CES: Kaplan -- FCC Should Not Rush Auction

Tells CES audience wireless market has reorganized to address "surprise" spectrum crunch

By John Eggerton -- Broadcasting & Cable, 1/9/2013 3:50:40 PM

Complete Coverage: CES 2013

The success of the FCC's incentive auction could hinge on not "rushing" an auction -- the FCC has set a 2014 deadline -- before resolving border issues with Canada and Mexico.

That was one of the messages to a Consumer Electronics Show audience from National Association of Broadcasters incentive auction point person Rick Kaplan.

Kaplan, who was at the FCC during the first DTV transition, said that would be nothing compared with the repacking associated with the incentive auctions, and that rushing the process was both counterproductive and unnecessary.

Speaking at a panel session Wednesday at the CES show, Kaplan said that the wireless marketplace, through various spectrum deals -- Verizon SpectrumCo and Sprint/Clearwire, for example -- had reorganized itself to respond to the "surprise" spectrum crunch, which gives the FCC time get the auction right rather than simply get it done.

Kaplan also said he was not sure channel sharing was going to work -- one of the options the FCC has given broadcasters who give up spectrum.

Charla Rath, VP, wireless policy development for Verizon, said Kaplan was right that the industry had some time, but said that the demand had grown -- for one thing, with the advent of tablets that were not around when the FCC's Broadband Plan was talking about the coming crunch. But she said that does not change the urgency and warned about a delay that would mean spectrum was not available when it needed to be.

FCC Media Bureau chief Bill Lake said the FCC was still looking at a 2014 auction, pointing out that was partly based on the prediction that 2015 would be a crunch year for spectrum.

Introducing the panel was Rep. Lee Terry (R-Neb.), a Republican leader on the House Communications Subcommittee that helped produce the incentive auction legislation.

He said he was concerned with how the FCC was going to get broadcasters to participate given that they could not be forced to give up spectrum and the FCC would have only $3 billion to compensate them. He suggested that could run out quickly.

"Let's not fool ourselves," he said, one of Congress's major reasons for the auction was money. "We want the FCC to design us rules to get at least $24 billion."

Kaplan said he thought that in the major markets where the FCC is most in need of spectrum, the stations would command a higher price than the FCC could pay.

Neil Fried, senior telecommunications counsel to the House Energy and Commerce Committee, suggested that might be the case for the top station in a big market, but that the exit price for the 25th station in the market might not be so high.

Both Fried and Terry said the committee would continue to monitor the FCC's progress in coming up with the auction framework. It issued a proposal in September and will be collecting comments through March.

Terry indicated there would be more hearings, but that the committee would try to do that oversight look from a "30,000-foot level" rather than get into the weeds.

That may have been the better part of valor. Mark Fratrik, VP and chief economist for BIA Kelsey, suggested the possible permutations made his "hair hurt." He talked about the prospect of repacking TV stations in concert with an auction with a lot of moving pieces. If station A in market 7 opts out in the third round, he said, that will affect all 30 stations along the Eastern Seaboard. "Repacking is going to be really challenging."

Lake reiterated that the FCC's goal was to keep the complexity in-house and make it as easy as possible for broadcasters to assess their options. He said some broadcasters were making very good use of spectrum, but some weren't. For some, he said, the opportunity to contribute spectrum to the auction, help meet what he said was a booming demand for broadband, and share in the proceeds from the auction "may be very attractive." He also said broadcasters could emerge "stronger than ever."

Kaplan suggested that the FCC not hold itself to the 2014 date, and instead focus on getting the auction framework right and, in that way, free up more spectrum than if it tried to go for speed.

For example, he said he did not think the FCC could conclude talks with Canada and Mexico on border coordination by 2014.

Lake suggested the FCC could do both, but conceded it would be a challenge.