Voluntary Incentive Auctions and the Benefits of Full Relinquishment*

Article excerpt

I. Introduction

In February 2012, Congress passed the Middle Class Tax Relief and Job Creation Act, authorizing the Federal Communications Commission (FCC) to use voluntary incentive auctions to repurpose electromagnetic spectrum.1 These auctions give television broadcasters, to whom spectrum is currently allocated, the option to voluntarily sell their spectrum back to the government. The relinquished spectrum can then be relicensed for multiple uses and reauctioned to companies that supply mobile data plans. To participate, broadcasters must either (1) relocate from their current channel to a shared channel, (2) transfer to a new frequency, or (3) fully relinquish their spectrum.

While the statutory scheme does not unilaterally revoke broadcasting licenses, its structure limits the FCC's ability to redistribute spectrum from its relatively low-value television use to a more high-value wireless broadband use. This Note argues that, from policy and economic perspectives, full relinquishment best accomplishes the goal of optimal spectrum reallocation. Congress likely assumed fully relinquishing broadcasters would be forced offthe air after losing access to the spectrum on which their programming was transmitted. This assumption, however, is faulty. Broadcasters choosing to fully relinquish can continue to transmit using other mediums, thereby providing consumers with the services previously offered over the airwaves.

Accordingly, Congress or the FCC should create incentives to encourage broadcasters to choose the full-relinquishment option and protect viewers from potential programming losses. Motivating broadcasters to choose full relinquishment can be accomplished by extending incentives that are already being offered to broadcasters choosing the other two options: sharing or relocation. To incentivize full relinquishment, Congress or the FCC can extend must-carry privileges, pay for broadcasters to relocate to leased-access cable, or include a financial premium.

Part II of this Note discusses the modern regulatory framework, focusing on the inadequate mechanisms for repurposing spectrum and introduces the voluntary incentive auction. Parts III and IV provide an overview of the Middle Class Tax Relief and Job Creation Act, and argue that full relinquishment is the optimal broadcaster choice to help curb the spectrum deficiencies. Part V outlines possible incentives to coax broadcasters to fully relinquish and transmit on other mediums. Part VI briefly concludes.

II. Command and Control in the Modern Era

A. Overview of Modern Command-and-Control Regulations

Despite its critics, FCC stewardship of the electromagnetic spectrum has not changed in a meaningful way since Congress first cleared the airwaves with the Radio Act of 1927.2 Pursuant to its authority to grant licenses according to "public interest, convenience, and necessity"3 the FCC has parceled out spectrum for use as a public resource since its creation in 1934.4 Because frequencies cannot be occupied by two transmissions at the same time without harmful interference, and there are a limited number of frequencies, the government treated spectrum as uniquely scarce.5 Accordingly, the government retained control over spectrum while vesting ownership in the public.

In the current scheme, known as command and control because of the FCC's direct regulation, spectrum is allocated and licensed for a particular use for a term of up to eight years.6 Once allocated, the FCC grants a license to a specific individual, organization, or corporation to transmit over a specific frequency, at a specific location, at a specific time, subject to certain parameters of service.7 Licenses may be renewed subject to public interest considerations, but most licenses are renewed automatically.8 In this way, the FCC is able to tether frequencies to certain technologies indefinitely.

Consistent with the Radio Act's categorical declaration that there would be no private property interest in spectrum,9 the rights and privileges of licensees are limited. …