CES 2013

Incentive Auction Is Coming, But When?

The FCC wants to do it in 2014 and some involved say that’s possible, but others claim there are too many complications and details that must be worked out to make sure the very complicated process goes smoothly. FCC Commissioner Robert McDowell told a CES audience: “So, while I hope it’s 2014 … folks just need to realistically understand that history tells us that these things can take longer than you hope or expect, especially when you have literally the most complicated spectrum auction in world history.”

It’s the countless gadgets and gizmos on display at this year’s International Consumer Electronics Show that are driving the FCC’s incentive auction of TV spectrum, but just when that auction will be held is still up in the air.

The FCC has set it for 2014 and wireless carriers eager to join the bidding are hoping that the agency can stick to that schedule. But others believe it’s too aggressive.

“This is enormously complex,” said Rick Kaplan, EVP of strategic planning for the NAB, at a CES panel devoted to the incentive auction. “And it could sink the entire auction if it isn’t done correctly. A lot needs to be done and we really need to get these things right — not just done.”

Kaplan told an audience of about 50 people that the 2014 date doesn’t give the FCC enough time to make sure the spectrum is efficient and coordinating with Canada and Mexico.

“Border issues are enormous,” he said. “Does the FCC want to go forward with 2014, and potentially leave Canada and Mexico out? Some of that spectrum currently extends as far as New York City. Or do we want to repack more stations in a way that makes sense, frees up more spectrum and results in a more successful auction?”

In a separate panel at the CES about the FCC’s regulation agenda, Republican Commissioner Robert McDowell echoed Kaplan’s feelings.

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“We’d all love this to be as soon as possible,” he said. “I’ve lived through two of the largest auctions in FCC history — AWS1 and 700 MHz — especially with 700 MHz, we had the industry coming to us asking for a delay. There were lots of twists and turns that were not foreseen.

“So, while I hope it’s 2014, and I’m going to work as hard as I can, folks just need to realistically understand that history tells us that these things can take longer than you hope or expect, especially when you have literally the most complicated spectrum auction in world history.

“With the reverse and forward auction and all the rest of it — the repacking, really everything — we need to keep all of that in mind, but we hope it’s 2014.”

The FCC still has plenty of work ahead of it. Laying out a fair set of rules that would provide an incentive for broadcasters to go off the air, relocate from UHF to VHF or accept extra interference is still a challenge, said William Lake, chief of the FCC’s Media Bureau.

“For some broadcasters, their opportunity to share in those auction proceeds could be very attractive,” Lake said. “We want to design an auction to size up that opportunity, to help broadcasters decide whether or not to participate and allow the broadcasting industry to emerge stronger than ever.”

On the later panel, Lake got some support from Democratic FCC Commissioner Mignon Clyburn, who said the fast-track attitude of the FCC would help push an incentive auction forward in 2014.

“There is, has been and will continue to be on-going engagement,” she said. “This is a very dynamic item. If there is any opportunity to be on target, there are all sorts of incentives and engagement that will get us there in that timeframe. Yes it’s aggressive, it’s hard, but there are a lot of motivated bodies and participants in this particular auction.”

Those who believe the FCC will hit the 2014 deadline point to the market demand for more spectrum — all those gadgets and gizmos — as the No. 1. motivator.

“We’re focused on the incentive auction as a country,” said Charla Rath, vice president of wireless policy development for Verizon. “Anyone who walks the [CES] show floor can count the vast majority of products out there that have some kind of wireless component. People want to be mobile.”

The International Data Corporation predicts the demand for Internet-connect devices could reach more than $2 trillion in 2015.

When Congress passed legislation to allow a voluntary spectrum auction last year, it was estimated that the complete auction could generate $24 billion — $7 billion that would be used for public safety communications — and $3 billion that would be paid out to the participating broadcasters.

No one on the panel, however, would agree or comment on those numbers.

“There will be some broadcasters out there that will be getting some checks with significantly high value,” said Mark Fratrik, VP-chief economists of BIA Kelsey.

The FCC is expected to offer a price for stations in a particular market to either go off the air or make the move to VHF. The stations will either accept or reject that price. The FCC will then evaluate how many stations accept. If it’s too many, the price will drop — essentially leaving the price up to the marketplace.

It is still unclear, however, if stations would get the exact amount that they bid, or if they would all get the same, which would likely be the highest price of any accepted bid.

Life after the auction and repacking is also an issue for the industry that could add more time to the incentive auction. Broadcasters that don’t participate in the auction could be affected by the repacking of channels once the auction is completed, even though it was added into the legislation that the FCC would “make all reasonable efforts” not to diminish the quality of those station’s broadcasts.

“We’re confident that the FCC will ensure this will happen,” said Kaplan. “We wouldn’t allow anything else.”

Since the repacking is going to be dynamic, the FCC needs to decide if broadcasters will get only one crack at putting out a bid for their station, or if those bids can be revised. “Can we make sure everyone can adjust to a multi-round, simultaneous repacking?” asked Neil Fried, senior counsel of the U.S. House energy and Commerce Committee.

Again, these issues all add time to the process.

“If station A in market 7 decides to opt out in the third stage, it’s going to affect everyone on the Eastern seaboard,” said Fratrik. “That integration of repacking is really, really challenging.”

But he added that he expects this auction to happen in 2014 and be a “nice Christmas gift” for everyone involved.

Comments on the FCC’s Notice of Proposed Rulemaking must be in by Jan. 25, with reply comments due March 26.


Comments (3)

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Meagan Zickuhr says:

January 10, 2013 at 3:46 pm

“Kaplan told an audience… that the 2014 date doesn’t give the FCC enough time to make sure the spectrum is efficient and coordinating with Canada and Mexico.” Hey Rick and FCC…. don’t forget that LPTV and Class A Broadcasters still have until September of 2015 to make their FINAL TRANSITION TO DIGITAL! Many of these broadcasters still have second channels and have not decided which one will be their final home. That sure puts another little crimp in their plans!

Joanne McDonald says:

January 10, 2013 at 4:38 pm

I’m seen to know how to understand the entire spectrum situation.

I would take a bet that Daystar, Trinity, Ion and all the other religious and minor broadcast network plus all the diginets multicast networks would round up being regulated to cable only network that would be made available to customers with FTA systems and be made available on all cable systems as well as on both Directv and Dish Network and also be allowed to stream their programming online for internet users at no cost. I like the idea in which NBC stations on 1080 share their channel with Telemundo on 480 in widescreen, CBS stations on 1080 sharing with CW on 1080 in widescreen, FOX stations on 720 sharing with MyNET on 720 in widescreen, Univision and Telefutura share a channel together on either 480, 720, or 1080 in widescreen, and ABC would continue to not have to worry about sharing their stations with another network or another station and still on 720 in widescreen, but could likely share it with other network affiliated channels on either 480, 720, or 1080 in widescreen. PBS stations would likely be forced to merged and share it’s stations on the same channel frequency and still be able to transmit in 1080 widescreen. The stronger PBS stations would end up sharing the channel space with the weaker PBS stations in markets where there are multiple PBS affiliates in the same market. The mid-sized and smaller TV markets could end up carrying 2 to 3 subchannel feeds in widescreen SDTV or HDTV on the same channel frequency. I would recommend that all the TV stations that are now on the UHF 14-51 band in digital that were on 7, 8, 9, 10, 11, 12, and 13 in analog be forced to move on 7, 8, 9, 10, 11, 12, and 13 in digital and all the TV stations that are now on the UHF 14-51 band in digital that were on 14, 15, 16, 17, 18, 19, 20, 21, 22, 23, 24, 25, 26, 27, 28, 29, and 30 in analog be forced to move back to those channels in digital plus all the TV stations that are now on the VHF 7-13 high band with different RF physical channel numbers on the VHF high band in digital that were on 7, 8, 9, 10, 11, 12, and 13 in analog to be forced to move back to those channels in digital as the best way to not mess up on frequency assignments in the future maybe by around 2020. I like the idea of all the TV stations be allowed to transmit all HDTV and SDTV as well as mobile programming in the MPEG 4 format in the future maybe by around 2020. I like the idea of both IVI TV and FilmOn HDi be allowed to go in business again and be able to transmit all the local stations to the viewers on the net for free without any interference from the government for violating any copyright laws with benefits for online viewers that want to watch their favorite stations programming such as local news and shows even after the spectrum auction and plan becomes very mandated and very hard for TV stations to be able to stay on the air without being able to stream all their programming online to the viewers online. Me wanting IVI TV and FilmOn HDi transmitting the locals online for free to the viewers on the internet would be very beneficial when it comes to very severe weather outbreaks and breaking news that the viewers would want to be very informed the sooner and the better. I’m afraid that my take of what channels the TV stations ought to be on with the planning of an spectrum auction. Thank you for my understanding to this crisis in the TV business lately as it relates to the spectrum crunch going on right now. My comment to this matter is not a negative attack but a opinion and theory on my own terns to the spectrum auction in the future.

Ellen Samrock says:

January 11, 2013 at 1:27 pm

The FCC keeps whining about how complicated this incentive auction is but they are the ones that are making it overly complicated by rushing to meet a self-imposed deadline of 2014. Despite the dire predictions from the telcos, there will be no breakdown of the wireless infrastructure from overuse by 2015. Remember, they are still sitting on 300 MHz of warehoused spectrum. I have no doubt that they are already putting plans in motion to meet the projected needs two years from now, including utilizing some of that unused spectrum.


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