O'Rielly: Broadcasters Should Challenge Spectrum Reserves

Says policy could depress prices

Related: NAB Show 2015 Complete Coverage

FCC commissioner Michael O'Rielly told broadcasters Tuesday that he is concerned that broadcasters could price themselves out of the incentive auction, while FCC rules could artificially lower revenues in the forward auction. 

That came in a speech to the National Association of Broadcasters convention in Las Vegas.

"I worry that the information and hype about the potential proceeds may lead to broadcasters pricing themselves out of the auction. I also worry that the impediments placed on wireless providers will prevent a free and open bidding process, thereby lowering revenues from the forward auction portion," he said. "Simply put, if there is a gap between expectations to sell and willingness to pay, the auction will fail."

The "hype" about potential proceeds has been driven in part by the success of the AWS-3 auction, which drew almost $45 billion in bids.

"[T]he recent success of the AWS-3 auction may have inflated the overall expectation as to the money that will be available for broadcast licenses. It is unclear, however, how comparable that auction is to the incentive auction," he said.

O'Rielly told his audience that the best way to insure they get a good price at auction is to insure that as many wireless companies participate as possible.

The FCC has proposed setting aside some of the low-band spectrum at auction for carriers other than AT&T and Verizon, which together already have the majority of that spectrum. O'Rielly says the effect of that will be that "these licenses will go for far less, because the country’s largest providers will only be able to win the unreserved spectrum."

Then there is the FCC proposal that it put the best spectrum in the reserve, and let AT&T and Verizon bid on spectrum with interference issues—so-called encumbered spectrum. "For broadcasters seeking to maximize the value of their licenses, which affects not only those that participate but future valuations of remaining stations, such a policy would seem to be troubling and well worth your effort to see changed," he said.

The commissioner urged broadcasters to "actively follow the Commission’s proceedings to pointedly critique any proposals that may detract from wireless license value."