telecommunications Bureau or for use in assigning licenses, but is now integral to the FCC’s core mission across a wide variety of programs and services.
McHenry said that the current agenda of OEA and the Auctions Division is to continue to release spectrum at a steady pace, consistent with the Commission’s 5G FAST Plan. As she described the upcoming auction proceedings at the FCC, she highlighted the innovative approaches the FCC has devised to address the unique characteristics of each spectrum band auctioned.
- Auction 103 – The FCC will again use its incentive auction authority, this time to reorganize the 39 GHz band. The Commission will also introduce an innovative voucher system to compensate incumbents and allow them to purchase flexible use spectrum.
- Auction 105 – The Commission will auction Priority Access Licenses (PALs) that will depend on novel dynamic spectrum sharing to allocate spectrum between Department of Defense incumbents and PAL licensees. The Commission is also exploring innovations in the auction design, including quasi-package bidding and modifications to the bidding activity rules.
- 5 GHz Band – The FCC has revised the band rules to allow flexible use spectrum and is offering a Rural Tribal Window, a unique opportunity that will allow Tribes in rural areas to directly access unassigned spectrum over their Tribal lands.
The Challenges Ahead
McHenry used the ongoing discussions over the future of the C-Band as an illustrative example of the challenges facing the FCC’s efforts to release spectrum for 5G. There is no more “greenfield” spectrum. The Commission will increasingly have to find creative ways to encourage incumbents to relinquish their spectrum so it can be repurposed for more productive uses. She reiterated the Commission’s four priorities regarding the C-Band:
- To make available a significant amount of spectrum;
- To make the spectrum available quickly;
- To generate a significant amount of revenue for the federal treasury; and
- To ensure continuation of services currently delivered by the C-Band.
In considering solutions for the C-Band and other bands that require reallocation, McHenry urged stakeholders across the industry to be open to exploring new incentives and auction formats, as well as new mechanisms for sharing between incumbents and new uses. She also reminded attendees that the spectrum landscape will continue to change as the highest value uses continue to evolve.