Bloomberg News

TV Airwaves Sale Delay by U.S. Seen as Fallout From Obamacare

December 07, 2013

The U.S. government’s delay until 2015 of a broadcast airwaves auction to boost wireless services is a sign agencies are learning from the Obamacare website’s botched debut to take time to avoid technology mistakes.

Federal Communications Commission Chairman Tom Wheeler is postponing plans to publish auction rules by the end of this year and conduct the sale of spectrum in 2014, he said in a blog yesterday. Wheeler partly blamed the complexity of the auction technology and said the agency will “check and recheck the auction software and system components” before unveiling.

“It further underscores with the rollout of the health-care reform website that you really have to get it right and ensure that all systems are in place to improve chances of success,” said Jeffrey Silva, a telecommunications policy analyst with Medley Global Advisors LLC.

Wheeler delayed the auction after the Obama administration spent weeks repairing the federal online insurance exchange that’s central to implementing the Patient Protection and Affordable Care Act. While the exchange attracted 2.8 million visitors when it went live on Oct. 1, outages and software errors kept many users from enrolling in insurance plans.

Fixes have improved the website’s performance, with 29,000 people signing up for health coverage in the first two days of December, more than all of October, according to a person familiar with the effort. Even so, the exchange’s troubles have spurred inquiries from Republicans opposed to the 2010 law and damaged President Barack Obama’s standing in public polls.

‘Rubik’s cube’

Wheeler cited the auction’s complexity as he announced its delay, likening the multi-step process to “a Rubik’s cube.” It involves obtaining airwaves volunteered by broadcasters and then selling the frequencies in blocks to wireless companies. Some broadcasters also want to be moved to new airwaves.

The proposed auction of vacated television airwaves is seen by carriers such as Verizon Wireless and AT&T Inc. (T:US) as a necessary reallocation of assets to give network operators the ability to address surging mobile traffic volumes. The new swath of spectrum frequencies could help carriers keep up with consumer demand for services such as wireless streaming of video and music.

The five-member FCC will be presented with a new timetable for the auction early next year before a planned vote, Wheeler said. During the second half of 2014, he said, public comments will be accepted regarding how specific parts of the auction are to function.

New Timetable

Wheeler’s move changes a timeframe put in place by his predecessors, former Chairman Julius Genachowski and former acting Chairwoman Mignon Clyburn, for an auction to be completed in 2014. The FCC still hadn’t put in place rules for the auction, such as whether to limit how much spectrum one company can own.

“Getting the right policy and procedures for the auction is only half the job,” wrote Wheeler, who took office Nov. 4. “For the incentive auction to be a success, we must also ensure that the operating systems and software to run it work from the moment the first bid is placed, until the final broadcast station is relocated or ‘repacked.’”

Wheeler said the technology for the incentive auction will be demonstrated for participants in a “mock auction” and tested before the actual sale.

Gordon Smith, president of the Washington-based National Association of Broadcasters, said in a statement that “given the complexity of the auction and its many moving parts, the most important goal is to get the auction done right.”

‘Some Comfort’

Christopher King, an analyst with Stifel Nicolaus & Co., said the new timetable “provides some comfort for broadcasters” such as the Walt Disney Co. (DIS:US), CBS Corp. (CBS:US), and Twenty-First Century Fox Inc. (FOXA:US) “who have voiced concerns about what they said was the FCC’s rush to hold the auction.”

The delay also “gives the broadcasters more information to determine their likelihood of participation,” Marci Ryvicker, senior analyst for Wells Fargo Securities LLC, said in a note to clients yesterday. “We actually think that the longer this auction is delayed, the better it is for those with unused spectrum (we would highlight DISH here).”

Joan Marsh, vice president of federal regulatory for AT&T, the second-largest U.S. wireless provider after Verizon, said in an e-mailed statement that while the company “is eager to see new spectrum allocations brought to market as soon as practical, we appreciate the enormity of the task the Commission faces and believe that it is essential that time be taken to get it right.”

The broadcaster airwaves, in the 600 megahertz band, are “prime real estate” for wireless services, as signals can travel farther and penetrate buildings and walls, he said.

“There may not be another big tranche of good, valuable spectrum put on the markets in the near future,” Silva said. “Therefore, it’s probably better to get it right than to adhere to an artificial deadline.”

To contact the reporter on this story: Elizabeth Wasserman in Washington at ewasserman2@bloomberg.net

To contact the editor responsible for this story: Bernard Kohn at bkohn2@bloomberg.net


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