LPTV Floats Tax-Credits-For-Spectrum Plan

Excluded from the FCC’s incentive auction, a group of LPTV broadcasters is proposing that buyers of LPTV stations who turn over the spectrum to the FCC for unlicensed use be granted tax credits in the same amount or twice the amount as the stations’ purchase prices.

Participation in the LPTV Spectrum Clearing Tax Credit program would be voluntary, according to a seven-page outline of the plan floated on Capitol Hill this week.

“Almost all are small businesses, and many are diverse multicultural owners,” the outline says. “The tax credits could be the only way to unlock value from their spectrum investments in most situations.”

According to the outline, the tax credits could be used to reduce ordinary taxes of buyers or taxes of businesses that further the FCC goal of fostering economic activity in unlicensed spectrum.

Normally, tax credits are issued at a 1:1 ratio — LPTV buyers would get a $1 credit for every dollar they spend on the spectrum, the outlines says. However, the program would be such a boon to the economy, buyers might be able to get $2 for each $1 spent.

With the exception of Class A stations, most LPTV stations are not eligible to sell their spectrum in the incentive auction. In the auction, slated for early next year, the FCC would buy the spectrum of full-power and Class A stations in a reverse auction and then sell it to wireless broadband carriers in a conventional forward auction.

In the outline, the LPTV coalition, which says it represents 175 LTPV broadcasters with more than 1,000 stations, says its members will suffer “economic harm” if they have no means for cashing out as full-power and Class A stations do and warns that it will not go away quietly.

“[T]he coalition is prepared to exercise its rights in ways that could delay or otherwise greatly affect the incentive auction. One consequence might be to require reopening the incentive auction, enabling legislation, which would be a ‘can of worms.’

“A delay of a year in the courts could cost the economy the full face value of the auction itself, which in many estimates could be as high as $84 million-$100 billion,” the outline says. “Therefore, LPTV legal actions, even if unsuccessful in their final judgments, could cost the economy $40 billion-$50 billion for a six-month delay, and more if longer.”

According to the outline, LPTV broadcasters would be able to sell at any whatever price “the market will bear.” However, it says, the tax credit will be capped at $3 per coverage-pop.

Even with the $3 cap, the program would clear between 2,000 and 5,000 stations, the outline says. “If a buyer and seller agree on a price above the $3 tax credit limit, that is their private negotiation and would reflect any competition for that sale/purchase.

“The total aggregate cost of the tax-credits is currently being researched. The $3/pop cap on the tax credits is based on 25% of the post AWS auction pricing of $12 for unimpaired spectrum with a national footprint.”