Nº 2 2015 > Special Report on the Digital Switchover

Digital switchover in the United States and subsequent plans for a 600 MHz incentive auction

The transition to digital television in the United States took place in 2009. Rather than adopting an area-by-area approach to digital switchover, all analogue television stations ceased transmission simultaneously. This was facilitated by a pilot test in North Carolina, which took place a year before the full switchover date.

Digital switchover in the United States and subsequent plans for a 600 MHz incentive auction

Digital switchover in the United States was enabled by the development and adoption of the Advanced Television Systems Committee’s (ATSC) digital television standard. Like other digital terrestrial television standards, such as the Digital Video Broadcasting — Terrestrial (DVB‑T) and Integrated Services Digital Broadcasting — Terrestrial (ISDB‑T) standards, the ATSC standard enables digital television broadcasts to be provided using significantly less bandwidth than for analogue, allowing channels to be compressed into a smaller amount of spectrum. This produced a digital dividend for the United States — the 700 MHz band for mobile use.

Analogue switch-off

The original analogue switch-off date set by the United States Congress was at the end of 2006. However, as the condition of 85% of households having a digital tuner capable of receiving digital broadcasts was not met in time, the deadline was postponed to 2009.

Ahead of this, in 2008, the Federal Communications Commission (FCC) auctioned the digital dividend frequencies in the 700 MHz band. This process, officially known as Auction 73, commenced on 24 January 2008 and sold the rights to operate mobile networks in the 700 MHz band before the digital switchover was finalized on 17 February 2009.

The early digital switchover in the United States can be attributed mainly to the relatively small number of homes that rely on antenna and terrestrial services to watch television (7% in 2013, down from 16% in 2003 and 9% in 2012). Instead, the majority of consumers subscribe to cable, Internet protocol television or satellite services, or increasingly consume television via Internet services such as Netflix or Hulu.

Awarding the digital dividend

Digital switchover in the United States initially freed up a total of 108 MHz of spectrum (698 MHz–806 MHz) for mobile use. It was planned that Auction 73 would assign a total of 2×28 MHz of paired spectrum and 6 MHz of unpaired spectrum for mobile use, while 2×12 MHz of spectrum was reserved for public safety (see Figure 1).

Block A and E licences were offered for each of the 176 larger areas referred to as economic areas, while those for Block B were offered for each of the 734 much smaller cellular market areas. The 2×11 MHz Block C was offered for each of ten regional economic area groupings. Six of the ten regional economic area groupings make up the continental United States, while the remaining four comprise Alaska, Hawaii and outlying United States territories. The 2×5 MHz D Block was offered in one national licence. The D Block spectrum was subject to significant constraints as all devices operating in the block must be supportive of spectrum sharing with public safety devices.

The auction concluded on 20 March 2008 with 1090 provisionally winning bids covering 1091 licences and totalling USD 19.6 billion, with the provisionally winning bids for the A, B, C and E Block licences exceeding the aggregate reserve prices for those blocks. However, as the provisionally winning bid for the D Block (public safety) licence did not achieve the reserve price, it remained unsold. As a result, 1090 licences were awarded to 101 bidders, and 9 licences remained in the hands of the FCC. As shown in the table, Auction 73 raised a total USD 19.0 billion in net winning bids.

The auction of the D Block spectrum was never rescheduled, and on 17 February 2012, the United States Congress agreed to administratively assign the full D Block to public safety in order to support the development of a mission-critical, nationwide public safety broadband network.

Subsequent mobile market developments

After the 700 MHz auction, and following a series of spectrum purchases and acquisitions between different wireless carriers in the United States market, mobile spectrum is now split relatively unequally across the major mobile service providers, as shown in Table 1 and Figure 2. There are also significant regional variations, as illustrated in Figure 3, resulting from the structure of FCC’s auctions, in which licences are sold on a regional basis rather than nationally.

Four years after the award of the 700 MHz spectrum, plans were announced to proceed with the replanning of further UHF television spectrum in the United States, below the 700 MHz band. It was proposed that this replanning would be achieved through the use of an innovative “incentive auction”, enabling the transfer of spectrum between broadcasters and mobile operators during the auction.

In February 2012, the United States Congress authorized the FCC to begin preparations for an auction of broadcast television spectrum in the 600 MHz band. The incentive auction is designed to be a voluntary mechanism that encourages broadcasters to relinquish their spectrum usage rights in exchange for a share of the proceeds of the auction. The FCC has stated that it expects a number of broadcasters to be interested in participating, particularly in geographical areas where terrestrial distribution is expensive relative to the revenue that it generates.

As involvement in the auction is voluntary, it is not guaranteed that all current UHF spectrum licence holders will take part, while some licence holders may wish to relinquish only part of their licensed spectrum. Hence the FCC has the authority to change the frequencies covered by the broadcasting licences that remain in place after the auction, in order that the spectrum blocks that are released through the auction are in a contiguous form suitable for mobile use.

Provisional award plans for the 600 MHz band

On 2 June 2014, FCC released the text of its Incentive Auction Report and Order, adopted on 15 May 2014, including the provisional rules for implementation of the auction. The FCC anticipates accepting applications for the auction in the fall of 2015 and starting the auction in early 2016.

The prices offered to participating broadcasters will vary based on factors such as location, potential for interference and the populations within the area that the spectrum covers. Prices will then be adjusted downward, with broadcasters allowed to drop out at any price, until there is no excess supply of bidding stations. This drop-out price determines the minimum payments that mobile operators are required to pay. If they choose to participate in the auction, broadcasters will have a number of options, involving either relinquishing frequencies or moving to alternative channels.

Due to the voluntary nature of broadcaster participation, it will not be possible for the FCC to set out a band plan until the reverse auction has been completed. The only constraint on the resulting band plan is that channel 37 (608–614 MHz), used for wireless medical telemetry services and radio astronomy service purposes, is not to be relocated. Provisionally, FCC has stated that it plans to convert the 6 MHz broadcasting channels into 5 MHz building blocks, to be used in the creation of mobile paired uplink and downlink spectrum blocks.

Once this band plan has been finalized, the forward auction (for mobile operators bidding on the newly released spectrum) will take place. This will include an ascending clock format, in which prices start low and are adjusted upward, and operators bid for generic spectrum blocks. If the final bids submitted in the forward auction (where there is no excess demand for licences) are sufficient to cover the incentive payments to the broadcasters, then the incentive auction will close. After the completion of this forward auction, an assignment round will be held, allowing bidders to select specific spectrum blocks.

After the finalization of the auction and the payment of broadcasters, those broadcasters that have chosen to go off-air or to share a channel will have three months to clear their channels, while those broadcasters opting to relinquish their current channel and move to alternative frequencies will have 39 months to complete the transition and cease operation on their original channel. These repackaged channels will be eligible for a share of a USD 1.75 billion reallocation fund, to cover up to 80% of reallocation costs for commercial operators and multichannel video programming distributors, and 90% for non-commercial stations.

Through this planned auction, it is expected that a further portion of the UHF spectrum, below 700 MHz, will be released for mobile use in the United States, starting immediately below the current 700 MHz band and potentially extending down to below 600 MHz.


 

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