Federal Communications Commission

Business Challenge

The Federal Communications Commission manages the radio frequency spectrum used for communications purposes within the U.S. As spectrum is a finite resource, the FCC used analytics and operations research to determine that over-the-air TV stations could be rearranged onto fewer channels using less spectrum, which could then be reallocated for other uses. Based in part on the results of this research, Congress directed the Commission to conduct the world’s first two-sided “incentive auction” using market incentives to reallocate some of the spectrum used for over-the-air broadcast television to mobile broadband uses to meet the ever-increasing demand for mobile broadband, “5G,” and other wireless communications technologies.

Analytics Solution

The Incentive Auction required more than a typical simultaneous two-sided exchange for a largely homogeneous commodity, such as those used for stock or commodity trades. The FCC therefore created a simultaneous two-sided auction where what was being sold by broadcasters was not what was being bought by wireless carriers, and where the collection of goods within both the “Buy” and the “Sell” markets were heterogeneous.

Overcoming the many challenges required the analysis of massive amounts of data, the creation of complex optimization and feasibility models, new solution techniques, and the determination of appropriate policy objectives to serve American consumers, the wireless industry, and television broadcasters. Off-the-shelf commercial solvers couldn’t solve the many hurdles. New algorithms, heuristics, and other tools developed by the FCC’s analytics team were therefore used in every aspect of the auction, from the earliest planning stages to determining price offers in the reverse auction and calculating how much spectrum could be offered for sale.

Impact

The auction repurposed 84 MHz of spectrum and created a unified North American band plan. Wireless companies paid more than $19 billion for the new spectrum, while TV broadcasters received over $10 billion. More than $7.3 billion has gone to the U.S. Treasury for deficit reduction. The repurposed spectrum will fuel the growth of new technologies essential to the American economy, including next-generation “5G” services such as the Internet of Things.