FCC Clearing Target Expected Soon
The FCC is expected to release a spectrum clearing target for the incentive auction before the end of this week, numerous broadcast attorneys and industry officials told us. Many broadcast officials now expect the number to be relatively high, such as 114 or 126 megahertz. Those predictions are based on an expected high level of broadcast participation and on FCC Chairman Tom Wheeler's comments at the NAB Show (see 1604200051), where he dwelled on the incentive auction going into multiple stages. Wheeler also said that the clearing target would be announced before the end of the month, and some officials told us they expected an announcement at Thursday's FCC meeting.
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The FCC approved nine possible clearing targets, of which 126 megahertz is the highest and 114 megahertz the second highest. Many broadcast industry officials we spoke with this week believe the clearing target will be 108 megahertz at its lowest, which is up from the 84 megahertz floor that speculation at the NAB Show pointed to. A February study funded by Public Media Co. estimated total auction revenue at 126 megahertz and 114 megahertz as up to $37 billion, 108 megahertz at $28 billion, and 84 megahertz at $5 billion. The FCC had no comment for this story.
Wheeler's focus on additional auction stages indicates a likely high clearing target since a high target would make such stages more likely, numerous broadcast attorneys have told us. The incentive auction goes into multiple auction stages if the forward auction doesn't generate enough money to cover the broadcaster reimbursement fund, the costs of the auction, and to clear enough spectrum to reach the clearing target. If the auction goes into a second stage, the clearing target is reduced, and some broadcasters who had provisionally received winning bids will see those prices fall, attorneys and broadcast officials told us. The multiple stages of the auction are a mechanism to allow the market to reach the correct price for spectrum, Wheeler said last week.
Broadcaster participation in the auction is expected to be high because of the high dollar initial offerings, one broadcast attorney familiar with the auction told us. Most broadcasters won't be able to cash out at that initial price, however, and may leave the auction as their prices fall in subsequent rounds. Lower participation could make it harder to reach higher clearing targets, attorneys have told us.
Though most broadcast industry officials we spoke with saw Wheeler's remarks as indicating a high target, others had the opposite reaction. The focus on multiple stages was intended to reduce expectations, they believe, and some saw Wheeler's comments on the matter of reserving spectrum for vacant channels as indicating he doesn't expect a lack of space for translators, low-power TV and unlicensed devices to be a problem. “I think the key there is what happens insofar as the clearing,” Wheeler said. If Wheeler had a large clearing target to announce, he would likely have done so at the NAB Show before a crowd that would welcome a big number, one broadcast official said.