FCC May Pay Broadcasters for Airwaves

The Federal Communications Commission is considering a plan to pay broadcasters to vacate airwaves it could use to alleviate network strain caused by the surging use of smartphones such as the iPhone, an FCC official said.

Regulators are weighing the compensation as part of a larger effort to improve access to high-speed Internet connections, says the official, who asked not to be identified because the plan is not yet public. The National Broadband Plan is due to be delivered to Congress in March.

FCC Chairman Julius Genachowski in October warned of a "looming spectrum crisis," saying it poses a threat to U.S. mobile communications. Genachowski's staff, in the broadband plan, will outline ways to make additional spectrum available. The plan may propose using revenue from airwave auctions to pay existing users to exit airwaves, the FCC official says.

Clogged Networks

"One of the options we are considering is compensating incumbent users to vacate, perhaps by receiving a share of the proceeds, subject to congressional approval," the official says. "We know there's a spectrum crunch; we are just trying to come up with options."

The government is looking for ways to cope as consumers step up use of mobile handsets including Apple's (AAPL) iPhone, Research In Motion's (RIMM) BlackBerry, and devices running the Android operating system, developed by a Google (GOOG)-led group. The surging data use results in clogged networks and dropped calls for companies such as AT&T (T).

The FCC in December asked the public for comment on whether broadcasters should relinquish some airwaves. Blair Levin, the FCC official who is overseeing the drafting of the broadband plan, said in December he wanted to explore "the idea that some broadcasters might wish to sell their spectrum in a way that benefits them and the country."

Typically, the government keeps proceeds from airwave auctions. Two recent big auctions alone generated $33.5 billion. New auctions could raise "tens of billions of dollars," says Peter Cramton, an economist at the University of Maryland at College Park. In the next decade, the government may need to double the amount of spectrum available, he says.

Broadcasters May Be Reluctant

There's no guarantee that Congress will approve the FCC's recommendation or that broadcasters will accept payment in exchange for relinquishing airwaves they could use to expand in areas including mobile digital TV (DTV), says Dennis Wharton, a spokesman for the National Association of Broadcasters, a Washington-based trade group.

"The broadcasters that I talk to are excited about the future, and particularly the opportunities afforded by live and local mobile DTV," Wharton says in an e-mailed statement. "They have no interest in 'cashing out' based on a speculative promise from the FCC that we will be receiving money in exchange for spectrum."

Broadcasters could free up some of their airwaves for high-speed wireless purposes while continuing to provide over-the-air broadcasts at other frequencies, Coleman Bazelon, a Washington-based analyst at The Brattle Group, wrote in an October paper submitted to the FCC.

That scenario would free up an estimated $48 billion in spectrum and involve paying broadcasters about $6 billion, according to the research. Redeploying the spectrum would have "far-reaching economic and social benefits," Bazelon wrote. "Not doing anything is a costly option."