Auction worries multiply

Four years ago, Congress ordered the FCC to auction broadcast licenses and other spectrum rights, ending a cumbersome decades-old practice that required seemingly endless rounds of hearings before regulators made their best guess about which applicants would best serve the public.

But auctions have created headaches of their own, including a court decision last week that could delay bidding for four TV stations and more than 600 radio stations over the next year.

Last week's ruling throws out an FCC policy requiring public broadcasters to bid against for-profit stations when seeking channels outside the narrow band of spectrum reserved for non-commercials. National Public Radio and other public broadcasters had challenged the rules, arguing that Congress exempted non-commercial outlets from bidding for any licenses.

"This is clearly going to be problematic," said Susan Eid, mass-media adviser to FCC Chairman Michael Powell.

Although FM frequencies between 88 and 92 MHz are reserved for non-commercial users, public broadcasters may also locate on other unreserved portions of the spectrum.

The decision by the federal appeals judges in Washington comes on the heels of another ruling attacking FCC auction procedures by the same court. That ruling invalidated an FCC decision to re-auction more than 200 wireless licenses seized from bankrupt NextWave Telecom. The order will cost the government roughly $11 billion, the difference between bids in the second auction and the $4 billion that NextWave originally promised to pay.

Roughly 350 broadcast permits are set to go on the block on Dec. 5, while bidding for another 250 licenses has yet to be scheduled. Bidding for TV outlets in Columbia, S.C.; Pittsfield, Mass.; Magee, Miss.; and Scottsbluff, Neb., has not been scheduled either.

Commissioners struggled over the handling of non-commercial applicants on the unreserved part of the band when drafting auction rules in 1998. Suggested alternatives included banning non-commercial applicants from new commercial allotments altogether or implementing a hybrid system that would pit applicants against each other using a point system similar to the one used to dole out non-commercial licenses. That system awards points to applicants based on the portion of local ownership, size of the geographic area and population that would be served and whether the ownership group would be new to the market.

Under the hybrid plan, the public broadcaster that tallies the most points would be declared the winner. If a commercial applicant scored the most, non-commercial applicants would be disqualified and an auction held to determine the winner.

Several Washington attorneys, following NPR's suit, said regulators' worries over the case prompted the commission to delay the 350-license auction, which had been scheduled for May. FCC staffers have refused to say why they delayed that auction, however. Other attorneys blamed the delay on the FCC's plan to add five of seven stations seized from convicted child molester Michael Rice to the auction. Last week, Rice's battle to keep his stations ended when the Supreme Court refused to review his appeal.

Although the judges found that the 1997 budget law mandating spectrum auctions was plagued by "inartful drafting," they also criticized the FCC for ignoring the clearest reading of congressional intent by requiring public stations to bid for channels located on the commercial band. "The act unambiguously forbids the commission from requiring non-commercial broadcasters to participate in auctions for any channel," wrote Justice David Tatel.

The ruling validates dissents by Commissioner Gloria Tristani and former Commissioner Harold Furchtgott-Roth when the initial auction rules were issued. "I believe the decision reflects congressional intent that non-commercial applicants not be subject to auctions under any circumstances," Tristani said last week.

Even if the FCC figures out how to resolve competing applications from public and commercial operators, the bidding process may face other stumbling blocks. Radio-industry attorney Lauren Colby insists the agency will be in for a raft of lawsuits when winning bidders discover that the allotments up for bids in December can't adequately serve the markets advertised.

But civil-rights attorney David Honig, who hopes to help minority applicants bid for some channels, said a little engineering research will sort the jewels from the waste. "The FCC offers no guarantee that these sites can be built out," he said. "Don't go into this with eyes closed."