OPEN MIKE BY EOBC'S PRESTON PADDEN

FCC Auction Formula Shortchanges Stations

The FCC's proposed formula for calculating the prices it will offer broadcasters in the opening round of the incentive auction will result in at least 1,100 stations getting less than they deserve. The alternative that the Expanding Opportunities for Broadcasters Coalition is advocating would yield billions more for stations by tying their auction value to the interference they cause rather than their business value.

The FCC last December published its proposed formula for setting the starting prices broadcasters will see in the reverse auction.  The FCC formula undervalues all broadcast spectrum and impermissibly discriminates among broadcasters, underpricing at least 1,100 stations.

The FCC has said its goal is to “allow market forces to determine the highest and best use of spectrum.” Yet, the agency released its price formula for spectrum a month before the AWS-3 auction closed on Jan. 29 and that auction is the best and most current measure of the market value of spectrum.

The FCC formula for broadcasters does not reflect up-to-date “market forces” as the FCC has promised. This shortchanges all broadcasters.

The FCC has also said unequivocally that “a station with a high potential for interference will be offered a price that is higher than a station with less potential for interference to other stations.”

The FCC’s proposed price formula for broadcasters fails to fulfill this promise. Instead, the FCC formula yields prices hundreds of millions of dollars apart for stations with identical interference profiles and identical impact on clearing spectrum. This is wrong, unfair, not in accordance with the statute and legally unsustainable.

Take a look the coverage maps and the FCC’s starting prices for WIFR, the CBS affiliate in Rockford, Ill., and WTTW, a PBS station in Chicago. 

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Although WIFR has a larger interference profile than WTTW, its starting price from the FCC is $334 million less – a handicap from which it can never recover in an auction that only goes down.

Both stations block every station in Chicago.  The FCC’s own table of interference constraints lists 118 constraints for WIFR and only 116 for WTTW. WIFR blocks a population of 14.1 million, while WTTW blocks only 13.3 million.

Despite the FCC’s pledge that “a station with a high potential for interference will be offered a price that is higher than a station with less potential for interference to other stations,” the FCC’s formula yields exactly the opposite result.

The Expanding Opportunities for Broadcasters Coalition, which I represent, has offered a minor amendment to the FCC’s formula that raises the starting prices for every broadcast station owner and narrows, but does not eliminate, the price differential among stations with similar interference profiles.

This is not a matter of simply “inflating” prices.  All broadcasters deserve to be paid bona fide market prices based on their impact on clearing spectrum. To the EOBC, the FCC formula looks like a backdoor way to pay based on “enterprise value,” which the FCC promised not to do.

The EOBC is pleased that on March 13, more than 140 stations not members of the EOBC supported our price formula. These 140 stations included substantial numbers of NAB and APTS stations, and stations from both large and small markets.

We invite all broadcasters to visit our blog and check out your prices under the FCC formula and under our alternative. Also at our blog, you can find a list of the 1,100 broadcasters who get badly hurt by the FCC formula. And, that list is representative, not exhaustive.

The FCC has promised to be responsive to fact-based data driven input. It is hard to imagine more fact-based and data driven analysis than the EOBC has provided on the critical issue of starting prices. We now wait to see if and how the FCC responds.


Comments (2)

Leave a Reply

Warren Harmon says:

April 7, 2015 at 9:51 am

KEEP OTA, DON’T SELL

Ellen Samrock says:

April 7, 2015 at 10:38 am

Forget it, Preston. The Auction Valuation Express has left the station. You may not be on board, but the FCC sure is.


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