EOBC Says Its Auction Formula Tops FCC’s

If broadcasters want to get more for their spectrum in the FCC’s reverse auction next year, the Expanding Opportunities for Broadcasters Coalition says they need to back the EOBC formula for calculating the opening bids.

With the EOBC formula, the group says, the value of TV spectrum in the opening round of bidding would increase by 73%. And the higher the opening bid, the EOBC says, the higher the final bid will likely be. Since prices only go down in a reverse auction, “it’s better to go down from a higher price than from a lower price,” said EOBC Executive Director Preston Padden in a conference call this morning.

To make its point, the EOBC compared opening bids of 2,173 stations using the current FCC formula and EOBC formula. In all but eight cases, the opening bid is higher, in many cases, significantly higher, under the EOBC formula.

The EOBC also calculated how the opening bids for 27 station groups would be affected under each of the formulas. The big winner was Sinclair. Its opening bids, in the aggregate, would soar $15 billion — from $18 billion to $33 billion — under the EOBC formula.

The FCC currently bases its opening bids on the protected contours of the selling station.

“Our reweighting of the FCC formula gives broadcasters the credit they deserve for the spectrum they occupy beyond their own service area — spectrum that the FCC wants to buy at a discount,” the EOBC says.

Under any formula, the opening bids do not necessarily reflect the value of the spectrum. In the reverse auction, the FCC will keep dropping the prices until it buys only the amount of spectrum it feels it needs in that market. “Nobody can predict the ultimate prices people are going to receive,” Padden said.

The EBOC says using its formula for opening bids will also benefit the proponents of the incentive auction by inducing more broadcasters to participate.

The reverse auction for buying spectrum is just half of the incentive auction for reallocating up to 126 MHz for wireless broadband.

Once the FCC buys TV spectrum, it plans to turn around and auction it to wireless broadband providers like Verizon and AT&T.

The incentive auction is slated for early next year. “We think the demand [from wireless broadband] is going to be extraordinary,” Padden said.