The promise of the incentive auction was that volunteering broadcasters would be paid for the value of their spectrum. The duplex gap plan seems designed instead artificially to reduce the prices the FCC may have to pay in crowded and border markets. If the FCC is going to be the honest broker it claims to be in the upcoming auction, it should not be placing its finger on the scale.
A dispute about something called the “duplex gap” derailed FCC Chairman Wheeler’s plan to adopt final rules for the incentive auction at the FCC’s July meeting, and the continuing controversy over the duplex gap has not stopped and could affect the chairman’s backup plan to adopt auction rules today (Aug. 6). If the FCC does not change its plan, its decision could reduce the values stations receive in the auction in many markets and harm broadcasters’ ability to cover breaking news and sports.
What is the “duplex gap”? Unlike broadcasting where transmissions are one-way from stations to receivers, wireless broadband service involves two-way transmissions since information flows both from cell sites to mobile devices and from those devices back to cell sites and then to the Internet or telephone networks.
Because so-called “uplink” and “downlink” transmissions can interfere with each other (if for no other reason because the downlink signal is typically far stronger than the uplink signal from mobile phones and other devices), wireless spectrum is frequently licensed in paired bands, with one band designated for uplink and the other for downlink and with those bands separated from each other.
In the spectrum to be assigned to wireless after the incentive auction and repacking, the FCC decided to split the new wireless band into uplink and downlink frequencies and, to avoid interference between those bands, plans an 11 MHz “duplex gap” between them. The current argument concerns what to do with that in-between spectrum.
In the FCC’s 2014 auction decision, it decided to use the duplex gap to provide spectrum for wireless microphones and “white spaces” devices (gadgets that use vacant TV channels to transmit data) which might not be able to operate in the post-repacking TV band. The FCC now wants to change that decision and instead assign TV stations to the duplex gap — which will be in the middle of the new wireless band — in at least some markets. Why is this happening?
The FCC’s goal is to clear the largest possible nationwide band for wireless service minimizing the amount of variation between markets, and in particular to avoid having only a limited amount of wireless spectrum available in the largest markets, like New York and Los Angeles. The FCC faces particular problems in border areas since it must protect Canadian and Mexican television allocations.
If too many TV stations remain broadcasting to fit into the repacked TV band, some stations in those markets and the largest markets will remain on channels that, in most of the rest of the country, will be assigned to wireless service, reducing the amount or quality of spectrum that will be available in the forward auction. The rules require that wireless carriers protect those stations from interference, but the experience of digital stations that were assigned to ch. 51, which is adjacent to wireless spectrum, tells us that neither the wireless carriers nor the broadcasters placed in the wireless band are likely to be happy.
The FCC’s first attempt to get around these problems was called Dynamic Reserve Pricing. Under DRP, even if the FCC did not have enough channels remaining in the new TV band to repack all stations that did not relinquish spectrum, it proposed to keep reducing the auction prices, and said that it would put the “excess” stations in the wireless band, creating interference in up to 20% of wireless channels across the country. No one liked DRP: wireless companies objected to dealing with such high levels of interference; broadcasters viewed it as a scheme to reduce station prices below their true value. The FCC says that DRP will be abandoned in the final rules.
The FCC’s duplex gap proposal is, in effect, the “son of DRP.” The FCC proposes that in markets where not “enough” stations participate in the auction or drop out of the bidding, it may put at least one TV station into the duplex gap. The FCC released simulations that showed this affecting six to eight markets, but other simulations show stations in up to 30 markets could end up in the duplex gap.
Among the reasons for doubting the accuracy of the FCC’s simulations are that it assumed that all Canadian stations will remain on their existing channel and that the U.S. could locate stations on any channel now reserved for so-called “phantom” Canadian allocations. That is what the FCC hopes the Canadians will permit, but the current Industry Canada plan is different and would leave fewer channels for the FCC to play with.
Allowing stations to be placed into the duplex gap will certainly result in interference both to and from wireless providers. The FCC says it needs to do this to conduct a successful auction even if fewer broadcasters sell their spectrum than the FCC wants. What the FCC does not say is that by using the duplex gap, the FCC can increase the number of channels where it can repack stations, permitting it to reduce the prices it will pay for TV spectrum.
Of course, there is another obvious way the FCC could solve this problem: it could increase the opening bids for stations in markets where it thinks spectrum will be tight. That would bring in more station bidders and reduce the need to find more post-auction TV spectrum. The FCC apparently has rejected that idea.
Why should broadcasters care? First, in markets where TV stations are in the duplex gap, the already limited spectrum available for wireless microphones would either shrink or disappear. The FCC says it will find other spectrum, but who knows whether it will offer the same capacity or what costs moving to that band would entail.
Wireless microphones are absolutely essential for news and sports coverage and the FCC’s plan could leave stations, particularly in markets like New York and Los Angeles, without the spectrum they need to produce news and sports.
Second, it will leave some stations in second-class status. TV manufacturers may resist building tuners to receive those stations, particularly since they will have to include filters for wireless signals for the markets where those channels are not used for TV. These stations will face perpetual battles over interference with their wireless neighbors and if the ch. 51 experience is any guide, will eventually be pressured to move. And if Canada follows through with its plan to repack its stations and allows more spectrum to be devoted to wireless in border areas, stations placed into the duplex gap or the wireless bands might have to move again, but the FCC would have no funds available to pay for those costs.
Finally, the promise of the incentive auction was that volunteering broadcasters would be paid for the value of their spectrum. The duplex gap plan seems designed instead artificially to reduce the prices the FCC may have to pay in crowded and border markets. If the FCC is going to be the honest broker it claims to be in the upcoming auction, it should not be placing its finger on the scale.
The FCC should give up its plan and use the duplex gap for wireless mikes and other unlicensed uses, and pay stations what their spectrum is worth.
Jack Goodman practices communications law in Washington. He was previously general counsel of the National Association of Broadcasters, where he was NAB’s chief legislative counsel on the 1992 Cable Act. He can be reached at [email protected].