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CEA, EOBC Call For Incentives On Spectrum Auctions

Washington – The Expanding Opportunities for Broadcasters Coalition (EOBC) and the Consumer Electronics Association (CEA) today released a new report urging the Federal Communications Commission (FCC) to implement a spectrum incentive auction framework.

The report calls for a framework that supports open participation by all wireless firms while meeting the price expectations of potentially-willing TV broadcast sellers for their spectrum as repurposed for wireless broadband, maximizing the benefits for consumers and public safety.

“Maximizing the Success of the Incentive Auction” is a data-driven analysis of FCC bidding restrictions demonstrating that their costs would outweigh any potential benefits to competition among the four national wireless firms in the upcoming incentive auction. The study also examines the adverse impact on auction revenues if the FCC were to “score” the spectrum licenses of TV stations.

The report shows how FCC bidding restrictions could reduce incentive auction revenues by nearly $5.8 billion, even if restrictions are placed on just 50 percent of the available spectrum. The report also shows that an open incentive auction that meets the price expectations of broadcasters would pose no potential for competitive harm to Sprint and T-Mobile, who have recently strengthened their competitive positions in the wireless market.

“New options are emerging for TV stations to use their existing spectrum licenses,” said Preston Padden, executive director, EBOC. “To attract the critical mass of broadcasters necessary to make the auction a success, we need competitive bidding among all wireless carriers for every license and the assurance that every TV station will be fully compensated for its spectrum rights.”

“The future of our mobile broadband ecosystem depends in large part on the success of the incentive auction,” said Gary Shapiro, president and CEO, CEA. “This study provides timely guidance for ensuring that the auction succeeds and that our mobile ecosystem thrives long-term, bringing new, innovative devices and services to America’s consumers.”

The report analyzes previous FCC auctions that imposed bidding restrictions on nationwide mobile spectrum and found that restrictions failed to spur widespread, long-term participation by small firms in the wireless industry as originally intended while harming consumers by delaying the provision of new wireless services to 68 percent of the public by a weighted average of nearly seven years, and by lowering net auction bids on spectrum by 31 to 61 percent.

The report notes that the Department of Justice (DOJ) has not offered evidence that an open auction has the potential to cause harm to Sprint and T-Mobile in the competitive marketplace. After an exhaustive review of market data in 2011, the DOJ concluded that all four nationwide carriers (Verizon, AT&T, Sprint, and T-Mobile) are especially well positioned to drive competition in the wireless marketplace, at both the national and local levels.

The report also highlights data demonstrating that, within the last year, Sprint and T-Mobile have further strengthened their competitive positions by acquiring substantial amounts of additional investment capital, secondary market spectrum and new customers in the marketplace:

  • Sprint already holds a nationwide, contiguous block of spectrum below 1 GHz that the FCC made available for 4G mobile broadband services in 2012 – a fact that was not considered by the DOJ.
  • Sprint recently acquired substantial spectrum in the 2.5 GHz band, 1.4 million new customers from Clearwire, and a $21.6 billion capital infusion from its Japanese owner SoftBank, including $5 billion in new investment dedicated to the expansion of Sprint’s wireless network.
  • T-Mobile recently acquired substantial spectrum in the PCS, AWS-1, and 700 MHz bands, 8.9 million customers from MetroPCS, and nearly $11 billion in new investment from its German owner Deutsche Telekom to expand its wireless network.

These facts are inconsistent with the notion that Sprint and T-Mobile would be unable to compete effectively in the wireless market without auction subsidies from the U.S. government, the report states.

The study also concludes that a proposal to lower the prices paid to broadcasters for their spectrum licenses by “scoring” TV stations using criteria based on station characteristics such as population covered would give them an incentive to forego participation in the auction and pursue alternative options in the marketplace.

To access the full report please visit EOBC or CEA’s website.