Questions Mark Auction Launch

Broadcasters need answers to decide on offering up spectrum

Why This Matters

Pre-Auction Q&A

One broadcast group exec who asked not to be identified offered up these questions he wants the FCC to answer about the incentive auction.  He says he is not planning to put any spectrum up for bid, but will "wait to see the rules and guidelines before making a final decision."

  1. How will the FCC decide what is the "value" of a station that might decide to participate in the reverse auction in a particular market?  Will it really be a number that a volunteer suggests, or will the Commission try to limit what a station can get?
  2. How long is an auction likely to go on?  Will it be market by market or nationwide all at once?
  3. When will a station that does not volunteer know whether they have to switch channels and what channel they are supposed to switch to?  Will stations have a chance to make suggested changes to channel assignments like we did in the digital television transition?
  4. How long will stations have to plan for switching channels?  Will all rebuilding costs (such as temporary antennae/transmitters needed during a transition) be eligible for reimbursement?  Will there be some sort of eligible cost list with reasons why some costs are not included?
  5. What will happen to a station that does not have the switch channels, but has to move its antenna to accommodate someone else's move?  Will those costs be reimbursed?

The FCC last week released what
one commissioner’s aide called its
“straw man” model of a reverse incentive
auction. A “straw man,” according to
various tech and definition websites, refers to
a piece of software that is “not expected to be
the last word,” but is more like a beta test, or
something that is “refined until a final model
or document is obtained that resolves all issues….”
In terms of the FCC’s model, that description
sums it up very well for broadcasters.

Although National Association of Broadcasters
president Gordon Smith said broadcasters
would work with the FCC to make the auctions
a success, he suggested there were still a lot of
questions the commission needed to answer about how the
auction would be structured and how it would affect broadcasters,
particularly those that choose to remain in business after
the FCC auctions to reclaim and sell their spectrum. That is obviously
and understandably the NAB’s focus, given that Smith
does not run the National Association of Former Broadcasters.

The FCC has launched a broadcaster education campaign,
including a first workshop slated for Oct. 26. But that appears
to simply be more of an effort to encourage broadcasters to give
up spectrum, given that the FCC pitched that program as an
opportunity to educate broadcasters on “the unique financial
opportunities of incentive auctions.”

Here are some of the key questions broadcasters need answers
to before the FCC votes on final rules sometime next year:

1. How much of their coverage areas will broadcasters
be allowed to retain after they are repacked—moved and
relocated—to make room for large swaths of spectrum?

Smith says the NAB “hopes” and “believes” that, as with the
digital transition in 2009, broadcasters will lose
no more than 2% of their coverage areas. But the
incentive auction notice of proposed rulemaking
(NPRM) issued last week also seeks comment on
whether the FCC could pay stations to accept
reducing their coverage areas even more.

2. Will there be enough money to cover the
moving and relocation costs for broadcasters—
and any for cable or satellite operators
to retransmit the moved signals?
has conceded that the $1.75 billion Congress authorized
for those expenses may not be enough
to cover them. What’s the FCC going to do about
it? FCC commissioner Ajit Pai, who has plenty
of questions about the auction process—he quoted Winston
Churchill in calling it “a riddle, wrapped in a mystery, inside an
enigma”—raised the compensation issue at the FCC meeting
voting out the item. Pai wants to know whether covering broadcaster
costs should be a prerequisite of closing the auctions.

3. What model will the FCC use to determine how to
repack stations?
The commission signaled that the allocation
optimization model it’s been talking up since the National
Broadband Plan proposing auctions was released in 2010 won’t
be the model, but has asked for input from broadcasters. Broadcasters
have been pushing the FCC to release that info so they
can decide how much of a business the FCC is leaving them
with. Last week’s NPRM asked plenty of questions, but leaves
the answers for another day. Broadcasters, meanwhile, are hoping
they do not put their business models in final jeopardy.

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