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This month Policy World talks to Howard Symons, Partner, Jenner & Block LLP and former Vice-Chair of the US Federal Communications Incentive Auction Task Force
Q. Congratulations on the session at the IIC on the US Incentive Auction. What areas did you decide to cover for this very international audience?
Thanks for the opportunity to participate in this year’s Annual Conference. The US incentive auction was a first-of-its-kind two-sided spectrum auction, meaning that an auction mechanism was used to determine supply as well as demand. The auction succeeded in reallocating 84 MHz of spectrum from broadcast to mobile. The auction yielded a surplus of about $7 billion that was contributed to the US Treasury after accounting for payments to broadcasters for relinquishing their spectrum; the establishment of a fund to cover the costs of repacking the broadcasters remaining on the air; and the FCC’s costs in designing and running the auction.
My goal was to cover three areas at the session. First, I wanted to briefly describe the purpose and goal of the US auction. Second, I wanted the audience to understand the challenges of auction design and the perspective of stakeholders in a two-sided auction. Third, and most importantly, I wanted the audience to understand the relevance and applicability of incentive auctions outside the US context. The incentive auction concept can be used in any band, not just broadcasting; and it can be used to facilitate spectrum sharing as well as out-and-out reallocation.
Instrumental in presenting these issues were my co-panelists, Dr. Paul Milgrom of Stanford University and Auctionomics, the world-renowned auction design expert; and Peter MacAvock, Head of Distribution, Platforms & Services at the European Broadcasting Union.
Q. What was the most challenging question that the panel was asked? What was the response?
The most challenging question was how the incentive auction model could work outside the US. For instance, in most countries broadcasters do not own their spectrum, so there would appear to be no need to induce them to relinquish it through an auction bidding process. It was a great question, because it highlighted an important step that the US took to make the incentive auction a reality. In the US, broadcasters also do not own their spectrum; they use it under license from the Federal government. While the FCC has historically reallocated spectrum by regulatory fiat, it faced political resistance to moving the broadcasters. The answer was to give broadcasters a financial stake a reallocating the broadcast band, by passing a law giving broadcasters the right to seek compensation through the auction for relinquishing their frequencies.
Q. Looking forward, what do you think the biggest challenges are for the TMT sector over the next three-five years? Indeed, does it make sense to talk of the TMT sector or should we find a new nomenclature?
A major challenge is the ongoing need for more spectrum to meet the ever-growing demand for mobile broadband services. The incentive auction mechanism is a tool that carriers and regulators should consider in addressing that need, whether through reallocation of spectrum, or the introduction of spectrum sharing, or facilitating alternative uses of frequencies where authorized use is low. Moving beyond spectrum, the disruptive effects of the internet and online services continue to reshape the TMT sector. VoIP disrupted traditional telephony; now over-the-top video is doing the same for the traditional satellite and cable TV model. It’s increasingly hard to differentiate OTT from traditional video, yet the regulatory schemes are often much different. That disparity will need to be addressed. Nomenclature aside, the convergence of edge and network-based providers and the implications for markets and regulators will be the story of the next three-five years.
Q. How should policy makers ensure that regulation does not stifle innovation and development?
Policymakers need to continue to create space for incumbents and new entrants alike to experiment, innovate, and adapt to changing market conditions and technologies. Regulatory safeguards will be necessary in certain circumstances – privacy and security come to mind – but it is important to keep the focus of regulatory oversight on areas where market forces are demonstrably insufficient to protect consumers. Policymakers should also periodically review existing regulatory regimes to limit disparities in the treatment of incumbents and new entrants to what is necessary to promote competition and protect consumers.
Q. This is not your first IIC event – have you personally gained much learning from these meetings?
IIC events have provided me with an opportunity to meet and interact with industry leaders and key policymakers from around the world. In Brussels, as at past conferences, the formal presentations and workshops were thoughtful and informative. In parallel with the structured part of the conference, the chance to network informally with my fellow attendees was equally valuable. Again, many thanks for the opportunity to participate in the Annual Conference.
Policy World talks to Howard Symons, Partner, Jenner & Block LLP and former Vice-Chair of the US Federal Communications Incentive Auction Task Force
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