Broadcasters Want FCCTo Show Them (All) the Money

New alliance seeks open action on spectrum auctions in place of bidding limits that could cost them billions

Why This Matters

Wheeler’s Activist Outreach

FCC chair Tom Wheeler shook things up last week with his appointment of Gigi Sohn as special counsel for external affairs, overseeing outreach to the media and Congress. “This team provides an excellent mix of governmental, private-sector and public-interest expertise,” Wheeler said last week in announcing his new staffers. (See the full list of appointments.)

It was that “public interest expertise” part that had Washington buzzing. The rumor circulating two weeks ago was that Sohn, president of Public Knowledge, might be named head of the FCC’s consumer and governmental affairs bureau. Sohn had nixed that speculation in no uncertain terms.

Broadcasters on background expressed some concern about Sohn joining the FCC given Public Knowledge’s advocacy for retransmission consent reforms—it is a member of the American Television Alliance—that broadcasters argue undercut their negotiating position to the detriment of their business model and, ultimately, TV viewers.

”My portfolio is really three things,” Sohn said. “It is third-party outreach and coalitionbuilding, which will take up a lot of my time, and overseeing the office of media relations.”

That, said Sohn, will include “shaping the message” of the commission. The third thing on her list will be heading up intergovernmental affairs. “I will be overseeing the office of legislative affairs, but I am also going to be working with agencies that have an interest in broadband policy, including the Department of Education, HUD and Health and Human Services to try and strengthen their relationship with the FCC.”

So, what of those broadcaster concerns about the former head of Public Knowledge, which has pushed for retrans alongside cable operators, “shaping the message”? “I don’t think they should be concerned at all. Let me get in my job first, but I have a reputation of being an honest broker,” Sohn said.

“We’ve known and respected Gigi for 20 years. She’s super smart and will be chairman Wheeler’s fiercest advocate,” said NAB spokesman Dennis Wharton. “She’s also pro-competition, and we’re optimistic that she and chairman Wheeler will acknowledge that fair retrans compensation allows local TV stations to remain competitive against behemoth pay TV giants.” —JE | @eggerton

The FCC's spectrum auctions will ultimately take place, turning the industry
into something resembling an elaborate, very special episode of Storage Wars. And when it happens, broadcasters considering
selling their lockers full of spectrum
want to make sure the bidding is
fast, furious and fully engaged.

So they have gotten together with the
Consumer Electronics Association and big
wireless companies to convince the commission
to not limit the ability of Verizon
and AT&T to bid in the forward auction.
(That’s the auction that will see the collection of money
from wireless companies to pay off broadcasters.) To
limit Verizon and AT&T in those sales would, broadcasters
say, cost them billions in lost auction revenue.

Broadcasters that are not selling out have a dog
in the fight, too: The money will be used to pay their
spectrum moving and repacking expenses. But it’s the
so-called “coalition of the spectrum willing” (a.k.a.
the Expanding Opportunities for Broadcasters Coalition,
or EOBC) that is making the big push.

 Why This Matters
Restricting the bid amounts for spectrum would be yet another blow to broadcasters that feel their position is already weakened in this historic shift.

Last week, the EOBC and the CEA unveiled an
analysis (read it at
stating that bidders and the act of scoring stations
based on factors other than their spectrum value
could do a number on the auction revenue number,
reducing it by nearly $6 billion.

Sprint and T-Mobile argue that the FCC should
make sure bidders other than the two largest carriers — who already have the majority of low-band
beachfront spectrum — get a shot at the new spectrum
being put up for auction. AT&T and Verizon
counter that Sprint and T-Mobile can hold their own
in an open auction.

The analysis, “Maximizing the Success of the Incentive
Auction,” concludes that a combination
of bidding restrictions and scoring TV
stations could reduce the auction take by
about $5.8 billion. The incentive auctions,
combined with other spectrum auctions —
specifically, the H block and AWS auctions
the FCC has been told by Congress to
conduct — need to raise enough money
to pay broadcasters (billions) along with
the moving and relocation expenses for the spectrum-
unwilling TV stations ($1.75 billion budgeted)
and for an interoperable broadband public safety network
(let’s call that many more billions).

And broadcasters may even be underestimating
the impact. Two weeks ago, AT&T submitted an
analysis from some of the same people the FCC
hired to design the auction, and their conclusion
was that even the “mildest” restrictions on the participation
of AT&T and Verizon would cost billions.
More severe restrictions that essentially foreclose
the top two carriers could reduce the auction revenue
by as much as $26 billion, they argue in a paper

Cost-Benefit Conundrum

According to CEA and EOBC representatives, the
costs to the auction revenue of FCC bidding restrictions
“would outweigh any potential benefits to competition
among the four national wireless firms in the
upcoming incentive auction.”

The FCC is contemplating adjusting its local market
spectrum screen, including taking into account the
relative values of low-band and high-band spectrum,
which could limit what spectrum carriers, particularly
AT&T and Verizon, could bid for in some markets.

Sprint and T-Mobile have been arguing for rules
that would ensure a more even playing field, but
Verizon and AT&T have countered that the two bidders
are plenty big enough themselves to compete
for spectrum.

The EOBC/CEA report was written by Fred
Campbell, a veteran communications attorney who
formerly served as wireless adviser to FCC chairman
Kevin Martin, chief of the agency’s wireless bureau
and an adviser on auction policies.

Campbell’s report concludes that scoring stations
on criteria such as population covered instead
of spectrum value would lower the prices paid to
broadcasters and discourage participation.

“New options are emerging for TV stations to use
their existing spectrum licenses,” EOBC executive
director Preston Padden said in announcing that
CEA and EOBC had teamed on the study. “To attract
the critical mass of broadcasters necessary to
make the auction a success, we need competitive
bidding among all wireless carriers for every license
and the assurance that every TV station will be fully
compensated for its spectrum rights.”

Those new options include multicast channels that
give broadcasters multiple market entry points, as
well as possible wireless offloading and data services
that depend on what flexibility the FCC gives broadcasters
to use their spectrum.