Spectrum of Possibilities

Two FCC incentive auction leaders take on all sides of the issue, from station rights to interference (electrical and otherwise) 12/24/2012 12:01:00 AM Eastern

Bill Lake and Gary Epstein will have a lot to do
with how the FCC eventually creates and implements
a framework for
incentive auctions, which
in turn will help determine
the fate of the broadcasting
business in the months and
years ahead.

Lake is chief of the FCC’s
Media Bureau, and Epstein
is senior adviser and co-lead
on the FCC’s Incentive Auction
Task Force.

While the exact outlines
of that framework have yet
to be determined—a tentative
framework was put out
for comment in September—
the pair agreed to an on-the-record conversation with
B&C Washington bureau chief John Eggerton about the unprecedented
effort to reclaim spectrum from broadcasters and
auction it to the highest bidders—which would be, presumably,
spectrum-hungry wireless carriers. An edited transcript follows.

Will extending the deadline for final comments on the
auction framework—from Feb. 19 to March 26—set
back your timetable for voting the item mid-2013?

Gary Epstein: We’re on track. We have said publicly that we
are still on track for rules in 2013. The auction is going to be
a 2014 event.

When is the “June 2009” moment for this next DTV
transition, by which we mean, when will broadcasters
actually have to give up their channels and/or move to
new ones?

Bill Lake: We haven’t set a date for that. We asked in the notice
of proposed rulemaking what the transition arrangements
ought to be. This is different from the DTV transition, where
the June [2009] event was basically just turning off the analog
signal if you already had the DTV signal up. This is one where
we will have a slightly different transition and we don’t know
exactly what the timing ought to be.

But let’s say the auction is completed by the end of
2014, roughly how long after that? A year? Five years?

Lake:We’ve put out for comment whether it could be done in
18 months. And, of course, we will see if people say whether
that is feasible or not. We want to be aggressive on all of these
things, to try and do them as quickly as we can.

Could there be a third
DTV transition, where you
have to come back to the
well again if this auction
isn’t successful?

Epstein: Our view is that
Congress gave us this authorization,
we put out this
notice and we are doing
everything we can to make
this auction a success. We
are designing it to make it
relatively simple for broadcasters
to participate. We
are spending a lot of commission
resources and time on it, and we don’t have a plan
B at this point. We are focusing our efforts on making this
auction a success. We think that broadcasters are being, and
should be, cooperative because they have a stake in this.
This Congress has authorized certain protections for broadcasters
with respect to reimbursement costs and preserving
coverage areas.

But, totally separate from this auction, the FCC has
the authority to grant or take away a license if it concludes
it is in the public interest. So, the FCC still has
the power after the auction, if it does not get spectrum
where it needs to, to go back and simply take it, right?
It would be politically difficult, obviously, but the FCC
could, theoretically, do it?

Lake: We have authority with respect to licenses. We haven’t
thought about using that outside of the context of this auction
because this is one that we expect to be a success, and we think
broadcasters have a strong interest in making it a success. As
[Gary] says, there are special protections in this auction. If we
were to do another auction under the statute five years from
now, those protections wouldn’t be there. So we have an incentive
to make this work, and the broadcasters have an incentive
to make this work, and we fully expect it to work.

What percentage of stations are involved?
From how many stations do you actually want spectrum?

Epstein: What we have said is that we are not in
the business of predicting how many stations are voluntarily doing this. What
we're in the business of doing is designing an auction that will really make it
easy for them to participate and laying out as simply as possible the three
options Congress gave us [for auction participation], which are going off the air
completely, sharing spectrum and going from a UHF to a VHF channel.

So, maximizing spectrum while maintaining
a viable broadcast industry. But Bill, haven't you said you are really only
looking at the top 30 to 50 markets.

Lake: I would distinguish two things. One is
where we expect contributions. Clearly the greatest need for spectrum is in the
largest markets. So that is where we would expect to get the greatest number of
contributions. There will be some other smaller markets where we will need some
spectrum as well, particularly in markets adjacent to major markets.

When we get to
repacking, stations in smaller markets may also have to move, for example; if
they are on one of the frequencies we are moving over to wireless service they
may have to move. Now, in smaller markets, there may be plenty of places for
them to move and it will be an easy matter for them to move to another channel.
Stations in any market in the country may be subject to repacking depending on
what channel they might be on.

Epstein: That is an important point-As far as
repacking goes, we are trying to clear spectrum on a nationwide basis and maybe
on a regional basis in some markets. That means in some of the smaller markets
there will be some repacking.

So, the space is there, but they may be
in the wrong place and you have to move them to the right place.

Epstein: Exactly.

It says in the notice of proposed
rulemaking: "We interpret [the statute] to require provision of a channel
for each eligible station that will remain on the air following the completion
of the incentive auction, i.e., each station that does not participate in the
reverse auction, participates but does not submit a winning reverse auction
bid, or submits a winning bid to move to another band. The statutory
preservation mandate is limited to such stations." That seems to say that only
people who move from UHF to VHF-or theoretically from V to U-would be covered,
not anyone moving within either one of those bands. Should it have said "channel,"
or what are we-and some concerned broadcasters-missing?

Epstein: What we meant by that for stations that
do not participate in the auction at all, or for stations that participate in
the auction but don't win, is they will be assigned to the band where they
were. They may be repacked, but a U will be a U, and will be in that band. What
we meant in that last situation is a station that chooses to go from U to V.

Lake: One of the options in the auction is to
be able to move from U to V for a share of the auction proceeds. No one will be
involuntarily moved from one band to the other.

This is like a
second spectrum downsizing for broadcasters.

What kind of interest have you seen from
broadcasters? Has Preston Padden-who is representing broadcasters willing to
give up spectrum-approached you with actual potential bidders?

Lake: We have had a lot of anecdotal,
individual expressions of interest. Some station owners have come to us and
said they plan to participate in the auction. We have had other contacts by
lawyers for stations that haven't been identified. Preston has not identified
the stations that are members of his coalition. But certainly indications that
we have are of substantial interest in contributing. There is no way that we
can quantify that at this point.

The NPRM proposes compensating
broadcasters for voluntarily accepting additional interference. The FCC
potentially boosting interference doesn't seem very consumer friendly.

Lake: I don't think that is the case. In fact,
this is the sort of thing that broadcasters did in the DTV transition and that
they do simply as a private matter between them. Two stations that are butting
up against each other will sit down and decide exactly how much interference
each will accept from the other as a way of defining the boundary between them.
And they do that obviously with the interest of serving viewers as best they

So, we don't see
this as anything harmful to consumers at all. It is an option that stations
might take if they thought it was in their interest, and their interest is in
serving their viewers, to say they would accept some interference for auction
proceeds. We have asked whether we should afford that option. It is not in the
statute and we may decide that it is not something that is a good idea or
works. We just basically asked the question.

What about the argument that much of the
spectrum you are targeting for contribution will wind up coming from smaller,
urban stations who have been providing diverse programming?

Epstein: I think it would be really difficult for
us to think about not allowing all stations to participate in the reverse
auction, no matter who owns them. And so we have that premise. In addition,
there are a number of attractive options for stations participating in the
auction to not go off the air, including in particular the sharing of stations
where they can get a good capital infusion and remain on the air as
broadcasting or moving from a U to V. Especially in an area where there is a
lot of cable and satellite coverage, they can maintain their audience and again
get a capital infusion.

Lake: If our interest is in making sure that
viewers don't lose important niche programming, there are ways that Gary
described for participating in the auction and staying on the air. There are
also other ways in this modern economy to reach viewers. Someone who has been
an independent today could arrange to be a ["multicast" channel] on another
station. It might actually get greater coverage that way. The Internet is
available for niche programming. We're very interested in trying to make sure
the auction makes programming available to viewers that they want to receive.
And we have actually asked whether there is anything the commission should to
do encourage the use of these other media if that is necessary in order to
assure consumers get what they want.

Broadcasters are concerned about an FCC
proposal to make wireless a co-primary user of the broadcast band.

Lake: We originally made the proposal to
allocate the entire band as a co-primary between the two services. Broadcasters
said they did not like that proposal. So what we have done is basically table
it. We don't anticipate that when the auction is finished there will be any
part of the band in which there will be both broadcasters and wireless
companies participating. We will end up with a band plan where certain parts of
the spectrum will be available for broadcast and other parts for wireless. The
concern that broadcasters won't be considered to sort of belong where they are
is not going to really exist. I think that was maybe a broadcaster
misunderstanding of what we were about.

What we have
assured them is that we are going to create a band plan in which the wireless
carriers are in one part of the band and broadcasters in another and we will
create guard bands as needed to make sure they don't interfere with each other.

Shouldn't you conduct a comprehensive
spectrum inventory before you conduct the auction?

Epstein: We did a spectrum inventory as part of
the National Broadband Plan and we have the Spectrum Dashboard. But the
practical answer is we are looking for a large, contiguous swath of low band
spectrum. Whether we do a spectrum inventory or not, there really isn't another
potential for low-hanging fruit or any opportunity other than the incentive
auction in this band.

It is a matter
of record that we are looking for frequencies below one gigahertz here. We know
what they are. And the incentive auction is the broadband plan's, Congress',
the president's and now our way to repurpose some of that spectrum.

What is the status of treaties with
Mexico and Canada?

Epstein: We've started discussions both with
Canada and Mexico. We have treaty obligations with respect to them whether
there is anything in the statute or not. We have a long history of cooperation.
We're getting some good initial indications back. We intend to address the
border issues before we come out with a report and order. But a couple of key
points are that the statute does not require us to complete negotiations before
we go to a report and order. And second, the lead band plan proposal that is in
the NPRM is flexible enough to be able to accommodate differences in spectrum
along the border if we actually need it. We are optimistic and positive that we
will be able to clear more spectrum through those negotiations, but we have
given ourselves the opportunity through the flexible band plan to be able to do
the auction.

What are broadcasters worried about?

Lake: They may not have appreciated during the
legislative phase that we would be accepting different amounts of spectrum in
different markets. There was one NAB concern, for example, that if we got 120
MHz in Detroit there wouldn't be any stations left. But that is sort of
starting at the wrong end of the issue. The question is how many stations in
Detroit will contribute its spectrum. I am absolutely confident that every
station in Detroit is not going to contribute its spectrum.

I think they
were reasoning backwards from 120 MHz rather than forward from individual
decisions of broadcasters, which is going to be what drives this.

So, every broadcaster could remain if
none were willing to give it up?

Epstein: Yes, that is what the statute
authorizes, but we do not think it a likely outcome.

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