Re-Auction of the D Block: A Review of the Arguments

Abstract

This paper demonstrates the problems behind the plan to reauction the D Block for commercial purposes. First, a re-auction of the D Block is unlikely to generate $3 billion in revenues as some believe. Statistical analysis of auction data indicates that a 10 MHz block of spectrum in the 700 MHz band must be unencumbered to produce $3 billion in revenues. However, the FCC’s National Broadband Plan envisions a number of significant encumbrances on the re-auction of the D Block that have reduced auction revenue in the past. Second, the Phoenix Center points out that the re-auction of the D Block cannot fully fund the public safety network – not even close. A nationwide public safety network is expected to cost about $10 to $13 billion. The D Block re-auction offers no other mechanism by which to generate funds for the remaining network construction and operating costs. Third, the report considers the potential broader adverse market effects of a D Block re-auction. The evidence indicates that the public safety community needs a full 20 MHz of spectrum. If given only 10 MHz today as a result of a re-auction of the D Block, then the additional 10 MHz must be obtained from either future spectrum assignments or the capacity equivalent thereof obtained via burdensome public safety use of commercial spectrum. This alternate block of spectrum will not be contiguous to the existing 10 MHz public safety block as is the D Block, which has the effect of increasing the deployment cost of the public safety network by an estimated $4 billion relative to the D Block assignment. Filling the public safety spectrum shortage with public safety obligations on commercial providers could substantially reduce future auction revenues.