NAB Says Incentive Auction of TV Spectrum Unlikely Next Year

"We continue to believe that this should not be done in a rush,” said NAB CEO Gordon Smith. “It’s more important to get this done right than to get it done right now,” he said during the press conference. “Soon is fine if it’s done properly ... when you're dealing with something with this level of complexity, and you rush spectrum policy, you end up with a [LightSquared] result or something like that.” The willingness of broadcasters and wireless carriers to work together is key, he said: The cooperation “shines a very bright light on the way forward to a successful auction."

Smith said he doesn’t know of a network that is interested in participating in the auction. “I know of no network or network affiliate who is saying ‘we're out of business,'” Smith said. A coalition of 39 TV stations, led by Preston Padden, expressed interest in participating in the auction process (CD Nov 14 p19). Padden is a former president-network distribution for Fox Broadcasting, president of ABC Television Network, executive vice president-government relations for Disney, and president of the Association of Independent Television Stations.

Smith said he’s worried that foreign language and minority stations might be part of the “coalition of the willing.” But “I don’t know that. I don’t know who these people are.” NAB is concerned and engaged “to make sure that those broadcasters who do not wish to volunteer to go out of business do not run into a world of tomorrow that is filled with interference, diminished contours and international conflict,” Smith said.

Repacking is the least developed part of the auction process to this point, said Rick Kaplan, NAB strategic planning executive vice president. Last year’s spectrum law says the FCC can’t repack until it coordinates internationally, he said. Under agreements with Canada and Mexico, if channels or power are changed, “you have to coordinate ... and that process takes some time and it can result in either a 45-day ‘yes’ or a much longer process to see if it works out,” he said. The international coordination will likely be difficult to figure out to meet the 2014 timetable, he said: “That process will probably put you beyond 2014."

NAB officials cited band plan concerns as a key problem facing the FCC as it develops rules for an incentive auction. Smith and Kaplan both said an agreement between wireless carriers and broadcasters unveiled Thursday (CD Jan 25 p3) was key. “We think because the wireless community and broadcasters have come together it certainly shines a very bright light on the way forward to a successful auction,” Smith said. “This was the direction Gordon set for me when I first came here, ‘be in the conversation,'” Kaplan said. “We have been working very, very hard to find the areas of commonality and we clearly have reached it with a lot of major players in the wireless industry and I think you'll see probably more come in and support the letter that we have sent."

Asked about the most difficult issues the FCC must work through, Kaplan started his list with international harmonization issues. “The band plan is very complex,” he said. “We think we've got the ball somewhat down the field for the FCC. Taking it home will be challenging. And then I think the single most challenging piece will be repacking, the engine of the auction.” The repacking mechanism is undefined at the moment, Kaplan said. During the repacking process of the DTV transition, 100 stations were moved down, he added: “This is likely going to be many more than 100 stations."

NAB also plans to comment on the $1.75 billion broadcaster relocation fund, Kaplan said. For some reason, the FCC didn’t put in its notice that it’s a budget for them, he said. The FCC should use that amount of money to determine how many stations can be repacked, he said. It can probably repack 400 to 500 stations with that budget, he said: Instead, the commission seems to have thought of it as a fund and that “if it runs out, broadcasters won’t get reimbursed for the cost of the auction.”

"The stakes are as high as the issues are complex,” said AT&T Vice President Joan Marsh on AT&T’s blog, in advance of the company’s comments. “Freeing up more spectrum is critical to U.S. economic growth and technological leadership. And this auction presents the FCC with the best opportunity it will have for many years to advance that goal.” The auction is by its nature unusually complex, Marsh wrote (http://xrl.us/boca8c). “In this auction, the Commission must persuade two different sets of auction bidders to participate in two separate auctions designed to create forward-auction revenues that exceed winning reverse-auction bids, plus administrative and repacking costs,” she said. “If they fall short of these goals, only limited amounts of spectrum will be cleared or, in the worst-case scenario, the auction could fail altogether. This fact has profound consequences for every decision the Commission must make in this proceeding, from establishing a band plan, to designing the forward and reverse auctions, to establishing the ground rules for participation."

AT&T supports parts of the FCC’s proposed preferred band plan, Marsh said. “That said, after engaging in a detailed engineering analysis and consulting with our vendors, we believe that certain aspects of the FCC’s initial proposal raise technical concerns (outlined in detail in our comments) that could create the potential for harmful interference and risk auction participation,” she said. AT&T also supports, in general, the FCC’s auction proposals, she said. “For example, in the forward auction, we propose that the Commission permit package bidding through all-or-nothing bids for certain groups of complementary licenses, such as the same frequency block in all of the license areas that comprise a metropolitan area or region,” Marsh said. “AT&T also proposes a ’single-pass’ reverse auction that would ask broadcasters to indicate, before the forward auction is convened, whether or not they would cede specified spectrum rights at progressively lower price levels for the full range of potential spectrum clearing targets."

In other comments released Friday, Mobile Future said simplicity is critical. “All aspects of the auction process should be as simple and transparent as possible, and the Commission should continue its outreach and educational efforts so broadcasters have sufficient information to make decisions regarding auction participation,” the group said (http://xrl.us/bocbq4). “The Commission should also adopt its proposal to provide additional options for broadcasters to participate in the reverse auction, as well as auction design specifics that the record demonstrates will increase participation.” Mobile Future said “following the auction, broadcasters” should be “relocated within a fixed timeframe as soon as possible after the auction ends, and reimbursed for the costs associated with such relocation promptly and efficiently."

The FCC has to get the details right, the Telecommunications Industry Association said. “A well-designed broadcast incentive auction and repacking plan will unleash significant investment,” the group advised. “A flawed approach to the auction, on the other hand, would frustrate wireless providers’ ability to meet growing demand, raise consumer prices, slow investment in information and communications technology, and jeopardize the United States’ leadership in the global wireless marketplace. It also may cast a cloud over the future usefulness of incentive auctions to repurpose other spectrum."

The National Academy of Sciences, through the National Research Council’s Committee on Radio Frequencies, emphasized the importance of Radio Astronomy Service operations in TV Channel 37, one of several issues teed up by the FCC for comment. The academy noted that since 1974, eight scientists have been awarded the Nobel Prize in Physics for their work on radio astronomy. “Radio astronomy measurements have discovered the cosmic microwave background (CMB), the radiation left over from the original big bang that has now cooled to only 2.7 K above absolute zero,” the academy said (http://xrl.us/bocbu4). “Later observations discovered the weak temperature fluctuations in the CMB of only one-thousandth of a percent: these are signatures of tiny density fluctuations in the early universe that were the seeds of the stars and galaxies we know today. Within our own solar system, radio astronomy observations of the Sun have been used for more than half a century to aid in the prediction of terrestrial high-frequency radio propagation."

Comments from TV broadcasters revealed a variety of opinions among the industry about how the auction and subsequent repacking should proceed. Station groups, individual licensees, trade associations, anonymous broadcasters and various other industry consortia all submitted comments in response to the rulemaking notice. Their suggestions ranged from calling the auction off entirely to speeding up the process (CD Jan 25 p12). A common thread among broadcasters’ comments was a plea to protect broadcast service after the auction, however the commission proceeds. Several station groups asked the commission not to impose a Feb. 22, 2012, cutoff for determining what a station’s protected service ought to be.

Associations representing the affiliates of the four major broadcast networks urged the FCC to take its time in developing auction rules. “The commission should not further complicate the rulemaking process by rushing to implement the forward and reverse auctions and the repacking process,” they said (http://xrl.us/bocbvv). A recent wave of spectrum transactions shows the market is responding appropriately to short-term spectrum demands, they said. “The Commission’s focus can be on crafting rules that will make the auction successful, rather than on concluding the rulemaking as quickly as possible."

LeSEA Broadcasting Corp. was among the broadcasters that pushed back against a proposed Feb. 22, 2012, cutoff for determining a station’s service protection. That’s the day the law authorizing the auction was enacted. It said it owns two stations with pending channel substitution permits that would help maximize their coverage areas (http://xrl.us/bocbxn). It said the FCC should protect stations with pending channel substitution permits and maximization permits when it conducts the TV band repacking. “Neither LeSEA’s stations nor the public should be penalized merely because a previously authorized process had not been completed as of an arbitrary date,” it said.

Hearst TV raised similar concerns with regard to some of its stations and construction permits. The commission could set a “use-it-or-lose-it” deadline before the auction by which broadcasters with new construction permits must build, it said (http://xrl.us/bocbyh). “Not allowing stations to protect post-February 22, 2012, facilities would be patently unfair and contrary to the public interest,” it said. Some stations that got construction permits before the February 2012 cutoff relied on the FCC’s standard three-year deadline, it said. Others were in the middle of construction on that date, it said. “These stations simply have had no prior notice that the Commission’s interpretation ... might not afford protection to their facilities,” it said.

A broadcaster that described itself as “a prospective reverse auction participant” told the commission it’s “exactly the type of broadcaster whose participation is critical to the success of the incentive auction.” The broadcaster has no major network affiliation and operates in one of the 30 largest markets, it said (http://xrl.us/bocb4o). To attract it and similarly situated stations to the auction, the FCC must make it financially wise to participate in the auction, it said. The station enjoys 50 percent-plus profit margin and has no debt and “would not even consider participating in the incentive auction unless the expected auction proceeds will exceed the station’s expected profits over a certain period of time,” it said.

The Writers Guild of America West said the FCC should address the current aggregation of spectrum in the wireless sector before the auction. Wireless industry “consolidation is impairing the development of a wireless video market,” it said (http://xrl.us/bocb3x). Consumers are increasingly carrying devices capable of displaying high quality video but wireless carriers’ data plans impose low data caps and “hefty” overage fees that prevent usage from increasing, it said. “As wireless providers have acquired more spectrum and invested in network upgrades, data has become more expensive to the user, not less,” suggesting that there is not enough competition, it said.