EOBC Sees 60/40 Split Of TV Auction Revenue

The Expanding Opportunities for Broadcasters Coalition says the FCC's incentive auction could yield $50 billion for the government and $35 billion for broadcasters — if the agency follows the EOBC's advice for conducting the auction.

If the FCC would simply follow its advice, the Expanding Opportunities for Broadcasters Coalition says the commission could net around $50 billion for the U.S. treasury in next year’s incentive auction.

With the recommended tweaks, the EOBC says in an FCC filing, the agency could buy or “clear” 126 MHz of TV spectrum in a reverse auction for $35 billion. It could then turn around and sell it to wireless carriers for $85 billion.

The EOBC comprises broadcasters who have invested heavily in TV stations in hopes of selling them for a profit in the incentive auction. The EOBC reps submitted the filing during a visit with FCC officials Monday afternoon.

Its estimate for the cost of a revised reverse auction is based on 180 computer simulations that University of Maryland economist Peter Cramton ran on its behalf, the EOBC says.

As it has before, the EOBC argues for higher opening prices in the reverse auction. That would increase what the FCC has to pay for spectrum by 5%, but result in “dramatically improved broadcaster participation and less loss of over-the-air viewing alternatives for consumers.

“In fact, using these improved metrics, and assuming relaxed channel sharing rules, we found that the commission can reliably clear 126 MHz on a near-nationwide basis with only very few markets in which a top four affiliate, Univision affiliate, or top-rated public broadcaster relinquishes its spectrum.”

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“Even in those few [markets], it is highly likely that the stations would continue to broadcast either through channel sharing or a move to VHF,” the filing says.

The simulations also indicated the auction would not create any more markets with no noncommercial stations, the EOBC adds.

What’s more, it says, the revised pricing formula would result in “similarly situated stations” receiving similar prices. Under the FCC’s current formula, pricing gaps would be 53% greater.

The EOBC estimate for what the FCC may be able sell the recovered spectrum for is based on an analysis by Cramton of the recent AWS-3 spectrum.

“The AWSâ€Â3 paired price of $2.72/MHzPop is a timely estimate of 600 MHz auction prices,” Cramton writes in 69-page supporting paper attached to the EOBC filing.

“This price implies forward auction revenues of $84.9 billion for the 126 MHz clearing target (10 blocks). There are good reasons to believe that revenues will be higher than $84.9 billion as a result of the better propagation characteristics of the 600 MHz band and the greater scarcity of lowâ€Âband spectrum.”

The computer simulations also provide more evidence for getting rid of dynamic reserve pricing (DRP) or replacing it with a round zero reserve (RZR), the EOBC says.

The simulations exposed DRP’s “Achilles heel,” it says. “To properly implement DRP requires a full channel-assignment optimization between rounds of the reverse auction. However, this is impractical because full optimization is expected to require days, not hours, to complete.”

If the FCC finds it necessary to impose some form of reserve pricing, it says, it should implement RZR. “The concept of RZR is that any station that would be frozen at the start of the auction will receive an RZR price offer that is equal to or less than its opening bid.

“The station could accept the offer and relinquish its spectrum or reject the offer and be repacked. Once the RZR round is complete, the auction would continue on a market basis.”


Comments (15)

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Jim Church says:

June 15, 2015 at 7:04 pm

Sell, sell, sell. Get rid of all of those broadcasters who want to exit and make room for LPTV.

    Ellen Samrock says:

    June 15, 2015 at 9:35 pm

    And it just might happen. Something known as the Broadcasters for Fair Auction Pricing claims 140 member stations and they along with the EOBC, which now boasts 100 member stations, might be enough to give the FCC its 126 MHz clearing target (although there could very well be overlap between the two groups).

    Wagner Pereira says:

    June 17, 2015 at 4:37 am

    Sorry, but appears the FCC will reserve a channel for unlicensed white space in each market before they get around to even thinking about LPTV. And remember LPTV’s don’t count anyway! “In Orlando, Tuff TV is on a LPTV station, so that doesn’t count.” @Flashflood 5/28/2015 http://tvnewscheck.com/article/85690/tuff-tv-adds-wmcn-philadelphia#comments

Daniel Webster says:

June 16, 2015 at 8:46 am

Also cures acne and creates peace in the middle East.

Mark Annas says:

June 16, 2015 at 9:24 am

Sure, reward the speculators that grabbed stations only to make a fortune, not to serve the community. And we wonder why broadcast television is suffering a slow death – long live App,e TV, Hulu, Netflix etc.

    Dante Betteo says:

    June 16, 2015 at 12:48 pm

    Yes and I have to pay for that.

Dante Betteo says:

June 16, 2015 at 12:59 pm

I watch only over the air TV. In the Cincinnati Dayton Markets, I receive 56 channels with an indoor antenna. I get all of the Retro type networks, also Get TV, Grit TV, This, Movies and others. I know people with cable who don’t get those stations. The TV auction, I feel will take that all away from me. With that new proposed TV Format 3.0, My wide screen will need and adapter and I will have to purchase new converter boxes for my analog TV sets. The past three decades I have seen consumers forced to buy something because something else was done away with. The TV auction is just one part of it. Finally I just hope that they come short of 200 stations next year.

    Ellen Samrock says:

    June 16, 2015 at 1:29 pm

    According to the Greenhill Report they need 200 stations to participate in order to clear 84 MHz. To clear 126 MHz, the current proposed clearing target, they will need about 250 stations to participate in the auction. The EOBC insists that the auction will be a financial failure if anything less than 126 MHz is cleared. I have serious doubts about their claim. But channel sharing, Tom Wheeler’s favorite repacking solution, is a terrible idea. It’s the FCC surgically creating Siamese twins that will end up hating each other while severely limiting the channel space available for current diginets. The only solution is a new broadcasting standard like 3.0 that will more efficiently use the remaining TV band spectrum. It will allow any who wish to remain as broadcasters to do so independently while providing channel space for existing and any future diginets.

Dante Betteo says:

June 16, 2015 at 3:39 pm

Channel sharing, I feel it will give the station the owns the tower will have the upper hand.

    Wagner Pereira says:

    June 16, 2015 at 5:35 pm

    Very few TV stations own their tower any longer. I would venture to speculate that those few that still own their tower would be the same stations that will not participate in the auction – nor share their channel.

Bobbi Proctor says:

June 17, 2015 at 11:07 pm

The more I read about this pending auction the more I fear that as antenna viewers we will lose some service and what remains will have a lower quality signal. Our local Fox affiliate is a LPTV station. Sounds like it could be gone as well as others. ION recently moved from channel 51 to another channel. Now channel 51 is now gone forever and soon some others. We have lost some LPTV service already because of stations now being too close to other stations on the same channel. If a “broadcaster” doesn’t want to be a broadcaster and only has a station in order to sell the spectrum they are not really broadcasters and the frequency given to a group that wants to serve the public interest, convenience and necessity. The FCC appears to be determined to destroy over-the- air television.

    Wagner Pereira says:

    June 18, 2015 at 3:28 am

    There is limited spectrum and the FCC has decided to re-allocate it – whether we true Broadcasters like it or not. As only ~12% of the population receives OTA Broadcasts, in the eyes of Congress and the FCC, the other 88% deserves to use the Spectrum. In all honesty, if one looked how the % of OTA has fallen in the last 30 years and that was the metric of how much to take away, we would be losing more than what the FCC is talking about taking away.

    Dante Betteo says:

    June 18, 2015 at 9:27 pm

    I agree, They want us to pay.

    Dante Betteo says:

    June 18, 2015 at 9:30 pm

    I have seen here in the Cincinnati area, there is a company called MR. Antenna He is doing well. With rising cost of cable and other TV services there will be more like me.


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