Let’s face it, most people don’t know that there is a big airwave auction, and even those who know there is one haven’t figured out how it works or perhaps even why they should care.
Luckily, we at Re/code love details and have headed deep into the weeds and resurfaced just in time to explain things before the list of bidders comes out.
For those who just want a one-paragraph explanation, here it is: The federal government controls the use of the airwaves, or spectrum, and right now TV broadcasters have more than they need; wireless carriers (new and emerging) badly need more spectrum so their customers can all watch Netflix on their phones. To facilitate this, the FCC is running a two-part auction to try to transfer as much spectrum as possible while making a little dough for Uncle Sam.
Okay, that’s the gist. Now here are the details:
How does the auction work?
First up, the government has to find out who might be interested in selling and who might be up for buying spectrum. That process is already under way.
After figuring out who the possible players are, the next step is to see how much of their airwaves broadcasters are willing to give up. Ideally, the government would like to get upward of 125 MHz of spectrum nationwide. To do that it will buy up spectrum and then move around the channels allocated to TV stations so that a big chunk at one end of the UHF spectrum is free to be auctioned off to those that want to offer wireless service.
This first part is being done as what is known as a reverse auction. That means that the government starts off offering its highest possible price and then sees who is willing to sell for less than that. The auction ends when the government finds the cheapest price it can for the amount of spectrum it wants.
The government is buying a bunch of airwaves back from the broadcasters. It will then take those airwaves it just re-acquired and auction them off, a piece at a time, to companies that want to use the spectrum for wireless communications. Companies bid on a particular amount of spectrum in a particular market.
Here’s where things get a bit (more) complicated. The FCC has set aside a certain chunk of the airwaves up for auction (though not as much as T-Mobile had wanted) to go to companies that don’t already own a ton of airwaves (namely AT&T and Verizon). It’s doing things a bit different in the hope that saving some spectrum for the have-nots won’t hurt the overall proceeds of the auction.
How long will all this take?
Not as long as you would think. It has taken years to get to this point (the auction was first proposed in 2010 and approved by Congress in 2012), but things are actually moving pretty quickly now. The list of potential bidders is likely to come out sometime this week or next.
The reverse auction to acquire the spectrum is expected to start at the end of March and go through late April. The second auction, where people bid to acquire spectrum, is expected to take place in June or July.
How much could the auction raise?
We won’t really know until the auction is done. Some have speculated it could be $60 billion to $80 billion, though AT&T Mobility CEO Glenn Lurie has expressed skepticism of that.
Who’s in and who’s out as far as the bidders go?
AT&T, Dish and T-Mobile have said they are interested. Sprint has said it is out. Some upstarts have said they will bid, notably a group backed by Social Capital’s Chamath Palihapitiya. Comcast could be both a buyer and a seller. A list of potential buyers should come out this week, an FCC official told Re/code.
Wait a second. Why doesn’t Comcast just use the TV spectrum they have to operate wireless?
They can’t. The FCC licenses are granted for a particular chunk of airwaves and for a particular purpose. If Comcast wants to give up some TV space and buy space for wireless it will have to first offer up its TV space and then compete with other wireless buyers in the auction.
Does this mean my cell service will get better? If so, when?
Yes, but don’t hold your breath. This auction is an effort to address long-term spectrum needs. In order to benefit, the broadcasters will have to be moved, then service providers can place new gear capable of broadcasting in the new frequencies and, finally, devices will have to be created that also work in the new frequencies. Think in terms of a few years before this spectrum is in active use.
This is great, but I want to know even more about the auction.
The FCC has a ton of information here. Also, you might want to seek some professional help.
This article originally appeared on Recode.net.