With spectrum auction looming, a community college questions the value of its public TV station

FRANKENLUST TOWNSHIP, MI -- The Delta College Board of Trustees says its doing its due diligence by deciding to initially participate in a national spectrum auction that's going to dramatically change the landscape of the broadcasting industry and potentially see the community college's public television station WDCQ go off the airwaves in exchange for millions of dollars.

At its meeting Tuesday, Dec. 8, the board unanimously approved a resolution to direct a three person committee to handle all auction-related activities. They must submit an application to the Federal Communications Commission by Jan. 12 in order to participate in the auction.

"Delta public broadcasting has been part of who Delta College is, and part of our community focus for a long time," said President Jean Goodnow. "The board, as do I, feel very strongly about the services it provides and that's why we're keeping all our options open to stay on the air. However, the board also has a fiduciary responsibility to the citizens of the region, so that's why they directed us to explore that option as well."

The unprecedented auction looks to buy up as much television spectrum across the country and repackage it for wireless carriers like Verizon and AT&T as the general public relies more on mobile devices as opposed to old fashioned over-the-air TV waves. As a result, industry experts have estimated as many as 500 TV stations across the country could go off the air if their owners decide to sell.

"It's a total game-changer for the industry," said Harry Jessell, editor of TVNewsCheck.com, a trade publication covering the broadcasting industry. "Every broadcaster in the nation right now, commercial and public, is trying to decide if it makes more sense financially to continue operating or to sell and go off the air."

For Delta's WDCQ, also known as Q-TV, that decision starts with an eye-popping, $166 million opening auction price, according to FCC documents. The national average starting auction price for a station to relinquish its spectrum and go off the air is $155 million.

Unlike a typical auction where the high bidder wins, the FCC auction is a reverse auction format that's designed to find out which broadcasters in each market are going to accept the lowest amount to sell and vacate their channel. The FCC would then purchase the spectrum and sell it back to the wireless carriers.

In other words, the $166 million amount that caught the attention of Delta's publicly elected board could be significantly less than the starting price.

How much money the college would end up getting for its spectrum depends on how badly the board wants the college to get out of the broadcasting business and how much interference, or how congested the airwaves are in the Flint-Saginaw-Bay City market.

"The more interference a station in the market causes, the more valuable it is to the FCC," said Preston Padden, an industry analyst who ran the Expanding Economic Opportunities for Broadcasters Coalition.

Padden's group ran a simulation on how the auction would play out that showed it would cost the FCC about $42 billion. If you add up all starting bids for TV stations across the country, the total is about $342 billion.

"Some stations are going to see that opening price, some are going to get nothing and others will be in between," he said.

The big unknown is how much spectrum the FCC actually needs in each market.

Pam Clark, Delta's executive director of foundation and institutional advancement, and one of the members of the three-person group directed to handle auction activity for WDCQ, said she's anticipating an amount that could be as low as 10 percent of the starting value, or about $16 million.

The public station could be bidding up against as many as eight stations in the market, but they won't know who's playing for competitive reasons.

"The only thing we know right now is $166 million and that's a pretty powerful number," Clark said. "The trustees have not appreciated how the federal government is handling this auction because it puts the college in a tough situation. It's an amount we can't ignore."

Q-TV Station Manager Thomas Bennett, who runs a staff of about 12 people, declined to comment for this story.

Options

The college does have other options.

It could move from its UHF, or ultra high frequency channel, to a VHF, or very high frequency, channel. Local over-the-air channels in the market, like WNEM, WEYI and Delta's WDCQ operate in the UHF band, which is what the FCC is interested in repacking for mobile carriers following the auction.

The government is also paying stations if they decide to move to the VHF band. Delta could see between $66.5 million and $124 million, depending on what channel number they move to. Those amounts could also vary, depending on auction results.

Q-TV could also end up sharing a channel with another station in the market.

A quick broadcasting lesson: Every digital terrestrial broadcast television station in the country operates off a 6 megahertz channel that has a limited amount of bandwidth of about 20 Megabytes per second. For example, in order for WNEM TV-5 to broadcast its CBS channel in high definition, it uses about 12 Mb/s. That leaves the station with about 8 Mb/s to play with. The station uses its remaining broadband to broadcast classic TV and movie channels (MyTV and a Cozi TV) in standard definition as what's called a "subchannel." For over-the-air viewers, WNEM's main broadcast channel is on channel 5. The MyTV channel is on 5.2 and the Cozi TV channel is on 5.3.

So, one option for Delta College is to strike a partnership with another station in the market and essentially become a tenant of their spectrum or form some kind of business partnership. They would then move Q-TV to one of those subchannels.

It's important to note that following the digital conversation in 2009, technology can now disguise channel numbers in order to make it easier for TV viewers. Q-TV, for instance, technically is broadcast on channel 15, but viewers can watch it over the air by punching in 19 on their remote.

Clark said channel sharing, however, is becoming less of an option because other stations in the market haven't expressed interest in becoming the landlord for Q-TV during discussions with the community college.

The other option the college has is to simply pull out before the voluntary auction begins next spring.

Community concerns

Once the spectrum auction begins on March 29, it could last for several months. And while it's packed with complex options and rules, members of the community mainly want to know if Q-TV is going to continue broadcasting after 51 years on the airwaves.

"I'm totally in favor of keeping the channel on as long as we can," said Trustee Dee Dee Wacksman, one of the three Bay County representatives on the nine-person board. "I have the channel on all the time and I see it as a great resource for our college and community."

Today, about 130 Delta students are enrolled in the college's Electronic Media program, where they can take a track in broadcasting or video production.

Andrew Rogers, a Bay City resident who has donated to the station in the past, feels the public wasn't given enough notice by the college's board to offer comment. He says he has more questions than answers when it comes to Delta's participation in the auction.

"This is a valuable resource and the public, who has donated to the station, is its shareholders," he said. "The public deserves a forum to learn more about this and ask questions. There hasn't been enough public input."

Delta Trustee Mike Rowley, who serves as chairman of the board and on the three-person committee, along with Delta College President Jean Goodnow, said members of the public and faculty had at least two opportunities to comment on the issue. A special informational meeting was held on Dec. 3 and on Dec. 8, the public had an opportunity to speak during public comment of the board's regular meeting. The meeting agenda for that Dec. 8 meeting, however, didn't mention "WDCQ" or "Q-TV." There was an item labeled "FCC Spectrum Auction Recommendation."

Howard University in Washington, D.C., operates a PBS station under the call sign WHUT and is in the same situation as Delta, grappling with the spectrum auction. The university, however, held a series of community meetings and created a commenting portal on its website to allow the public to offer input.

"These stations serve the public community, so if this is done correctly, the community should have some input," said Dru Sefton, a journalist who has been covering the spectrum auction for Current.org, a publication that focuses on public media.

Rogers also questioned why the board would give permission to a three-person board to make all final decisions concerning the auction.

Rowley said transparency is the board's top priority, but the rules of the competitive auction make it difficult. Beginning Jan. 12, for instance, the auction can't publicly be talked about for competitive reasons.

"We can't talk about channel sharing, changing frequencies -- that's all illegal -- which makes it difficult when working for a public body," Rowley said.

That's why the board needed to direct a group to handle all auction-related activities

"Not only does it not make sense to have nine people work on this, we couldn't legally do it in an open meeting," Rowley said.

Other colleges

Delta College isn't alone in making a decision whether it should take its public channel off the air.

On Thursday, Dec. 17, the Central Michigan University Board of Trustees voted to potentially participate in the spectrum auction.

There's more money at stake for CMU, which owns and operates five separate TV stations across Michigan. The university broadcasts WCMU and WCMZ in the Flint-Saginaw-Bay City market; WCMV and WCMW in the Traverse City-Cadillac market; and WCML in the Alpena market. The combined starting value for all five stations is more than $780 million.

The Michigan State University Board of Trustees on Friday, Dec. 18, vote to give MSU leadership the authority take part in the auction if they decide to do so, said Jason Cody, spokesperson for the university. The university's station, WKAR, has a starting value of more than $207 million.

There have been no discussions about WNMU, Northern Michigan University's PBS station, according to university officials.

"University license holders are the ones most interested in this auction," Sefton said. "If a station sells, the revenue it keeps goes to the license holder, which means it goes back to the college. Boards are saying that while it's nice to have a TV station, selling it is one way to potentially raise millions of dollars and get out of the broadcasting business."

Determining its value

The challenge for those colleges is determining what exactly their station is worth.

Q-TV operated at a $109,000 loss for 2015, according to its year-end audit. The loss was more than double the station's operating loss in 2014. Membership gifts were down $33,000 from a year ago to about $404,000. Appropriations from the college also dropped to $532,000 from $609,700 a year ago.

Patrick Butler, president and CEO of the Association of Public Television Stations, an advocacy group that represents all 170 public television licensees, said a station's value, can go beyond revenue from donors and public funders.

"These stations also have to assess the value of their service to their communities," he said.

PBS programming like "Sesame Street" and "Curious George" are broadcast for early childhood education. PBS NewsHour, the hour-long evening news broadcast, is designed to keep the public informed on what's going on in the world.

Delta broadcasts a monthly program called Dateline Delta and other quarterly shows like "Somos Hispanos," which focuses on issues facing the area's Hispanic population, and "Soul Issues," which explores African American culture. The station also broadcasts locally produced documentaries throughout the year.

Butler said public stations can also be a strong link for law enforcement organizations and first responders during times of emergency.

"It's very important for people making the decisions to offer spectrum at auction to consider all the services and programming that people rely on quite heavily and value quite highly," he said. "You can't put a dollar amount on a lot of those things."

Just the beginning

Delta's three-person committee has until Jan. 12 to submit an application to the FCC stating it is interested in participating in the auction. By the end of March, it needs to again confirm its participation.

If the college is able to make millions of dollars by selling its spectrum and go off the air, the logistics are fairly quick and dry. If it opts to not participate and stay on the air or move to a different channel, it becomes more complicated.

Following the auction, the FCC is going to repack the spectrum, which is causing concerns in the industry.

"The FCC is going to be moving between 800 and 1,200 stations, and although Congress has said they will reimburse broadcasters that have to move, a lot of broadcasters don't feel the reimbursement is big enough," said Jessell, with TVNewsCheck. "They also don't feel like the FCC is giving them enough time to make the move."

The FCC has said it's only giving stations 39 months to move channels following the auction. If they haven't made the transition in that timeframe, then the station goes off the air until it broadcasts again on the new channel.

There's also concern about losing coverage area, Jessell said. Although in the legislation for the auction, Congress said the FCC couldn't reasonably degrade the coverage area of a station.

In the coming weeks, Delta is to do an engineering study to see if moving to a VHF channel impacts their signal and is a viable option, Clark said.

"We're looking to see if the signal quality lessens," she said. "That would require us to make sure our equipment can handle it, or if we have to make upgrades."

The money they would reap from the auction would have to be used to potentially strengthen the signal that is broadcast from the tower in Tuscola County's Gilford Township. The station has a small tower on Hotchkiss Road that transmits its signal to the 1,000-foot tower in Gilford Township. That could result in capital costs and higher electrical bills, Clark said.

And perhaps making auction-related decisions even more difficult is the creation of a new broadcast standard that's currently being developed. ATSC 3.0 has been described as a "silver bullet" that could create new revenue streams for broadcasters, in addition to allowing for several technical advancements, including 4K broadcasts.

In the coming months, Delta is going to determine what's in the best interest of its shareholders, the taxpayers. But it's not going to be easy.

"This is one of the most difficult decisions I've ever had to make as a board member for the college," said Wacksman, who's now in her third term. "This effects a lot of people and involves a lot of money. Both things are important to everyone."