Time is money for 60-69ers
Paxson-led group wants to push deadline and set up mechanism for reaping windfall
By Bill McConnell -- Broadcasting & Cable, 3/25/2001 7:00:00 PM
More than 20 of the TV companies in line for a windfall from wireless companies want more time to set up a deal many believe will yield them billions to vacate their channels early and switch to digital.
Their March 16 request to the FCC was backed by the consulting firm and investment bank negotiating with broadcasters either operating or holding digital allotments for stations on channels 60-69, slated to be auctioned by the FCC Sept. 12. The broadcasters, which are expected to strike buyout deals with the auction winners, want to move the bidding to January 2002.
Leading the broadcasters is Lowell "Bud" Paxson, founder of PaxNet and owner of 18 of the 138 stations on the band, located on the 700 MHz segment of the spectrum. Other broadcasters signed on include Sinclair, Shop-At-Home, Entravision and Pappas Telecasting. Together, they account for 42% of the stations with allotments on the band.
There are no clear estimates of the spectrum's value, although many point to the $46 billion Germany raised and the $35 billion fetched by the U.K. for similar spectrum auctions.
Although many analysts believe the European wireless companies drastically overpaid, PCS companies in the U.S. paid $17 billion earlier this year for spectrum widely considered inferior to the broadcast frequencies.
"Any estimate would be a wild guess and nothing more," said James Burger, a telecom attorney at Dow, Lohnes & Albertson in Washington. Yankee Group analyst Michael Goodman agreed but added that, if the auction garners $30 billion, it's conceivable Paxson could take in $1 billion in early-buyout money.
Despite the eye-popping numbers that could come the broadcasters' way, Paxson insists it's a just reward for building a viable business out of the UHF "desert."
Paxson isn't putting a number on the amount of cash he expects to take in and, two weeks ago before the House Telecommunications Subcommittee, emphasized, instead, the digital transition as a burden for his stations. "Some have said that giving digital TV allotments to broadcasters was a $70 billion giveaway," he told lawmakers. "I take strong exception to this charge. There are well-respected sources who say that the government will net $70 billion from the sale of the 52-69 spectrum."
Channels 52-59 are slated to be auctioned, too, in 2002.
Paxson's plan is being worked out with consultants from Spectrum Exchange Group and investment bank Allen & Co. Their aim is to work out private deals that will allow winning bidders of the 60-69 spectrum to buy out incumbent broadcasters before stations must give up operations on the band at the end of the digital TV transition. Without the deals, broadcasters are allowed to occupy the frequencies until 85% of homes are equipped to receive DTV-a level that could take more than a decade to reach. Without a way to move stations off the band quickly, the wireless companies will be less likely to bid enough to reflect the spectrum's full value.
The FCC must approve specifics of the buyout plan, which Paxson and his allies are still crafting. Last week, he urged the FCC to allow stations that accept early-buyout deals freedom to air either analog or digital broadcasts.
The FCC has not commented on Paxson's latest request but is expected to favor the overall buyout idea. In January, the commission upheld broadcasters' right to demand lucrative early settlements from spectrum winners.
Paxson also is pushing for multiple carriage rights for stations that offer digital multicasts, but the FCC isn't likely to bite on that one. Last month, the FCC tentatively ruled against Paxson's idea and against the broadcast industry's demand for dual analog/digital carriage during the transition to all-digital broadcasting.
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