incentive auctions

The Department of Justice is adding to the pressure on FCC Chairman Tom Wheeler to set aside a larger spectrum reserve in the broadcast incentive auction for bidders other than AT&T and Verizon. Writing to Wheeler, William Baer, the assistant attorney general for the DOJ, implored the chairman to use the broadcast incentive auction policies “to ensure that wireless carriers, other than those that currently hold the majority of low-frequency spectrum, have a meaningful opportunity to acquire the spectrum necessary to foster a competitive wireless market.”

In an analysis of what the Big 4 network-owned station groups might get in the upcoming auction, Todd Jueneger, senior analyst for AB Bernstein, wrote that “our most optimistic estimate for CBS, Fox, and NBC (Comcast) is $1.3-$1.5 billion … far below what … some companies have said is possible.”

When the FCC Incentive Auction task force released data on a simulation of the upcoming broadcast incentive spectrum auction Wednesday, GOP commissioners Ajit Pai and Michael O’Rielly promptly took the results and the process to task. Wheeler then pushed back in a press conference following the FCC’s regular monthly meeting on Thursday.

As the FCC continues to move toward an incentive auction in early 2016, the commission is reminding full-power and Class A television stations that there are certain actions they should take to make sure their facilities are subject to protection in the repacking process or eligible for relinquishment in the auction.

A Congressional Budget Office report is estimating that the FCC’s broadcast incentive auction could net the government between $10 billion and $40 billion. The mid-range estimate of the proceeds is $25 billion. The CBO did the analysis at the request of Sen. Dean Heller.

The pitch to television broadcasters this week was not easy for them to swallow. It is a good time, they were told, to sell their most precious resource. And so this week, at a major conference for broadcasters, officials from the FCC went into sales mode. Consider how much money you could make, they told the stations, and consider how little you risk by sitting at the bargaining table with us. Many stations seemed intrigued, if resignedly so. But they have been reluctant to commit, knowing that selling their airwaves could come at a price.

Stepping out from behind the podium in a symbolic gesture of breaking down barriers with a tough audience, FCC Chairman Tom Wheeler used his NAB Show keynote speech to return to now-familiar themes to convince broadcasters that the auction was a “once-in-a-lifetime opportunity.” He addressed some of the broadcasters’ questions, but not all of them, leaving the biggest concerns about the auction at home in Washington.

Estimates of the cost of the TV band repack following the FCC’s incentive auction next year range from $250 million to $1.25 billion more than the $1.75 billion the government has set aside.

The FCC continues to take its show on the road, announcing incentive auction seminars for TV broadcasters in several new cities. At these seminars, FCC officials meet with TV broadcasters in a general meeting to outline the mechanics of the proposed incentive auction to reclaim a portion of the TV band to be resold to wireless users for wireless broadband purposes, and the subsequent “repacking” when remaining TV stations will be assigned channels on which to operate in a smaller TV band.

In comments filed with the FCC last Friday, NAB said that the FCC’s best chance of matching the $40 billion success of the AWS-3 auction is by keeping the “rules simple, reducing the amount of government tinkering in the … process Congress envisioned and striving for a framework that embraces the auction’s enormous potential.”

Momentum for the FCC incentive auction in early 2016 is building. But it could be dissipated if the NAB doesn’t settle its repacking lawsuit against the FCC, demand for broadcast spectrum is less than advertised or the FCC gets bogged down in an ugly and protracted political fight over net neutrality.

Tribune Media CEO Peter Liguori: “We have crazy optionality with something like [selling spectrum],” he said. “We could sit here and line up six, seven, eight different options on how we can maximize that spectrum and really drive some shareholder value. Rest assured we look at it [the incentive auction] every day. We are active in the debate, we are monitoring the situation and we are sitting in a very good position.”

The agency releases study for broadcasters on how its incentive auction will work and how much they could make from selling their spectrum in the auction in every TV market. Hoping to encourage widespread participation, the study also includes a letter from the IRS providing guidance on the tax implications of selling spectrum in the auction.

Seeking to entice reluctant broadcasters to participate in its planned incentive auction of TV spectrum, the FCC is distributing today estimates of what stations might be worth in the auction — market by market. Figuring that broadband carriers will pay a total of $45 billion to buy 100 MHz of TV spectrum, the FCC says a full-power station in Los Angeles could get as much as $570 million and those in New York could bring as much as $490 million. Stations  adjacent to major markets like Wilkes-Barre/Scranton, Pa. ($150 million), and Palm Springs, Calif. ($180 million), could also make out.

It has been more than four months now since the FCC adopted a Report and Order for the forthcoming incentive auction of television broadcast spectrum. The number of the items that the FCC must resolve between now and the planned mid-2015 auction, however, continues to grow, including litigation by NAB and Sinclair Broadcast Group. Here’s a status report.

Some time next year, the FCC plans to hold a voluntary incentive auction in which it will attempt to entice broadcasters to relinquish some of their prime spectrum for mobile broadband use. Should the FCC allow the politics of net neutrality to interfere, however, the commission could blow one of the last great opportunities both to alleviate spectrum exhaust and to make a significant contribution toward deficit reduction without raising taxes.

Last June the FCC released its magnum opus (all 484 pages of it) laying the groundwork for the spectrum incentive auctions that (in the FCC’s fondest imaginings) may occur as early as next year. The FCC’s Report and Order has now been published in the Federal Register. As a result, we now know that the rules adopted by the commission are set to take effect on Sept. 9.

Chairman Tom Wheeler says the commission will provide estimates this summer and will also distribute information to broadcasters explaining why they should consider participating in the auction.

Among NAB’s major beefs is that the auction regulations released June 2 don’t protect broadcasters from the possibility that they may get stuck with at least part of the cost for moving to new TV channels during the post-auction channel repacking process.  “It’s clearly unacceptable,” says NAB’s Rick Kaplan.

On Thursday, the FCC adopted rules to implement its broadcast television incentive auction and released three documents relating to those rules, as well as separate statements from four of the five commissioners. At the meeting, the commissioners noted that, when released, the Report and Order will contain a number of rule changes to implement the auction. Here are the major takeaways.

The new regulations, which drew dissents from both of the agency’s GOP commissioners, could hurt broadcasters that don’t participate, NAB says. “The FCC cavalierly concluded that broadcasters forced into a shrunken TV band won’t be guaranteed full compensation for this disruptive move — as was the express intent of Congress,” says NAB’s Dennis Wharton

SPECTRUM & THE INCENTIVE AUCTION  SPECTRUM: THE AIRWAVES THAT CARRY COMMUNICATION SERVICES Across the country, in both rural and urban areas, consumers and businesses expect to have access to wireless […]

Under the FCC’s incentive auction proposal, spectrum repurposed for wireless services during the auction would have to be cleared no later than 39 months after the agency “repacking process becomes effective.

FCC Chairman Tom Wheeler wrote today: “Few FCC policies have generated more attention than the incentive auction. Getting the incentive auction right will revolutionize how spectrum is allocated. By marrying the economics of demand (think wireless providers) with the economics of current spectrum holders (think television broadcasters), the incentive auction will allow market forces to determine the highest and best use of spectrum. More immediately, the incentive auction will deliver tremendous benefits for U.S. consumers across the country.

Chairman Wheeler says he expects the commission would be ready to vote on major policy regulations for the spectrum auction by the spring of that year. Reaction from industry representatives favorable.

Oregon Republican Greg Walden tells an NAB Show audience that “We want the auctions to proceed but we do not want to wipe out small-power broadcasters,” adding, “voluntary means voluntary.”

The association’s comments to the FCC on proposed changes in how TV station coverage would be calculated are flawed and any changes should wait until after details on the proposed FCC incentive auction of spectrum are known.

Some of the best promotional copy ever written on behalf of broadcasters comes from Congress — and the latest to hail broadcast service are members of the Ohio delegation to the Hill, who ask that Ohio broadcasters emerge whole from the incentive auction due to their importance to residents of the state.

What if you could buy a 50-inch television, mount it anywhere in your house, and receive dozens of channels on it for free and without any futzing around? What if most or all broadcast signals, in their native form, were easily receivable on tablets and smartphones?

Association executives brief reporters on the group’s formal comments to the FCC on its incentive auction plans. CEO Gordon Smith emphasizes: “This should not be done in a rush; it should be done with deliberate speed; it’s more important to get this done right than to get it done right now.” NAB vows to protect stations that choose not to participate and fight to preserve the coverage and population areas of stations that are forced to move.

The commission says the new website “provides easy access to a range of useful information and resources that will help broadcasters and other stakeholders make more informed business decisions about participating in the incentive auction, which the FCC anticipates holding in 2014.”

Given that the FCC adopted its Notice of Proposed Rulemaking to establish the parameters of its much-anticipated broadcast spectrum auctions on Sept. 28, and released the text of that NPRM on Oct. 2, you would think that the communications industry would now be buzzing over the details of the FCC’s long-in-the-making plan. Instead, the industry doesn’t know much more now than it did before about how the auctions will be structured. Instead, we are left with many excellent but unanswered questions asked by the NPRM, leaving the auction rules and structure a very ethereal proposition.

By letting broadcasters share channels and not relinquish must-carry rights, the commission hopes to entice weak stations to double up (or even triple up) on channels, turn over spectrum to the FCC and participate in the voluntary “incentive” auction.

With the passage of legislation authorizing incentive auctions of TV spectrum for wireless broadband use, broadcasters scored a victory in getting numerous safeguards included. Good job. But if the FCC, broadcasters and broadband proponents could have found a way to work together, they could all have been winners. They could have found a plan that produces the extra spectrum that’s needed for broadband and improves rather than degrades broadcasting service.

The chief architect of the FCC’s National Broadband Plan says the incentive auction of TV spectrum is unlikely to produce much spectrum for wireless broadband or money for the federal treasury. Why? NAB-backed provisions designed to protect broadcasters in the authorizing legislation will expose the auction to crippling litigation. “Congratulations to [NAB President] Gordon Smith,” he says. “He did a great job. He did the job he was hired to do…. But let’s not kid ourselves: That’s not putting the United States first.”

Sen. John Kerry (D-Mass.), chairman of the Senate Communications Subcommittee, and Rep. Olympia Snowe (R-Maine) introduced a bill that would authorize incentive auctions and require the FCC and NTIA to conduct a spectrum inventory. It would allow the FCC to determine how much to compensate broadcasters for giving up spectrum, but would also try to prevent speculation in those licenses.