The system that underpins wireless communication in the United States is about to dramatically change. In a massive, complex undertaking that will be unfolding for years, the federal government will shuffle the airwaves that carry TV and wireless signals to consumers, making room for the next generation of service. Billions of dollars will change hands, giant companies will fight, and the machinery of transmission will be overhauled across the country — all to make sure you'll keep getting a good broadband signal on your phone, with (ideally) little change in how you watch TV.

Last month, the Federal Communications Commission kicked off the broadcast incentive auction, starting the chain of events that will lead to the restructuring. By the end of the month, the FCC is expected to finish an early round of the auction, an agency spokesperson told The Verge. Here's a brief look at how the auction works, and how it'll affect you.

What is the auction?

The broadcast incentive auction is a never-before-attempted (at least, not in this way) plan to free up wireless airwaves. The basic outline looks like this: TV broadcasters will sell their licensed airwaves — known as spectrum — to make room for wireless service providers, with the FCC acting as the middleman to determine prices and organize the handover.

Okay — so, why?

One big reason is something called "spectrum crunch." In short, people are using wireless data at a rate that could eventually lead to slower speeds, as there isn't enough spectrum to meet demand. To fight back that nightmare scenario, Congress authorized the National Broadband Plan in 2012, tasking the FCC with conducting the auction. By some clever rearrangement in markets around the US, airwaves set aside for TV broadcasts will be repurposed for wireless, hopefully offsetting that problem.

Step one is a "reverse" auction

Where did the broadcasters get their spectrum?

Decades ago, the FCC freely gave away spectrum to local stations, and now they have the opportunity to sell off some space. Many will be looking at a huge pay day, either by vacating that space entirely or by doubling up through channel-sharing technology on spectrum already occupied by other stations.

So how does it work?

It's complicated. Step one is a "reverse" auction. In your standard auction, bidders offer the maximum they're willing to pay, driving up the price of the product. In a reverse auction, or "Dutch" auction, a single buyer makes an offer of payment to multiple sellers. The buyer slowly lowers its offer, and the sellers unwilling to sell for the lower price drop out of bidding, until a final selling price is reached.

That's what the FCC is doing with the TV broadcasters, which include independent stations or local affiliates of major broadcasters, such as CBS or ABC. Before it does anything else, the agency needs to know which broadcasters are willing to sell their airwaves, and at what price. The TV broadcasters are sitting on valuable spectrum real estate that the FCC can change into much-needed wireless service. To that end, the agency has already issued notices to broadcasters across the country, making initial offers and asking broadcasters if they'd like to participate. (One New York City Telemundo affiliate was offered $900 million by the FCC to start.) Soon, those prices will drop and drop, until the FCC has spectrum it can work with at the right price. The TV broadcasters — whether they participated or not — can either elect to go off the air entirely or move to share space with someone else on the spectrum. Eventually, all of the broadcasters will be pushed together on the spectrum, freeing up room for the second phase of the plan.

Which is?

A second, "forward" auction. Once all of the broadcasters have made their bids or have decided to sit out but have been assigned a slot in the airwaves, the FCC asks companies interested in buying spectrum for wireless service to start bidding. In traditional auction format, the buyers make offers for the airwaves that the FCC has opened up in markets around the country, and will dole out spectrum space based on the bids.

There's also a "forward" auction

Once the bidding hits a certain dollar amount, the FCC will also organize a "reserve" spectrum auction, where just the smaller wireless providers can bid against each other, away from the bigger players. The FCC is setting up the reserve to encourage the smaller companies to duke it out with bigger companies, increasing competition to ultimately improve options for consumers. However, how much spectrum to allot for the reserve has been the subject of some controversy among wireless providers.

The money the FCC earns from that auction will be turned around to pay for the FCC's expenses to run the auction, and pay for any expenses broadcasters have for switching over to their new spots on the spectrum band. Anything extra goes to the federal government. It's expected that the auction will pay for itself, and maybe raise billions of dollars extra as well.

Who's involved in all of this?

Companies running local TV broadcasts across the country, big communications companies like Comcast, as well as Verizon, AT&T, and T-Mobile (Sprint has said it's sitting out), along with several other, smaller wireless providers hoping to make an impact.

Any extra money goes to the federal government

So the wireless providers have what they wanted, the TV broadcasters have been paid, and we're all done.

Not even close. The last part — transitioning the TV broadcasters — will take 39 months, and the FCC is still working out exactly how to do it. The changes will require a schedule across the country, as replacing equipment will need to consider factors like weather (which months will it be difficult to make those equipment changes?) and geography (if a broadcaster makes a change in Seattle, how will it affect TV service in surrounding areas?). We're looking at around 2020 before it all shakes out.

And then wireless service providers will set up shop?

Yes, which will take some time, too.

What does this mean for you?

For TV, not too much. Some local stations may cash out and go off the air entirely, while others who need to change spots on the airwaves may go out of over-the-air access in some areas. As for wireless service: if all goes according to plan, the FCC hopes the auction will position the US to meet mobile broadband demand, meaning you should have speedy data on your devices well into the future.

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