FCC Mulls How Spectrum Auction Will Work

The FCC is trying to figure out how to handle bidding as broadcasters put a price on vacating spectrum so it can be sold to wireless companies. More than one type of auction process is under consideration, so broadcasters are being urged to file comments on what would work best.

The first “incentive auction” to clear some broadcast TV spectrum for sale to wireless operators is on the fast-track, but there are still important details to be worked out on just how the process will work so that enough broadcasters are willing to participate. FCC officials spelled out some of the financial options in a PricewaterhouseCoopers LLP (PwC) webcast Monday and urged listeners to file comments as the commission works to write rules for the auction.

Just how the price to be paid to broadcasters willing to go off the air, relocate from UHF to VHF or possibly accept additional interference (a possibility still up for consideration) will be set is key to making the auction process work. Speaking on the PwC webcast, William Lake, chief of the FCC’s Media Bureau, spelled out two options.

First is the possibility of conducting a single round auction using sealed bids. Each broadcaster would set a price for vacating its spectrum and the FCC would accept the lowest (cheapest) bids which collectively cleared enough spectrum to meet the demand by spectrum buyers in that market. Even there, though, there’s a question yet to ponder. Would each seller get the price they offered their spectrum for, or would all get the same amount — the highest price of any bid accepted to get the FCC to the amount of spectrum needed in the market?

The other possibility is a multi-round auction, described as a “descending clock auction.”

“Rather than have the broadcasters give us a price, the commission would set a price. We would start with a very high price in a particular market,” Lake explained, picking some random numbers to illustrate.

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“Who’s willing to contribute their spectrum for 100? If we pick that opening price high, we should get a lot of offers. Then, we’d say, that’s more spectrum than we need. Who would be still willing for 90? And presumably as we ticked the clock down individual broadcasters would compare that price to what they think their station is worth and one-by-one they would drop out of the auction. We would stop the auction when we have … the right number of continuing offers,” Lane said.

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All TV channel allocations are 6 MHz, but not all broadcast allocations are equal, so there may have to be weighting in the auction process. Lane said the FCC will consider whether to give higher priority to broadcasters willing to sell who serve a larger service area and would contribute more to the goal of spectrum clearing.

The complexity of the auction process explains why the FCC has extended the deadline for comments on its Notice of Proposed Rulemaking to Jan. 25, with reply comments due March 26.

Representing NAB on the PwC webcast, Rick Kaplan, EVP strategic planning, noted that dollars alone may not be what broadcasters look at in deciding whether to participate in the auction. He said a station owner in Los Angeles might look at the station’s value to their community in evaluating whether they wanted to cash out.

Such non-economic analyses could limit broadcaster participation. Lane had earlier shown a slide which claimed that 83 stations in the top 10 DMAs account for less than 5% of TV industry ad revenues.

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Rebecca Hanson, senior adviser-broadcast spectrum, FCC, emphasized that going off the air isn’t the only option being offered to broadcasters in the auction.

“Many broadcasters are dedicated to the public service that they provide to their communities. So it was very important to us to offer ways to participate in the auction that allowed them to stay on the air at the same time. How a broadcaster would value any of those options — one way to look at that is what the opportunity cost is. Going off the air — people sell stations all the time. There are valuation experts and M&A contacts. You can figure out that valuation. But with, for example, channel sharing, I think a broadcaster could say, well am I programming my multicast streams? If I’m not, then what would be the opportunity cost of me not being able to program those in the future? Put a dollar amount on that and that could be the basis for a bid,” Hanson said.

“With the example of moving from UHF to VHF — with that example the broadcaster wouldn’t give up capacity, but they’d be giving up some coverage,” she added. So the broadcaster could put a value on the losing some over-the-air viewers, but still having its cable/satellite distribution. And she noted difficulties with doing mobile TV in the VHF band. The FCC is hoping broadcasters will put a price tag on such moves and participate in the auction process.

With so much of the auction process and nationwide repacking of the TV band to clear spectrum hinging on a few key markets, TVNewsCheck asked whether it was possible that the FCC would be willing to lose money in a specific market to buy back enough spectrum to make the repacking work — and presumably still return a nationwide profit to the U.S. Treasury from the auction.

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“We have not read the statute to confine our break-even or cost coverage to be on a market-by-market basis,” Hanson replied.

Just how much spectrum the FCC will clear will be determined by market demand. The objective is to have a nationwide swath of downlink spectrum beginning at ch. 36 and moving downward by whatever amount is cleared by the auction. That would allow for nationwide use by consumer devices. The uplink spectrum for wireless operators would begin at ch. 51 and work down, but the width of the vacated spectrum could vary by region.

The FCC’s engineers have their work cut out for them in repacking the remaining TV spectrum and even in dividing up the cleared spectrum for auction. The TV channels are 6 MHz, but wireless spectrum is typically auctioned in 5 MHz blocks. The FCC also has to decide on geographic areas for the auction to wireless operators.

Hanson and Lake repeated the FCC’s timetable of completing the auction rules in 2013 and conducting the auctions in 2014. Many observers expect those targets to slip. As for when the TV repacking will take place, Hanson noted that the law gives the commission three years to distribute funds allocated to pay for the channel relocation of broadcasters who don’t participate in the auction.


Comments (16)

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Jason Roberts says:

December 4, 2012 at 9:00 am

The wireless industry is awash in spectrum. Here in Miami local educators have leased at least the EBS A, B, C, D and F groups to wireless interests, a total of 16 EBS 5.5 Mhz channels and 2 6MHz Mid-Band channels (after allowance of EBS interests retaining two Midband channels). The spectrum scarcity driving the TV auction is a manufactured scarcity, based on the government’s unwillingness to require efficient use of wireless spectrum. Indeed the government has authorized the use of wireless spectrum for backhaul, thus doubling the amount of spectrum needed to complete a single communication. This phony crisis suits the political needs of both the wireless industry (which has been steadily acquiring UHF television spectrum for decades) and politicians of both political parties (who are casting around for a relatively painless means of reducing the Federal budget deficit. It is incredibly sad to recognize that our government turned every analog television set in the United States into a paperweight, solely for the purpose of selling television spectrum.

    Teri Green says:

    December 4, 2012 at 10:00 am

    First of all you’re not wrong. Everything you say is correct, but you could also say that about TV. The allocations are a complete and utter mess, harking back to the days of AM Radio,where anyone could put up a directional antenna and broadcast. Digital TV standard is hopeless outdated and doesn’t work in urban environments very we..

    President Obama has already declared America’s future is in broadband and the broadband will be wireless.This faulty as well as fiber should be the future. If we can string every home (virtually) in America with electric via programs like the REA, we could easily do so with fiber. But we won’t because business has Obama and ALL of Congress in their pockets. Indeed ATT dosn’t even want my business. I tried to upgrade to Uverse, I live in Chicago and the CSR told me, I couldn’t go faster than 6.0 (which I have on DSL) so I can’t switch to Uverse and Uverse isn’t available in my part of Chicago. Nice ATT strung only the rich parts I guess.

    Remember the area code crisis. Same thing we had lots of numbers inefficient use. Same thing here lots of spectrum but we need to redo TV, YES AGAIN, so it can be the latest technology and ensure future upgrades are via firmware.

    Christina Perez says:

    December 4, 2012 at 10:37 am

    It’s not only a phony crisis — it’s legally dead on arrival. The airwaves belong to the American people. Stations are mere licensees with no property rights to the electromagnetic spectrum. The courts have so ruled in the past, and they will no doubt do so again. The hubris of the current FCC chairman is beyond comprehension. Is he protecting the public interest, or the interests of his broadband-telco cronies, and possible future employer(s)?

Todd Barkes says:

December 4, 2012 at 9:10 am

I suggest the “Spectrum Screen” comment/filing made by Prof. Jon Peha at the request of Public Knowledge represents a coherent view of spectrum usefulness (FCC Docket 12-269 filing). Yes, we have a fabricated crisis, and yes, broadcasting is under fire. But, if the regulatory strait-jacket that keeps broadcasting out of technological innovation were lifted, we could meet the capacity end of the mobile video consumption wants of the American public. There is a solution, but the wireless industries (remember…we ARE wireless!) need to have a collective discussion before going to war. I can show a solution exists!

Matthew Castonguay says:

December 4, 2012 at 10:10 am

Mark, you better figure out how Uncle Sam gets a big slice ($) first.

Maria Black says:

December 4, 2012 at 10:52 am

yes, the electromagnetic spectrum is nothing one can own. But if we didn’t have a system of regulating the use of this, much like waterways and roads, the chaos would be counterproductive. Do I think our government is not really doing anything helpful? Yes. Do I think we should sort out this mess? Yes. I don’t know about you guys, but I have bunny ears and Netflix. And if I suddenly lost the ability to turn on my TV and get reliable channels, with some sort of system of oversight, I’d never watch TV again. Yes, these broadcasters do not own the spectrum, but they have agreed to handle this public resource in a certain manner and paid money to do so. Relinquishing that right deserves compensation. Its good that the FCC is requesting feedback and entertaining options! Its fantastic they aren’t blindly rushing into this. Take your ham radio and tune into your AM station if you don’t like it, and never turn on a TV again.

    Christina Perez says:

    December 4, 2012 at 11:25 am

    A broadcast license is not a “right”; it is a privilege. Renters don’t get a cut of the action when the landlord sells the building, and broadcasters have no legal claim to any remuneration for the “voluntary” relinquishment of spectrum that broadcasters do not own. I’m betting that “SalesGrrl” is a paid military contractor employee assigned to web-spam internet trade journals.

    Maria Black says:

    December 4, 2012 at 5:35 pm

    I work for a small women owned business, where we have under 10 employees. Our industry directly relates to television services. I see your posts all the time, and i’m fairly certain you are some tea party anarchist hippie who doesn’t think “the man” should be trusted. Get real! for all your spouting of “freedom” you fail to realize that your ideals are NOT reality, and your disenchanted harping isn’t going to solve an issue. Fact: specturm exists. Fact: some of it isn’t being used. Fact: letting people run amok doesn’t create a useful service.

    Christina Perez says:

    December 4, 2012 at 6:17 pm

    Well,since paid psyops web-spammers are my biggest fans, I’m not surprised that you see my posts “all the time.” Hey, everybody’s got to make a buck…

Bobbi Proctor says:

December 4, 2012 at 11:53 am

This whole process ignores we viewers who are enjoying great digital TV reception (better picture than cable) using antennas. The only interference concerns appear to be to the broadcasters who may not be concerned about all portions of their coverage areas. With TV now limited to channels 2 to 51, we already experience a lot of interference from stations on the same channel in adjacent markets causing a loss of signal or a lot of artifacts in the picture. Repacking the current stations will only add to this problem and VHF is certainly not the way to go. The FCC seems determined to close down some stations which will reduce the variety of programming available. Channel sharing is also not a good idea. It is OK to to share a channel like some are doing with HD on one and some great black & white reruns on another, but two HD (and that is the present standard) on one just doesn’t work. It is sad to see the government destroying broadcast TV when it has never been better especially as some say there is no shortage of spectrum anyway.

    Christina Perez says:

    December 4, 2012 at 11:57 am

    Some of that interference is being purposely and criminally generated by a military contractor for the Homeland Security- administered “threat fusion center” network — a malicious “psyop” (psychological operation) directed at so-called “targeted individuals,” but possibly a covert program funded by telecommunications companies who would like to see over-the-air television go away….

    Ellen Samrock says:

    December 4, 2012 at 1:15 pm

    Ignore the man wearing the pointy hat. The only solution I can see would be for broadcasters to build more booster stations in areas where their coverage is lost due to repacking and for the FCC to develop a streamlined CP process that will allow for the quick approval of these stations to get built.

    Bobbi Proctor says:

    December 4, 2012 at 1:46 pm

    If these “booster stations” are needed to fill in areas lost I think it would only result in more interference. It is clear, the FCC is trying to repack stations into too few frequencies. It will be like TV before the freeze in 1948. We will all lose. If a station doesn’t want to continue operating they should turn in their license and let someone else apply for it.

    Ellen Samrock says:

    December 4, 2012 at 7:11 pm

    Using stringent mask filtering techniques it can be done. But is it a cost-effective approach? For many stations, no.

Ellen Samrock says:

December 4, 2012 at 12:56 pm

It’s clear the FCC is stonewalling the spectrum inventory (and I think we can guess what it will reveal: that the spectrum crisis is a manufactured one). But does anyone at the FCC or in government know who really wants 600 MHz spectrum? We know the telcos are salivating over the prospect of losing a competitor, namely the end of OTA television, but there is little indication that any of them want this spectrum. Engineers have stated many times that it is not well suited to handheld devices like phones and pads. Verizon couldn’t wait to rid itself of its 700 MHz holdings. So does the government seriously think that Verizon (or any other wireless provider) will jump at the chance to buy spectrum on a lower band? This administration has such a blind hatred for broadcasting, and commercial broadcasting in particular, that all common sense has been cast aside. Unfortunately for those of us who rely on broadcasting for entertainment, information and our livelihoods are powerless to stop it.

    Christina Perez says:

    December 4, 2012 at 3:52 pm

    Well stated.


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