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Why the House spectrum bill should be ditched: Q&A with Reed Hundt

The former FCC chair outlines his objections to House spectrum auction proposals

By Brad Reed, Network World
February 03, 2012 06:01 AM ET
Reed Hundt

Network World - Former Federal Communications Commission chairman Reed Hundt made waves this week when he called the House spectrum auction legislation "the single worst telecom bill" he's seen.

The legislation, which would severely restrict the FCC's ability to place conditions on spectrum auctions, is seen as a non-starter in the Senate where a bipartisan group of senators including John Kerry (D - Mass.) and Jerry Moran (R - Kan.) have signaled strong opposition to the House approach to authorizing spectrum auctions. In this interview, we ask Hundt to outline his major objections to the House bill and describe what he would do differently to make more spectrum available.

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Outline your primary objections to the spectrum bill as it's currently written in the House.

The first one has to do with the bidding eligibility rules. The reigning auction theorists such as Paul Milgrom, along with many others, have learned over the last 20 years by studying spectrum auctions and many other auctions that the most important thing in any successful auction is to define carefully who is eligible to bid. The auctioneer needs to focus primarily on that, and it could mean setting conditions such as whether you have enough money in the bank to pay for the spectrum, whether you promise services to poor people or people living in rural America, or it could mean that are you are willing to have a competitor.

The House bill says that the FCC cannot do that. It's a repudiation of the smartest auction theorists in the world. The House bill, intentionally or not, repudiates all our expertise, wisdom and world-leading success in auctions by saying that the FCC can't define bidding eligibility.

The second issue has to do with another aspect of bidding eligibility. Many years ago when I was a spectrum auctioneer, we decided to auction spectrum for satellite radio. Sirius and XM were the winners. We decided that there would be two licenses in the auction and that the same firm could not buy both. So if you bid and won on one you weren't eligible to buy the second. The House bill would say that that's impermissible and that you couldn't stop one firm from buying both. The House bill will say that there can never be a rule that says one bidder can never buy anything. The American people should go like, "What? There's a rule against having competition, a rule against having innovators compete against each other?"

And the third thing is that when you have multiple firms building new networks, you're also going to have more investment than if you have just one firm. So by having rules against competition in the House bill, it reduces overall investment and it reduces jobs.

I've also read that the House bill bars the FCC from paying for spectrum and then opening it up for unlicensed use. Can you comment on that?

I was the guy who created the idea of unlicensed spectrum. Several technologists and economists came to me and said that we need spectrum for short hops between computers and cable connections. That technology became known as Wi-Fi and it completely transformed the Internet experience, as everybody who has a computer knows.

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