FCC Steps Toward Auction to Free Airwaves for Smartphones

The Federal Communications Commission today moved toward selling television airwaves for use by smartphones, a step intended to raise $15 billion and help meet soaring demand for wireless computing.

The agency on a 5-0 vote approved a document that asks about the best ways to conduct auctions of frequencies that would be voluntarily surrendered by TV stations, and sold in turn to mobile providers led by Verizon Wireless.

“This is a big deal,” FCC Chairman Julius Genachowski, a Democrat, said. The auctions, expected to take place in 2014, will free airwaves, raise “very substantial revenue” and help provide funds for a nationwide radio network for emergency workers such as police and firefighters, he said.

The auctions could fetch $15.2 billion for the U.S. Treasury, according to an estimate by the Congressional Budget Office, with part of the money dedicated to the emergency- responder network. Congress called for the auctions in legislation that passed in February.

President Barack Obama’s administration has made freeing more airwaves a priority, saying U.S. competitiveness depends in part on fast and widespread mobile-Internet service.

The FCC plans to buy airwaves that some TV stations will voluntarily relinquish in a process known as a reverse auction. It would sell the frequencies in a traditional auction. Through today’s action the FCC is seeking public comment before it settles next year on rules for the sales.

Freeing Airwaves

TV-station owners will have to decide whether to keep their airwaves and stay in business, sell part of their allotments, or sell all their airwaves and take a one-time payment to cease broadcasting.

As stations make their choices, the FCC will need to reassign some to new frequencies to assemble blocks of clear airwaves that would be attractive to mobile providers.

The FCC hasn’t estimated how many stations may participate, and the choice is up to the TV industry, said Gary Epstein, head of the agency’s auction task force.

Broadcasters want to make sure stations that don’t participate aren’t penalized by, for example, suffering interference or being moved to frequencies that don’t carry signals as far, Gordon Smith, president of the National Association of Broadcasters, said at a news conference. Members of the Washington-based trade group include News Corp. (NWSA)’s Fox, CBS Corp. (CBS), Comcast Corp.’s NBC and the Walt Disney Co. (DIS)’s ABC.

‘Uncharted Territory’

“We’re certainly entering uncharted territory,” Smith said. “There’s never been an auction of this type.”

Procuring airwaves has become a priority for Verizon Wireless, which in August won regulatory approval to buy frequencies from cable companies, and for second-largest provider AT&T, which was rebuffed by U.S. officials last year when it tried to buy No. 4 U.S. provider T-Mobile USA Inc.

Verizon and AT&T in e-mailed statements today welcomed the FCC’s action.

The agency today also voted to consider altering the way it judges whether prospective airwaves purchases by wireless providers raise anti-competitive concerns. The agency hasn’t offered a specific proposal to either tighten or loosen its discretion, Ruth Milkman, chief of the agency’s wireless bureau, said at a news conference.

Changes would affect Verizon, AT&T and smaller wireless carriers as they buy frequencies. The companies need FCC approval as they seek to acquire airwaves to meet smartphone demand.

The FCC’s test generally limits buyers to amassing no more than one-third of airwaves in any geographic market. Purchases that would carry a company’s holdings beyond that threshold invite extra scrutiny from the agency, which may require companies to sell airwaves so frequencies remain available for competitors.

To contact the reporter on this story: Todd Shields in Washington at tshields3@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net

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