FCC Announces Delay of Incentive Auction to Early 2016

The FCC announced that it plans to delay its incentive auction until early 2016, from the previous date of mid-2015, citing legal challenges to the incentive auction order it adopted in May (TRDaily, May 15).   “As Chairman [Tom] Wheeler indicated several weeks ago, the court challenges to the auction rules by some broadcasters have introduced uncertainty.  Earlier this week, the court issued a briefing schedule in which the final briefs are not due until late January 2015.  Oral arguments will follow at a later date yet to be determined, with a decision not likely until mid-2015,” Gary Epstein, chair of the Incentive Auction Task Force, said in a blog posting this afternoon.

“We are confident we will prevail in court, but given the reality of that schedule, the complexity of designing and implementing the auction, and the need for all auction participants to have certainty well in advance of the auction, we now anticipate accepting applications for the auction in the fall of 2015 and starting the auction in early 2016,” Mr. Epstein added. “Despite this brief delay, we remain focused on the path to successfully implementing the incentive auction.”

The delay is not a surprise, even given the fact that the U.S. Court of Appeals for the District of Columbia Circuit set an expedited briefing schedule for the legal challenges of the National Association of Broadcasters and Sinclair Broadcast Group, Inc. (TRDaily, Oct. 22).

Under the schedule released by the court this week, final briefs are due Jan. 27, 2015. “Typically, the argument date will be a minimum of 45 days after briefing is completed,” the court said in a notice to counsel. That would mean that oral arguments would not be held before mid-March.

This is the second time the expected start date for the auction has been pushed back. In December 2013 (TRDaily Dec. 6, 2013), Mr. Wheeler announced that the auction would begin in mid-2015 rather than the previous target of sometime in 2014.

Pushing the auction back by about another six months will give the FCC additional time to complete action on a variety of items related to the sale, many of which it has initiated since the auction order was adopted. In his blog posting, Mr. Epstein said “consistent progress” is being made in the proceeding.

“Of particular note, the Commission has followed through on commitments made in the Report and Order and initiated rule-makings to address the operations of important services affected by the incentive auction, including unlicensed white spaces devices, wireless microphones and Low Power Television.,” he said. “And just last week, the Commission addressed several broadcast and wireless interference issues.

“We are continuing our march toward implementing the incentive auction. Importantly, we anticipate the Commission will vote on the Comment PN before the end of the year,” Mr. Epstein added.  “The Comment PN will propose and seek comment on the detailed directions for how the auction will be conducted, including the methodology to be used to establish opening bids for the reverse and forward auctions; how to define ‘impaired’ markets subject to interference; and the components of the final stage rule. In the coming weeks, the Commission will also consider a notice of proposed rule-making to preserve one vacant TV channel post-auction for use by unlicensed devices.”

Mr. Epstein also noted plans to increase outreach to broadcasters “in town hall discussions and confidential meetings with individual station owners in markets around the country.”

In response to the auction delay, a spokesman for FCC Commissioner Ajit Pai said, “We would urge the Commission and the broadcasters to come to the table and settle the litigation.” The spokesman noted that Mr. Pai expressed concern when the auction order was adopted that it would lead to litigation and delay, adding, “This is one instance in which we are sorry our prediction came true.”

“Delaying the auction until early 2016, or a later date, shows thoughtful consideration of the circumstances and issues ahead,” said Commissioner Mike O’Rielly. “Much work is before us to ensure a successful incentive auction. I remain hopeful that the auction will happen as expeditiously as possible, but we must ensure a positive outcome.”

The offices of Commissioners Jessica Rosenworcel and Mignon L. Clyburn had no comment on the auction delay.

Most outside parties today expressed support for the FCC’s decision to push back the auction date given the pending litigation and other rulemaking items, with several saying they were not surprised by the development.

“As NAB has said repeatedly, it is more important to get the auction done right than right now,” said Dennis Wharton, NAB’s executive vice president-communications. “Given its complexity, there is good reason Congress gave the FCC 10 years to complete the proceeding. We reject suggestions that our narrowly focused lawsuit is cause for delay. We look forward to a speedy resolution of our legal challenge and a successful auction that preserves access to free and local TV for every American.”

“I would guess that the announcement reflects an appreciation for the auction’s complexity and a desire to get it done correctly,” said Rebecca Hanson, senior vice president-strategy and policy for Sinclair. “There is a lot at stake for broadcasters here, and we want our protections in place before the process begins, which they don’t seem to be at this point.”

“Gary Epstein, Howard Symons and the rest of the FCC Staff are doing an unbelievably great job of preparing for this auction,” said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition.  “The brief delay announced today makes perfect sense.” Mr. Symons is vice chair of the Incentive Auction Task Force.

“The FCC’s decision to delay the time frame for the incentive auction is not particularly surprising, and one could say a delay was actually expected,” said Steve Berry, president and chief executive officer of the Competitive Carriers Association. “The incentive auction is still on track, even with the slight delay. There is an old saying that, ‘If you want it bad, you will get it bad.’ I know our members want it right, and the FCC is just trying to ‘get it right.’  I have been impressed with the quality and progress of the work of the FCC team so far. This is a reasonable if not expected short delay for a very complicated auction and will allow time for the industry to plan for the acquisition and integration of the most valuable low band spectrum made available to the wireless industry in over a decade!”

Scott Bergmann, vice president-regulatory affairs for CTIA, said, “While any delay in spectrum auctions is unfortunate, we appreciate the thoughtful focus the FCC has brought to this complex auction to ensure it is conducted properly to the benefit of all Americans. Today’s action underscores the need to resolve the pending litigation over the FCC’s rules expeditiously.  When the auction is held, mobile companies will have their checkbooks ready to participate in this critical auction that will be key to our nation’s wireless future.”

“Given the complexities of the auction and the pending litigation, we anticipated that the FCC would need to make some modest scheduling adjustments,” said Joan Marsh, VP-federal regulatory for AT&T, Inc. “The adjustments announced today are reasonable and will provide both the Commission and interested stakeholders with additional time to resolve open issues and prepare for a successful auction.”

“We are disappointed with the delay because expedited access to low-band spectrum is critical to help create a super competitive wireless market,” said Andy Levin, SVP-government affairs for T-Mobile US, Inc. “T-Mobile encourages the FCC to move quickly to make necessary changes to the auction rules that will help create a more competitive market, namely by increasing the amount of spectrum reserved for bidding by the non-dominant carriers, and by removing any artificial price barriers that would trigger the reserve.”

“Given the circumstances, the FCC made a wise choice to revise the start date of the 600 MHz incentive auction,” said Sprint Corp. “While the auction schedule has changed, the policy focus has not. To that end, we look forward to continuing our dialogue with federal regulators to help develop auction rules that best promote vibrant, sustainable competition in the wireless space.”

Allison Remsen, executive director of Mobile Future, said, “While consumer demand for mobile continues to grow, there are a lot of moving pieces that all must align to conduct the incentive auctions so a delay is not unexpected. We remain hopeful that any obstacles to holding successful incentive auctions will soon be resolved so we can move forward to repurpose more spectrum for commercial mobile use.”

But the High Tech Spectrum Coalition suggested that delaying the incentive auction could hinder innovation and the U.S. economy. “There is a serious need for more spectrum on the horizon and without a timely incentive auction American innovation and economic growth tied to our wireless economy could suffer,” said Rhod Shaw, the coalition’s executive director. “The litigation stalling the auction will hinder the FCC from meeting our country’s needs for more spectrum at a time when consumer demand is reaching astronomical heights.  We urge the parties to the litigation to reach a swift conclusion so that there are no further delays.”

Some analysts also were not surprised by the auction delay announced today. “Not a huge surprise,” Jennifer Fritzsche, an analyst for Wells Fargo Securities LLC, said in a research note. “With the broadcasters’ recent legal challenge, there was much doubt that the original timeframe would be achieved.”

One attorney suggested today that the FCC may have to push back the start of the auction again.  “On a scale of one to ten – where one is a total no-brainer and ten is a case so complicated that it makes your eyes bleed – the spectrum auction appeal will probably be close to 11,” Davina Sashkin, an attorney at Fletcher Heald & Hildreth, said in a blog posting. “So if the Commission is planning on holding off on the auctions until the Court has ruled – an approach implicit in Epstein’s statement – the ‘early 2016’ estimate may still be subject to slippage. (Of course, the Commission is not necessarily obliged to wait for the Court’s decision, but that would impair the crucial ‘certainty’ element.)”- Paul Kirby, paul.kirby@wolterskluwer.com

Courtesy TRDaily