Monday, January 16, 2012

Implementing Spectrum Incentive Auctions

FCC Chairman Julius Genachowski deserves credit for espousing spectrum incentive auctions as a means of freeing up additional spectrum for fast-growing wireless and other services, and I am happy to give it to him. But he is wrong to assert, as he did at last week's Consumer Electronics Show, that Congress should not make certain high-level policy decisions concerning the auctions.
In Las Vegas, Mr. Genachowski said that it would be wise for Congress not "to prejudge or micromanage FCC auction design and band plans." And back at the FCC, Rick Kaplan, chief of the FCC's Wireless Telecommunications Bureau, released a statement asserting that "[s]ince the dawn of spectrum auctions, Congress has rightly recognized the need for the FCC to have appropriate flexibility to conduct them."
It is one thing to say that Congress should not "micromanage" FCC auction design, or "inappropriately" restrict the FCC's flexibility. But it is another thing entirely to say that it is improper for Congress to make certain high-level policy decisions about the conduct of the auctions.
It is most certainly within Congress's prerogative, and, indeed, perhaps even within its responsibility, to make such high-level policy decisions in authorizing the incentive auctions. While Mr. Genachowski suggests that Congress should delegate absolute discretion to the FCC with respect to conduct of the auctions, after all, it is Congress, not the FCC, which ultimately is accountable to the people.
Now I understand the distinction between Congress "micromanaging" and "inappropriately" restricting the FCC's auction flexibility is not a bright line to be found in some biblical injunction. But surely matters such as preventing the FCC from imposing new net neutrality restrictions or from restricting eligibility to participate in the auction to certain bidders – the very matters Mr. Genachowski wants to reserve to the FCC – fall into the category of high-level policy decisions that are appropriate for Congress to make.
This is not to say that Congress must decide to restrict the FCC's discretion regarding such matters, only that it is perfectly proper for it to do so. And, given the FCC's past and present predilections, it certainly would be reasonable for Congress, with an eye towards maximizing consumer welfare and protecting taxpayers, to choose to make high-level policy decisions that prevent the FCC from exercising completely unfettered discretion.
After all, the FCC's previous forays into establishing auction rules imposing conditions or encumbering participation have not turned out well. It is commonly agreed, for example, that the net neutrality condition imposed by the FCC on the 700 MHz "C" block auction decreased the value of the spectrum auctioned by 60% based on a comparison of the winning bid prices for the "A" and "B" 700 MHz blocks and the "C" block. Taxpayers were the losers. And so were consumers, who lost the opportunity to benefit from participation by those who may have wished to put the spectrum to higher-value uses unencumbered by the net neutrality restriction.   
A final word: Note that I am not advocating that, in authorizing spectrum auctions, Congress micromanage them. For instance, I think it would be unwise for Congress to prescribe auction design details, say, with respect to matters relating to bidding sequences, the size of the license areas, number of rounds, reserve bid levels, repacking requirements, and the like. These are not the kind of high-level policy matters I suggest it is appropriate for Congress to address.
So, Congress and the FCC each have their appropriate roles to play in authorizing, designing, and implementing spectrum incentive auctions. They should play them.