Yesterday, the Federal Communications Commission (FCC) released the full text of its widely-anticipated proposed rules for an incentive auction of television spectrum and broadcast “repacking” process that will accompany the auction.  (The FCC had voted to adopt these proposed rules on Friday, but had not released the text until yesterday.)  The proposed rules address three principal issues: (1) the reverse auction, whereby broadcasters would voluntarily agree to return all or a portion of their spectrum in exchange for a share of proceeds from the forward auction; (2) the forward auction, wherein wireless carriers bid on the freed-up broadcast spectrum; and (3) the (involuntary) repacking of broadcast spectrum to into a smaller television band.

Of important note, the FCC anticipates a relatively fast-moving process that aims to hold the incentive auction in 2014, with the repacking following thereafter. This goal means that the FCC would have to adopt incentive auction rules by the middle of 2013.  Comments in response to the NPRM are due December 21, 2012 and reply comments are due February 19, 2012.

This is the first in a series of posts describing and analyzing the far-reaching impact of the proposed auction and repacking rules on the communications and media marketplace.   Its purpose is to provide an initial summary of the proposed rules.  The FCC’s Notice of Proposed Rulemaking (NPRM) proposes an intricate, multi-step process for reclaiming, auctioning, and repacking broadcast television spectrum.  Among the NPRM’s long-awaited proposals are:

• Broadcaster Participation:  The FCC proposes three main ways for a station to participate in the voluntary incentive auction by agreeing to directly or indirectly free up spectrum in exchange for a share of the proceeds generated by the forward auction.  The three main ways that a station could choose to participate are: (1) by agreeing to turn in its entire 6 MHz license and go off-the-air; (2) by agreeing to share a channel with another station; or (3) by agreeing to move from a UHF to a VHF channel.  (The FCC may not involuntarily move a station from a UHF channel to a VHF channel during the repacking, but a station might agree to such a move in return for compensation set by the station.)   Of particular note, the NPRM seeks comment on a proposal that has not been raised before: whether the FCC should allow eligible licensees to agree to accept additional interference from other broadcast stations or reduce their service area or population covered by a set amount, again, in exchange for compensation that the station would specify in a reverse auction bid.
•  Reverse Auction:  The “Reverse Auction” is the process by which full power and Class A television broadcasters may submit bids to relinquish their spectrum rights (or agree to move to a VHF allotment).  A key question is how to establish a reserve (minimum bidding) value for these bids. The FCC refrained from making a tentative decision on one specific process for collecting bids from stations. Instead, the NPRM raises multiple proposals for comment, including collecting sealed bids, where bidders would specify the payment they would be willing to accept in exchange for relinquishing various spectrum usage rights during a single bidding round, or using a multiple round bid collection format such as a descending clock auction, where bidders would indicate their willingness to accept iteratively lower payments in exchange for relinquishing their rights. 
• Forward Auction:  The “Forward Auction” is the process by which wireless carriers submit bids for licenses to use the newly-reallocated broadcast spectrum.  A major challenge for the FCC in its rulemaking is determining the interplay between the reverse and forward auctions.  For instance, how does a wireless carrier know what it is bidding on if it is not yet clear how much spectrum is being freed up, what geographic areas are available, and what frequencies have been vacated?  To answer those questions, the NPRM proposes establishing a flexible band plan.  Under the flexible band plan, the new mobile broadband licenses would be made up of 5 MHz blocks, separated from broadcast operations by 6 MHz guard bands (which would be made available for unlicensed use). The uplink band would begin at channel 51 and expand downward toward channel 37 based on the amount of reclaimed spectrum, and the downlink band would begin at channel 36 (608 MHz) and likewise expand downward. 
• Repacking:  “Repacking” is the reconfiguring of broadcast allotments to take up a smaller portion of the UHF band in order to maximize the amount of spectrum that could be made available in the reverse auction.  Repacking may affect broadcasters’ over-the-air coverage areas.  It also could affect broadcast auxiliary stations, low-power television stations, translators, unlicensed wireless microphones, and otherwise entail expenses. The FCC proposes that full power and Class A television broadcasters forced to move to a new channel will be reimbursed for the cost of relocating to a different channel in the repacking process, using a portion of the forward auction proceeds (the reimbursement fund is not to exceed $1.75 billion). The NPRM proposes to allow stations eligible for reimbursement of relocation costs to elect between actual cost-based payments or advance payments based on estimated costs.

 At a public meeting held last Friday, the Commissioners who head the FCC and the FCC staff emphasized the complexity of the rulemaking process and the many important public policy goals that it hopes to achieve. Commissioner Rosenworcel frankly acknowledged that some of the goals the NPRM seeks to accomplish may be in tension with others.  Commissioner Pai approved in part and concurred in part, raising many new questions that he felt were left unaddressed by the NPRM.