Is the incentive auction a disappointment? For consumers, this auction is not a disappointment. At least–not yet.
Scott Wallsten at the Technology Policy Institute has a good rundown. My thoughts below:
By my count, this was the eighth major auction of commercial, flexible-use spectrum since auctions were authorized in 1993. On the most important question–how much spectrum was repurposed from restricted uses to flexible, licensed uses?–this auction stacks up pretty well.
At 70 MHz, this was the third largest auction in terms of total spectrum repurposed, trailing the mid-1990s PCS auction (120 MHz) and 2006 AWS-1 auction (90 MHz).
On the next most important question–how quickly will new services be deployed?–the verdict is still out. Historically, repurposing spectrum like this typically takes six to twelve years. Depending on how you classify it, this proceeding commenced in 2010 (when the FCC proposed the incentive auction) or 2012 (when Congress authorized the auction). With the auction over, broadcasters have over three years to clear out of the spectrum but some believe it will take longer. Right now, it looks like the process will take seven to eleven years total–not great but pretty typical.
Some people are disappointed, however, with this auction, particularly some in the broadcasting industry and in the FCC or Congress, who expected higher auction revenues.
High revenue gets nice headlines but is far less important than the amount of spectrum repurposed. It’s an underreported story but close to 290 MHz of spectrum, nearly 45% of all liberalized, licensed spectrum, was de-zoned by the FCC, not auctioned. De-zoning spectrum generates zero auction revenue for the government but consumers see substantial benefits from this de-zoning, even if the government does not directly benefit. I recently wrote a policy brief about the benefits of de-zoning spectrum.
In any case, in terms of revenue, this auction was not a failure. At around $17 billion, it’s third out of eight, trailing the 2008 700 MHz band auction (about $21 billion in 2015 dollars) and the massive haul from the 2015 AWS-3 auction (about $42 billion).
At close, broadcasters will receive $10 billion for the 70 MHz of available licensed spectrum. Some broadcasters consider it a failure, just as a home seller is disappointed when her home sells below list price. The broadcasters initially requested $86 billion for 100 MHz of available spectrum. When the carriers’ bids didn’t match that price, some broadcasters pulled out and the remaining broadcasters lowered their price.
Were there better ways of repurposing broadcast spectrum? Broadcasters have a point that the complexity of the auction might have reduced buyer and seller participation (which means lower bids and fewer deals). As Wallsten notes, an overlay auction (like AWS-1) or simply de-zoning the spectrum might have been better (faster) alternatives. But it goes too far deem this auction a failure (at least until we know how long the broadcaster repack takes).
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