The U.S. Federal Communications Commission (FCC) authorizes and manages the use of the radio frequencies (“spectrum”) that Americans use for communications purposes. The demand for spectrum has increased dramatically every year as myriads of new types of devices and uses for spectrum are being developed – and demanded by consumers and businesses. But spectrum is a finite natural resource that has become scarce as consumer, business, and governmental agency needs increase. Since new, unoccupied spectrum cannot be manufactured, one way to create supply to meet new demand is to repurpose spectrum from one use to another. The FCC won the 2018 Franz Edelman Competition.
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In 2012, based in part on the FCC’s preliminary operations research studies demonstrating the feasibility of the concept, Congress passed a law directing the FCC to relieve the “spectrum crunch” by conducting the world’s first two-sided “incentive auction” using market incentives to repurpose some over-the-air broadcast television spectrum to wireless communications services. The auction would offer television stations “incentive” payments to voluntarily relinquish their spectrum (i.e., TV channel assignments) and reassign the remaining television stations into the smaller segment of the spectrum allotted to television broadcasting after the auction. The vacated spectrum would then be converted from television broadcasting into expanded capacity for wireless communications services.
Conducting this auction required far more than the creation of a standard exchange for a largely homogeneous commodity. The television channels to be purchased in the auction differ in terms of the population they cover based on their location, frequency, and other factors. Adding significantly to the auction design challenges, the wireless spectrum “products” to be sold in the auction would not be usable by wireless service providers unless reconfigured into contiguous blocks whose dimensions differ in both frequency and geographic scope from the broadcast licenses. This required the FCC to use innovative operations research techniques and analytics to create a successful auction.
The FCC was required to determine how much spectrum was available to be repurposed, how to determine channel availability for nearly 3,000 stations across the United States and Canada on as few as 28 channels, and what new channel assignments would be feasible substitutes for television broadcasters who would remain on the air after the auction. This required analyzing massive quantities of data, creating optimization and feasibility models, and determining appropriate policy objectives to serve American consumers, the wireless industry, and television broadcasters. Without the use of operations research, the auction would not have been possible.
To solve these challenging problems, the FCC created two tools: (i) a distributed optimization solver to address all optimization problems, using Gurobi, combined with a set of custom heuristics and decomposition approaches to determine optimal or near optimal solutions, for each problem; and (ii) a highly customized portfolio of satisfiability solvers that determine, usually within a fraction of a second, whether a given station repacking was feasible or infeasible.
This unique and unprecedented auction generated nearly $20 billion in revenue from wireless providers, of which over $10 billion was paid to winning television broadcasters, $1.75 billion to support television stations required to switch to a new channel, and $7.3 billion to the U.S. Treasury to reduce the federal deficit. The auction repurposed 14 channels (84 MHz) of valuable low-band spectrum; 70 MHz for licensed use to support technologies like next-generation 5G mobile broadband and the Internet of Things, and 14 MHz for unlicensed use to support technologies like Wi-Fi and wireless microphones. The FCC’s use of optimization enabled the market to determine the maximum amount of spectrum to repurpose while giving all stations that remain on air a channel equivalent to their pre-auction channel. Importantly, these tools ultimately enabled the FCC to assign most of the remaining TV stations to their original channel, thereby significantly reducing transition costs and TV viewer inconvenience.
The FCC has continued to embrace operations research solutions, including using optimization to develop the post-auction transition schedule for broadcasters. This schedule helps broadcasters coordinate limited transition resources to enable all broadcasters to transition by the final deadline so that wireless providers can promptly use their newly acquired spectrum to provide expanded services to American consumers. The FCC also sees operations research as a pillar of its new Office of Economics and Analytics that will help to inform and improve future policy decisions. As the FCC’s Chairman recently stated, “The success of [operations research to solve complicated design and implementation challenges of the incentive auction] speaks for itself, and the team’s work is exemplary of the data-driven approach to policymaking that I believe should be this agency’s hallmark.” This ground-breaking auction has also created a new and powerful tool for managing spectrum use internationally.