Potential Interest in Incentive Auctions Surfaces as Spectrum Authorities Debate Future of UHF Band

After the World Radiocommunication Conference 2015, the 694-790 MHz band will be allocated on a co-primary basis to mobile services and identified for IMT (international mobile telecommunications) in Region 1, which includes Europe, the RSPG said in a June 13 opinion on strategic challenges in addressing the growing spectrum demand for wireless broadband (http://bit.ly/1859IUv). The band is now used in Europe primarily for digital terrestrial TV (DTT) and program-making and special events (wireless microphones).

In an April consultation on the future use of the 700 MHz band (http://xrl.us/bpk645), Ofcom sought input on what factors it should consider when gauging the costs and benefits of a potential future change of use of the band. It’s currently planning to use a cost-benefit analysis to assess the impact of alternative transition dates, which would help set the timing of the spectrum release, a spokesman said, but will also explore whether market mechanisms such as incentive and overlay auctions could play a role in determining the timing.

Ofcom described an incentive auction as one in which existing spectrum licensees can choose whether to relinquish some or all of their spectrum; new users can bid for future use of the spectrum in a standard auction; and existing users receive some form of consideration from auction proceeds. In the specific case of an incentive auction for 700 MHz release, Ofcom said it would expect the relinquishment of rights to center on timing of the release in the context of continued provision of the DTT platform via a DTT frequency re-plan and making the 600 MHz band available for DTT.

The FCC is trying to gauge the amount of spectrum broadcasters will release and its location in frequency and geography, Ofcom said. There’s no fixed supply of spectrum known in advance of the FCC auction; rather, the auction will determine the amount of spectrum available, it said. But in the specific context of a potential release of the 700 MHz band, “we are considering whether an incentive auction may be of use in determining the timing of the release only; that is, for example, with a decision being made that release would take place by a final date and the incentive auction element being used to determine if release could take place at an earlier point in time,” it said.

Ofcom doesn’t have the power to undertake an incentive auction, but the government is considering that issue, the regulator said. The potential advantage of having an incentive auction to determine the release date of the 700 MHz band for wireless services depends on several factors, it said: (1) The range of possible release dates and their respective costs and benefits. (2) Whether an efficient incentive auction would be likely to lead to the best results for citizens and consumers. (3) Whether an appropriate incentive auction can be designed.

Ofcom also asked for feedback on the idea of an “overlay” auction. In that case, the winner must share spectrum with the incumbent user and avoid harmful interference, and the incumbent can choose to relinquish some or all of its rights in return for a commercially negotiated payment from the new user. The main difference between an overlay and incentive auction is that the payment for relinquishing spectrum rights is negotiated by the incumbent and new user rather than through an auction process, it said. The comment period ended July 5.

Current RSPG “activities do not specifically include incentive auctions,” its secretariat told us. Nevertheless, the organization addressed strategic issues on spectrum for wireless broadband and broadcasting in the opinion above and an accompanying report on spectrum for wireless broadband and broadcasting in the 400 MHz-6 GHz range (http://bit.ly/1cDh5pJ). The RSPG recommended that the European Commission and EU governments develop an EU-wide strategy at the political level on the future use of the 700 MHz band that considers the spectrum needs of broadcasters and wireless microphone users as well as a “clear policy to facilitate any migration."

Meanwhile, a new working group set up by the Electronic Communications Committee of the Conference of European Postal and Telecommunications Administrations is studying the future use of UHF frequencies, focusing on the 470-694 MHz part of the band. The 694-790 MHz band, which WRC-12 decided to allocate to mobile and broadcasting services, “is being hotly debated” now, particularly in connection to its possible harmonization for wireless broadband services, the ECC said. The ECC “wishes to look beyond a piecemeal approach (’salami-slicing') to the use of the prime range of spectrum, and to consider options for a more joined-up strategy, especially for the longer term and below 694 MHz,” ECC Chairman Eric Fournier said in a press release.

Comparisons between U.S. and EU incentive auctions in the UHF band are difficult, said Fournier, director for spectrum planning and international affairs at France’s Agence Nationale des Fréquences. In Europe, terrestrial broadcasting supports general public interest objectives such as diversity of information and plurality of media, he told us.

A leaked draft of proposed EC legislation on a European single market for e-communications would require national authorities to, among other things, “consider the need to establish, in conformity with competition rules, appropriate compensation or incentive payments to or by existing users or spectrum usage right holders, inter alia through incorporation in the bidding system or fixed amounts for rights of use, with a view to the timely freeing up or sharing of sufficient harmonised spectrum in cost-efficient bands for high-capacity wireless broadband services.”