Telecommunications:

Strong Support for Extending FCC's Auction Authority Exists, but Little Agreement on Other Options to Improve Efficient Use of Spectrum

GAO-06-236: Published: Dec 20, 2005. Publicly Released: Dec 20, 2005.

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The radio-frequency spectrum is a natural resource used to provide an array of wireless communications services, such as television broadcasting, which are critical to the U.S. economy and national security. In 1993, the Congress gave the Federal Communications Commission (FCC) authority to use competitive bidding, or auctions, to assign spectrum licenses to commercial users. The Commercial Spectrum Enhancement Act required GAO to examine FCC's commercial spectrum licensing process. Specifically, GAO examined the (1) characteristics of the current spectrum allocation process for commercial uses; (2) impact of the assignment process--specifically the adoption of auctions to assign spectrum licenses--on end-user prices, infrastructure deployment, competition, and entry and participation of small businesses; and (3) options for improving spectrum management.

The current spectrum allocation process is largely characterized as a "command-and-control" process, in which the government largely dictates how the spectrum is used. Many stakeholders we spoke with, along with panelists on our expert panel, identified a number of weaknesses of the existing spectrum allocation process, including that the current process is slow and leads to underutilization of the spectrum. FCC staff have identified two alternative allocation models: the "exclusive, flexible rights" model--which would extend the existing process by providing greater flexibility to spectrum license holders--and the "open-access" (or "commons") model--which would allow an unlimited number of unlicensed users to share spectrum. While little consensus exists about fully adopting either alternative model, FCC staff, as well as many stakeholders and panelists on our expert panel, recommend a balanced approach that would combine elements of the current process and the two alternative models. FCC's use of auctions to assign spectrum appears to have little to no negative impact on end-user prices, infrastructure deployment, and competition; evidence on how auctions impact the entry and participation of small businesses is less clear. Additionally, FCC's implementation of auctions has mitigated problems associated with comparative hearings and lotteries, which FCC previously used to assign licenses. In particular, auctions are quicker, less costly, and more transparent. Finally, secondary markets provide an additional mechanism for companies to acquire licenses and gain access to spectrum, and FCC has undertaken actions to facilitate secondary-market transactions, such as streamlining the approval process for leases. Industry stakeholders and panelists on our expert panel offered a number of options for improving spectrum management. The most frequently cited options include (1) extending FCC's auction authority, (2) reexamining the use and distribution of spectrum--such as between commercial and governmental use--to enhance the efficient and effective use of this important resource, and (3) ensuring flexibility in commercially licensed spectrum bands. Stakeholders and panelists on our expert panel overwhelmingly supported extending FCC's auction authority; however, there was little consensus on the other identified options for improvement.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: In the Omnibus Budget Reconciliation Act of 1993, the Congress provided the Federal Communications Commission (FCC) authority to use auctions to assign certain spectrum licenses. Since 1993, FCC has conducted 59 auctions which have generated over $14.5 billion for the U.S. Treasury. However, critics of auctions assert that auctions: (1) raise consumer prices; (2) slow infrastructure deployment; (3) distort competition; and (4) deter entry and hinder small business participation. FCC's auction authority was scheduled to expire on September 30, 2007. However, we reported that auctions had little to no negative impact on the wireless industry and are more effective than previous assignment mechanisms. We therefore recommended that the Congress consider extending FCC's auction authority beyond the scheduled expiration date. Subsequent to our report, Congress passed legislation, S.1932 (P.L. 109-171), that extended FCC's auction authority until 2011.

    Matter: Given the success of FCC's use of auctions and the overwhelming support among industry stakeholders and experts for extending FCC's auction authority, the Congress may wish to consider extending FCC's auction authority beyond the current expiration date of September 30, 2007.

 

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