Incentive Auction Headed For Obama’s Desk

After more than two years of political wrangling, Congress on Friday signed off on legislation authorizing the FCC to conduct an incentive auction of broadcast TV spectrum.

The measure is contained in a major legislative package that would extend payroll tax cuts and unemployment benefits.

Both the House and Senate approved the package, which now goes to President Obama, who is expected to quickly sign it into law.

The legislation permits the FCC to hold auctions and share the proceeds of them with broadcasters that voluntarily relinquish their spectrum.

However, for TV broadcasters who chose not to give up their spectrum, the measure contains safeguards against their suffering any loss of service.

Before the FCC conducts an auction, it has much to do. Implementing the law could take as many as three separate rulemakings. Some believe it could take five to 10 years to get to get to an auction.

A key element of the FCC’s March 2010 National Broadband Plan, the incentive auction is a mechanism by which the FCC hopes to reallocate up to 120 MHz of spectrum from TV to wireless broadband carriers.

The NBP believes the reallocation is necessary to meet what it believes will be a severe shortage of broadband spectrum as more and more Americans use smartphones, tablets and other mobile devices to access the Internet on the go.

The incentive auction language in the spending package is based on legislation authored by House Communications Subcommittee Chairman Greg Walden (R-Ore.) and has the backing of the National Association of Broadcasters.

NAB has been pushing hard for specific safeguards fearing that the FCC’s incentive auctions might damage the broadcasting business.

Among the key provisions is a requirement that the commission make “all reasonable efforts’’ to preserve … the  coverage area and “population served’’ of broadcasters who don’t participate in the incentive auction.

For local TV broadcasters, it is paramount that any legislation guarantee that their service areas will remain unaffected by the channel reassignments or “repacking” that will occur as a result of the auction.

Broadcasters are also pleased that the legislation would set aside $1.75 billion to compensate TV stations (and cable operators) for costs associated with repacking — the wholesale switching of channels that would occur after the FCC identifies the spectrum it will have to auction and consolidates it into large swatches that can be more easily auctioned.

Originally, Walden’s bill allocated $3 billion to a relocation fund, but House Democrats complained about the amount and argued that the fund should be only $1billion as recommended by the Congressional Budget Office.

The legislation also makes it easier for those broadcasters that are thinking about leasing excess spectrum to wireless carriers. According to the legislation, in lieu of reimbursing stations for the costs of repacking, the FCC may grant stations waivers to use some of their spectrum for services other than broadcasting. Such a waiver would remain in effect only while the licensee provides at least one free, over-the-air television program stream.

The measure also prevents the FCC from moving stations from a UHF channel to a VHF channel or from a high VHF channel to a low VHF channel.

And it makes clear that this is a one-time auction with a 10-year sunset on the FCC’s authority to repurpose broadcast spectrum.

Under the legislation, only full-power TV stations and Class A low-power stations can participate in the incentive auction.

It states that the FCC must use a “reverse auction system’’ as a means to establish a price at which TV stations would give up their license and then conduct a “forward auction’’ of the TV spectrum.

Most important, if the proceeds are insufficient to cover the incentive payments and relocation costs, the auction fails. And stations that participate in a channel-sharing arrangement retain must-carry rights.

NAB is also pleased about the provisions directing the FCC to address issues that could affect TV stations with service areas bordering Canada and Mexico before it relocates those broadcasters to another channel.

Those provisions were authored by Reps. John Dingell (D- Mich.) and Brian Bilbray (R- Calif.).

There is also language in the measure that allows an unhappy broadcaster that is being displaced by the incentive auction, or any interested party, with the right to go directly to court.

“The bottom line is, instead of protesting a license modification at the commission first, you could go to court,” says a source familiar with the legislation.

Although broadcasters would get a cut of the incentive auction proceeds, the bill intends for most of the revenue to go to the federal treasury and to help fund a nationwide communications network for first responders.

The CBO is estimating that $15.2 billion will be raised by the incentive auction.

House Republicans wanted to include the auction language in the payroll bill as way to help cover the costs associated with extending those tax breaks.

Overall, the measure was being hailed on and off Capitol Hill.

“We struck a fine balance to make more efficient use of the airwaves while also providing necessary protections for broadcasters,” said a statement released by Chairman Walden and House Commerce Committee Chairman Fred Upton (R-Mich.).

NAB President Gordon Smith said: “NAB salutes the tireless efforts of Congress to ensure that local broadcasters have a vibrant and robust future.’’

Smith applauded the efforts of  Chairmen Upton and Walden “for steering this bill to conclusion, and … Reps. Dingell and Bilbray for a critically important amendment guaranteeing continued viewer access to TV station signals along the Canadian and Mexican borders.’’

Over at the FCC, Chairman Julius Genachowski was also pleased with the news of impending congressional action on the incentive auction proposal. The FCC chairman has been a chief proponent of the incentive auctions, believing that TV spectrum is underutilized and would be put to better use for wireless broadband services.

“I’m pleased that Congress has recognized the vital importance of freeing up more spectrum for mobile broadband, both licensed and unlicensed, although the legislation could limit the FCC’s ability to maximize the amount and benefits of recovered spectrum,” Genachowski said.

The wireless industry, which has been leading the charge on Capitol Hill to get the incentive auction bill passed, called today’s vote “a resounding victory for consumers and the American economy,’’ in a statement from CTIA-The Wireless Association President Steve Largent.

“Making spectrum available will make it possible for America’s wireless carriers to offer consumers better, faster, more ubiquitous wireless broadband service,” Largent added. “The release of additional spectrum also will spur the investment and job creation that our economy needs.”