White House Hosts Spectrum Auction Event

Economists push for legislation that allows FCC to compensate broadcasters

The White House Wednesday hosted a spectrum auction event to push for legislation giving the FCC authority to compensate broadcasters for clearing off or giving up spectrum.

 The centerpiece of the event was a letter from 112 economists arguing for the auctions as the most market-efficient means of freeing up spectrum for wireless broadband.

FCC Chairman Julius Genachowski talked about the need for swift action, while a panel of economists who signed on to the letter made their case for voluntary auctions, with one calling a forced move of broadcasters a terrible idea, suggesting the government seizure would be a bad precedent.

Paul Milgrom of Stanford, asked by an audience member why the auctions should be voluntary, said there were a lot of reasons. "If you get into the habit of seizing assets people think they own, you undermine the basis of our free market economy. I think it is a terrible idea."

But he also said the government needed to be involved because just to let broadcasters put the spectrum out there and let trading occur would be too messy given the need to aggregate spectrum in larger blocks (20 mHz for cellular rather than 6 mHz for broadcasters) and other details of repacking that would be hard to work out in private negotiations.

Genachowski, who spoke prior to the panel, said that an incentive auctiopn was"the single most important step we can take" top address the issue of looming spectrum shortfalls.

The economists, in the letter and in a panel session with five of the signatories at the Old Executive Office Building event, argued that spectrum should be freed up from "inefficient to more efficient uses," and pointed to a 10x value for spectrum in wireless hands vs. broadcast.

The White House is pushing for 4G wireless broadband service to 98% of the country within five years. The president has backed the spectrum auction as a way to help get that done.

Austan Goolsbee, chairman of the Council of Economic Advisers, said Wednesday that it was a win-win-win proposition, actually adding another half-win to the equation.

He said the auction would 1) relieve the spectrum crunch, spur innovation and jobs (that was only one "win"); 2) provide revenue to broadcasters to help them transform their businesses; 3) reduce the deficit; and 3.5) help fund a public safety network and a wireless innovation fund.

"Despite today's challenging economic conditions, a broadcast incentive auction for underused or unused spectrum could generate more than $30 billion for the U.S. Treasury," said CTIA: The Wireless Association in response to the event and the letter. "Once this spectrum is auctioned, it will fuel the ‘virtuous cycle' of innovation and competition that Americans have come to expect from our industry, which provides them with the best wireless products and services.

"We appreciate the leadership of the White House, the FCC Chairman and other policymakers who are working hard to secure more spectrum for our industry," said CTIA. "Let's move quickly to get this spectrum to auction so the wireless industry can continue to lead the world in innovation."

"As we've said consistently, NAB does not oppose incentive auctions that are truly voluntary,"sa id National Association of Broadcasters spokesman Dennis Wharton. "We would remind our economist friends that broadcasters returned more than a quarter of the spectrum held by TV broadcasters less than two years ago, and that those airwaves have yet to be fully deployed.

"Using a 'one-to-everyone' transmission architecture that is remarkably robust and reliable, broadcasters are far and away the most efficient users of spectrum, delivering the highest quality video programming to 43 million citizens who are exclusively reliant on over-the-air television. Moreover, broadcast programming is provided free to the end user, which constitutes a value to Americans that will never be replicated by cellphone providers whose business model is based on ever-higher monthly charges and fee-based apps."

In the letter, the economists said broadcasters could to the following in an incentive auction.

1. "Volunteer to relinquish their spectrum in exchange for a portion of the auction proceeds."

2." Volunteer to share spectrum in exchange for lease payments."

3. "Volunteer to move from a UHF channel to a VHF channel in return for compensation."

4. "Choose to stay put" and "to do nothing."

But the economists on the panel suggested that if the marketplace works the way it is supposed to, there will be a price point at which broadcasters will be willing to deal.

Those economists were Paul Milgrom, Stanford University; Hal Varian, Google; Michelle Connolly, Duke University and former FCC chief economist; Michael Riordan, Columbia University. Moderator was Jason Furman, deputy rirector of the National Economic Council, who pointed out that the economists were from both sides of the political spectrum, though they all said they were talking economics and not politics.

The audience at the event included a range of interested stakeholders, from former National Broadband Plan architect Blair Levin to Consumer Electronics Association chief Gary Shapiro to future National Cable & Telecommunications Association chief Michael Powell.