Mr. Speaker, Congress passed the Middle Class Tax Relief and Job Creation Act of 2012 on February 17, 2012. As House majority conferees, as well as chairmen of the House Energy and Commerce Committee and its Subcommittee on Communications…
Mr. Speaker, Congress passed the Middle Class Tax Relief and Job Creation Act of 2012 on February 17, 2012. As House majority conferees, as well as chairmen of the House Energy and Commerce Committee and its Subcommittee on Communications and Technology, we are pleased that the spectrum auction provisions in Title VI, Subtitle D, of the legislation are based on the Jumpstarting Opportunity with Broadband Spectrum, JOBS, Act of 2011. We helped pass the JOBS Act in the House on December 13, 2011, as part of the Middle Class Tax Relief and Job Creation Act of 2011. Like the JOBS Act, Title VI, Subtitle D, of the Middle Class Tax Relief and Job Creation Act of 2012 is designed to spur the next generation of wireless investment and innovation, to bring in federal revenue in the form of auction proceeds, and to promote significant new job creation. Among other things, Subtitle D allows the FCC to share proceeds with licensees, like broadcasters, that voluntarily return spectrum to be re-auctioned to meet the growing demand for commercial mobile broadband services. To prevent the Federal Communications Commission from picking winners and losers, Subtitle D prohibits the agency from excluding qualified bidders from participating in the auctions. To protect taxpayers, Subtitle D also requires the FCC to auction spectrum it has used federal funds to clear. What follows is a section by section explanation of some of Subtitle D's significant spectrum provisions.
Section 6401. This subsection establishes clearing and auction timelines for spectrum in 1915 1920 MHz and 1995 2000 MHz (the PCS H Block), 2155 2180 MHz (the AWS 3 block), 15 MHz from the government spectrum at 1675 1710 MHz, and 15 MHz to be determined by the FCC.
Section 6402. This section amends the Communications Act to grant the FCC authority to conduct incentive auctions under which it shares some of the proceeds with licensees that return spectrum to be re-auctioned for commercial use. Such auctions must have
competition on the ``reverse'' side--the portion of the auction that sets the buy-out price. To do otherwise would provide insufficient market competition to minimize costs and would create little more than a substitute for a license transfer.
Section 6403. This section grants the FCC special authority to conduct an incentive auction for television broadcast spectrum.
Subsection (a) governs the ``reverse'' side of the auction. Broadcasters may propose to relinquish their licenses to leave the market completely, to share a license with another broadcast licensee, or to move from a UHF channel to a VHF channel. The reverse ``bids'' they place represent the amount of money they would accept to exit, share, or move from a UHF channel to a VHF channel. The FCC is directed to maintain the confidentiality of auction participants until reassignments and reallocations are complete so as not to prejudice the ongoing business operations and relationships of broadcasters, including broadcasters whose bids may not ultimately be accepted. Spectrum recovered through this mechanism is to be auctioned for licensed services under section 309(j) of the Communications Act. This subsection also defines the retransmission consent and must carry rights of licensees who choose to channel share.
Subsection (b) governs the relocation of broadcast incumbents who do not leave the market through the incentive auction process. This allows the FCC to reorganize the remaining broadcast channels in a way that makes the cleared spectrum most valuable for re-auction, both in terms of monetary value and usefulness for licensed broadband services. To protect broadcasters, however, subsection (b) prohibits the FCC from involuntarily relocating broadcasters from UHF channels to VHF channels. It also requires the FCC to make all reasonable efforts to preserve relocating broadcasters' coverage area and population served. Subsection (b) also qualifies for reimbursement of reasonable relocation costs those broadcasters that are not being compensated through the reverse auction, cable systems that must retune or relocate their systems in order to receive the signals from the newly relocated broadcasters, and channel 37 incumbents (provided the entirety of channel 37 can be cleared for less than $300 million). Section 6402 limits to $1.75 billion the amount the FCC can spend to reimburse relocating broadcasters, cable operators, and incumbents on channel 37. Section 6403(b) also provides broadcasters the option of requesting specific regulatory relief in lieu of recovering relocation expenses. Finally, this subsection makes clear that while low-power broadcasters without class A status cannot participate in the incentive auctions, the incentive auction relocation authority under subsection (b) does not change the rights of low-power broadcasters.
Subsection (c) governs the forward auction of new licenses made available by the reverse auction and relocation process. The spectrum made available by the purchase of licenses through the reverse auction and reallocated under this section must be auctioned for commercial services through the mechanisms detailed in this subsection. This subsection ensures that the auction is both self-funding and generates a profit for the U.S. Treasury. This subsection also encourages the FCC to assign licenses in a variety of geographic sizes.
Subsection (d) allows the FCC to borrow in advance up to $1 billion of the $1.75 billion available for relocation costs.
Subsection (e) allows the FCC to conduct only one special incentive auction for the broadcast spectrum. It does so to encourage the FCC and broadcasters to make best efforts to ensure success of the special auction rather than await the results of a first attempt. Broadcasters may still participate in general incentive auctions authorized under Section 6402, although certain offsetting FCC flexibilities and broadcaster protections in Section 6403(b), (g), and (h) do not apply.
Subsection (f) leaves to FCC discretion whether to conduct the reverse and forward broadcast incentive auctions contemporaneously or separately.
Subsections (g) and (h) work in concert with the provisions of subsection (b) to create offsetting FCC flexibilities and broadcaster protections to facilitate the broadcast incentive auction. Subsection (g) creates certain limitations on the FCC's ability to relocate broadcasters or modify their spectrum usage rights during the pendency of the broadcast incentive auction. Subsection (h) limits broadcasters' rights to protest license modifications made pursuant to the broadcast incentive auction provisions.
Subsection (i) clarifies that the FCC's November 8, 2008, ``White Spaces'' order continues to apply to vacant channels in the reconstituted television broadcast band after the incentive auction, reorganization of the broadcast channels, and re-allocation of spectrum for broadband use.
Section 6404. This section prevents the FCC from excluding qualified bidders from participating in spectrum auctions so long as they abide by the auction procedures. Such ``prior restraints'' would be antithetical to the notion of open auctions, which use a competitive, market-based approach to allocate spectrum to those entities that will put the spectrum to its highest and best use. By maximizing the amount of spectrum available for auction and offering a variety of geographic licenses and license sizes, the FCC can help ensure all potential bidders--local, national, and regional; urban and rural--have an opportunity to obtain spectrum to address the exponential increase in demand for spectrum caused by the increased use of smartphones and tablets by U.S. consumers.
Under this section, the sole qualifications of bidders are that they abide by the auction procedures and other requirements to protect the auction process, and that they meet the technical, financial, character, and citizenship requirements under sections 303(1)(1), 308(b), and 310 of the Communications Act at the time of bidding or, if they submit a winning bid, before grant of the license. The phrase ``auction procedures'' refers to the mechanics of the auction, such as the ``activity rule.'' The phrase ``other requirements to protect the auction process'' refers to rules to protect auction integrity, such as those restricting collusion.
The FCC should not be picking winners and losers: the market should. As demand for spectrum grows exponentially in the mobile broadband age, all carriers will need additional spectrum, and artificially limiting access to certain entities or skewing auctions to favor them will lead to inefficient outcomes that ultimately hurt consumers. Moreover, recent history demonstrates that attempting to ``shape'' the market by micromanaging auctions leads to unintended consequences that hinder competition, harm spectrum policy, reduce auction proceeds, and result in valuable spectrum lying fallow for years.
This section also makes clear it is not intended to affect any remaining authority the FCC has to adopt and enforce rules of general applicability, as opposed to rules regarding particular carriers, particular classes of carriers, or particular auctions. The rigor of a notice and comment rulemaking conducted separately from a particular auction better ensures that all interested parties participate, not just parties courting particular spectrum. It also helps ensure that the FCC rigorously examines whether there is any need for action, as well as the pros, cons, and potential unintended consequences of any proposed measures. Conducting such a proceeding separately also ensures parties have a more realistic opportunity for appeal. Challenging rules adopted in the lead up to an auction are logistically challenging in that time is typically short, in that courts are likely reluctant to delay an auction or invalidate it after the fact, and in that if courts do, they potentially affect interests of all the auction participants, not just the challenging party.
It is not intended, however, that the FCC act in a way that would override or undermine the fundamental purpose of this section--ensuring open and wide participation in spectrum auctions in order to put spectrum to its highest and best use and to increase auction revenues. The reference to ``rules concerning spectrum aggregation that promote competition'' is not meant to confer any new authority on the agency, but merely to illustrate that the FCC retains authority to adopt such rules in an industrywide rulemaking to the extent such authority can be found elsewhere in the Communications Act and does not conflict with the prohibition on excluding bidders.
Section 6405. This section extends the FCC's auction authority through 2022.
Section 6406. This section instructs the FCC and NTIA to pursue additional secondary allocations of spectrum for unlicensed use by evaluating the viability of sharing spectrum with government operations in the 5 GHz band.
Section 6407. This section clarifies that nothing in sections 6402 or 6403 shall be construed to prevent the FCC from using relinquished or other spectrum to implement band plans with guard bands. Such guard bands shall be no larger than is technically reasonable to prevent harmful interference
between licensed services outside the guard bands. The FCC may permit unlicensed use in such guard bands. Unlicensed use shall rely on a database or subsequent methodology as determined by the FCC. The FCC may not permit any use of a guard band that would cause harmful interference to licensed services. Thus, this section makes clear that the FCC is free to create guard bands and allow secondary, unlicensed use in spectrum it has cleared with federal funds and auctioned under sections 6402 or 6403, so long as such guard bands are no larger than technically reasonable to prevent harmful interference between licensed services outside the guard bands and the use does not interfere with the licensed uses.
Section 6408. Over the last 20 years, licensees trying to use their spectrum as authorized have started to experience limitations on service because adjacent spectrum users are relying on receivers that are not sufficiently tailored to focus just on the spectrum allocated for their adjacent use. The result has been lower power limits, restricted uses of spectrum, and a proliferation of guard bands. This section requires the GAO to submit a study to Congress not later than one year after the passage of the Middle Class Tax Relief and Job Creation Act of 2012 detailing current spectrum uses and whether changes to receiver performance, changes to operational aspects of existing spectrum uses, and narrowing of existing guard bands can help make more efficient use of the scarce spectrum resource.
Section 6409. This section streamlines the process for siting of wireless facilities by preempting the ability of State and local authorities to delay collocation of, removal of, and replacement of wireless transmission equipment. It also increases access by establishing a uniform process for access to Federal rights-of-way and easements. It establishes a master contract process for siting wireless facilities on Federal Government owned property and buildings.
Section 6410. This section amends the NTIA Organization Act to make efficient use of spectrum by federal agencies one of the NTIA's core responsibilities. As we search for the 500 MHz of spectrum that the National Broadband Plan recommends we find to address the Nation's growing wireless broadband demands, it is critical to ensure that government users maximize the use of the spectrum devoted to their missions. Government users represent a significant portion of the use of spectrum below 3 GHz. Ensuring that agencies use this resource efficiently should be a tenet of the NTIA's stewardship of this important public resource.
Section 6411. This section requires OMB to update section 33.4 of OMB Circular A 11 to reflect recommendations in the January 11, 2011, Commerce Spectrum Management Advisory Committee Incentive Subcommittee report. OMB Circular A 11 currently requires agencies to integrate the cost of spectrum into their capital planning and management process. The CSMAC Incentives Subcommittee recommended changes to that circular that make the spectrum use analysis more robust, including whether new federal spectrum uses will share spectrum with other systems, a detailed explanation of the efficiency gains compared to the prior use, and consideration of non-spectrum based systems and commercial alternatives. Moreover, agencies must show that the chosen solution is the most spectrum efficient or explain why it is seeking to implement a solution that is less spectrum efficient.
Section 6412. This section requires the GAO to study the use of the 11 GHz, 18 GHz, and 23 GHz microwave bands with a focus on whether the spectrum is being used efficiently and whether commercial alternatives to the FCC licensing of such bands are sufficiently incentivizing efficient use.
Section 6413. This section establishes the Public Safety Trust Fund, where most auction proceeds under this Act are deposited. It also establishes a cascading series of priorities for use of auction proceeds. First priority is given to repayment of funds borrowed against the $7 billion authorized elsewhere in the title to establish the First Responder Network Authority and the State and local broadband offices. Next in priority is the remainder of the $7 billion for buildout of the public safety broadband network and $100 million for research and development related to public safety broadband communications, followed by $20.4 billion for deficit reduction. From any remaining auction revenues produced above approximately $27 billion, $115 million is used to fund the Next Generation 9/11 provisions under subtitle E of this title and an additional $200 million may be used for further wireless research and development of public safety broadband communications.
Section 6414. This section requires the GAO to study the capabilities and use of amateur radio operators in times of emergency and to make recommendations to improve integration of amateur radio operators in disaster response.