Here's What’s Next For The Spectrum Auction


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Last week, President Obama signed into law legislation authorizing an incentive auction of broadcast spectrum as a means of transferring spectrum from TV to wireless broadband, where the FCC and others policymakers have concluded it will eventually be badly needed.

To get a handle on how the auction would work and what it all means to TV broadcasters, TVNewsCheck Editor Harry A. Jessell spoke with John Hane, a Washington communications attorney with the firm of Pillsbury Winthrop Shaw Pittman.

As Hane sees it, the FCC's big job is to induce enough stations in the most densely populated areas to give up their spectrum for auction with the guarantee of a definite payoff — a payoff established by a preliminary reverse auction.
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Staff member
Selected Quotes:
What happens if the total from the forward auction is less than that from the reverse auction?

The law requires the auction to at least break even. So if the forward auction doesn't yield enough money, then no TV licenses are reclaimed and no new wireless licenses are issued.

Once the FCC has conducted the reverse auction, it will have enough information to repack the TV band to consolidate and maximize the spectrum available for the forward auction. Is that correct?

Yes. The FCC can’t design the licenses it wants to sell until it knows how much spectrum it can clear. And to figure that out, it has to have a good idea of how many stations are willing to tender; how efficiently it can re-pack remaining stations; and what constraints it will face along the Canadian and Mexican borders.

There’s probably a huge, huge difference in the whole auction depending on whether a half-dozen stations in a few key markets are in or out. The amount of spectrum cleared nationwide would be much greater if 18 stations in New York, Baltimore-Washington and Los Angeles bid versus 12. Those aren't the only critical markets, but you get the idea. The FCC really needs volunteers in areas of high population density.
The law includes repacking safeguards for broadcasters who choose not to participate in the auction. It requires the FCC to "make all reasonable efforts" not to diminish the coverage areas of non-participating stations and it prohibits the FCC from moving stations from U to V or from high V to low V. Do you think the safeguards are adequate?

I think the NAB did a good job with the safeguards. The auction proponents wanted provisions that would have been disastrous, and that’s not an exaggeration. Would I like to have seen more safeguards? Of course. The right of stations to protest license modifications — something stations have always had — has been stripped for the repacking. That means you’re going to need some particularly good lawyering and engineering if you think your station was shortchanged. I think we could blow through the $1.75 billion repacking fund long before all claims are satisfied.

Why does the law stipulate that there can be only one auction?

That’s one of the protections. We don’t want to have to go through this over and over. And we want the FCC to design an honest and fair process. If they could do multiple auctions it could be death by a thousand cuts. They could design rules to get channels from truly desperate stations for a pittance, knowing they could come back later. Or they could try some really aggressive approaches. If they got reversed by the court of appeals they could go back and try something else. One auction forces the FCC to really work hard to get it done all at once and means broadcasters don’t have to live under the sword of Damocles, always worried about the next repacking.

You suggested that the $1.75 billion that the law sets aside from auction proceeds to reimburse broadcasters for their repacking costs may be inadequate. Why?

I’m pretty sure a lot of soft costs will go unreimbursed. And I don’t know how the FCC will dole out funds. Do they have to wait until all claims are in? Do they pay costs as incurred? Do broadcasters have to finance the repacking with their own capital? Will cost of capital be reimbursed? New equipment isn’t free, but neither is the cost of money, and real money will have to be spent. What happens if they run out of money? I understand the need for a cap. The experience of other rebanding processes shows that open-ended cost reimbursement programs don’t work. But I have reservations.
I understand the incentive auction is only available to full-power and class A station. What happens to the other LPTVs.

In legal terms, we call it SOL — statutorily out of luck. LPTVs and translators aren’t eligible to bid in spectrum and they have no protection in repacking. In many cases, there may be plenty of spectrum for translators and LPTVs to relocate, but their relocation costs aren’t likely to be compensated. It’s grim. Congress threw them under the bus.
Can't the FCC just go ahead and repack the TV band to squeeze out more spectrum on its own authority without conducting an auction? Would such a non-auction repack be subject to the safeguards in the new law?

You mean without conducting incentive auctions? Before the new law passed, the FCC probably could have repacked the broadcast band — in theory anyway. But that has changed. The law gives the FCC one, and only one, shot at repacking, and the repacking safeguards apply to that repacking.