In his February 24 speech to the New America Foundation, FCC Chairman Julius Genachowski hinted at some of the ways the FCC hopes to find 500 MHz of spectrum to free up over the next 10 years. An obvious source will come from coordinating with the NTIA to identify federal spectrum that can be reassigned to commercial uses, but the FCC is also looking at incumbent FCC licensees, including broadcasters. Chairman Genachowski spoke of a “Mobile Future Auction,” which is a two-sided auction in which incumbent licensees, including TV broadcasters, could voluntarily relinquish their existing licenses in exchange for a portion of the proceeds.

The idea of giving incumbents financial incentives to relinquish their licenses so the spectrum could be put to other uses is nothing new at the FCC, which has long sought a way of reclaiming unused or underused spectrum licenses. Money talks, so the most logical incentive always seems to be cold hard cash. The idea of paying licensees to move off of their spectrum was the topic of a 2002 FCC “working paper” by Evan Kwerel and John Williams titled, “A Proposal for a Rapid Transition to Market Allocation of Spectrum.” The authors put forth the idea of band restructuring by allowing incumbent licensees “to keep the proceeds from the sale of their spectrum.” It seems the timing couldn’t be better because the Chairman is now proposing that incumbents keep a yet-to-be-defined “share” of auction proceeds.

Of course nothing is as simple as it seems. The logic and mathematics behind a combinatorial two-sided exchange can be very complex. Dr. Karla Hoffman and Dinesh Menon have a paper in the forthcoming March 2010 issue of the Journal of the Institute for Operations Research and the Management Sciences in which they describe a practical combinatorial clock exchange for spectrum licenses. Their work grew out of ideas we developed at the FCC in 2007, and the FCC went so far as to build a software prototype of such an exchange for testing purposes. To date no test results have been released, but the idea of a spectrum exchange has clearly moved from that of a policy think-piece to a piece of software, and with the nod from the Chairman, it could become reality in the coming years. The auction mechanism would facilitate a voluntary transition of broadcast spectrum, and any other spectrum for that matter, to the mobile carriers who have a bottomless appetite for the stuff.