EOBC: Successful Auction Will Need FCC Tweaking

Price is big sticking point for coalition of auction-interested
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The coalition of broadcasters kicking the tires on the FCC broadcast incentive auction has told the commission its auction game plan needs work.

In comments to the FCC on its proposal for pricing TV stations in the auction and repacking them afterwards, the Expanding Opportunities for Broadcasters Coalition (EOBC) says that if the FCC gets it right, it could get the 126 MHz from broadcasters it has always targeted, but not at the rate it is going.

"Unfortunately, many of the proposals in the Auction Comment [Public Notice] reflect a belief that the Commission, rather than the market, is the best determinant of auction outcomes. While this belief never was appropriate, it is particularly misplaced in light of the unmistakable market signals from the AWS-3 auction." That auction raised almost $45 billion for spectrum that most consider not as valuable as the broadcast spectrum.

Chief among EOBC's concerns is the way the FCC is pricing the spectrum, including the pricing of its opening bids and the dynamic reserve pricing (DRP) model the FCC has proposed for conducting the auction, which allows reserve prices to continue to decline even as they were rejected by broadcasters.

EOBC argues the latter artificially depresses prices for winning bidders or relegates stations to the wireless portion of the band, with interference potential for both stations and wireless operators.

EOBC says the FCC's opening bid prices are too low— those prices will only go down from there since the money goes to the station willing to take the least money for giving up spectrum. The coalition argues that the FCC's justifications for its price,that higher starting points would result ion "many hundreds of rounds" or that the FCC is bound by statute to limit payments to broadcasters, are "fabricated" and "unacceptable," and the number of rounds a red herring. The recently completed, wildly successful —at least financially— AWS-3 auction went 341 rounds.

"Any scheme to artificially limit payments to broadcasters is contrary to the market-based principles that the Commission has espoused," EOBC says. "The only predictable aspect of DRP is that no station will receive its opening price or likely anything approaching its opening price," EOBC says.

Using DRP to artificially depress the price of a TV station before putting it up for auction, says EOBC, is like "beating your car with a sledge hammer before taking the photo to sell it on Craigslist."

EOBC's Preston Padden has consistently criticized the DRP approach. Back in December, he called DRP a nonstarter and said it actually stands for "discourage robust participation" or "dynamically rigging pricing." 

EOBC closed its comments on an up note. "By committing to a market-based auction that places spectrum to its best and highest use, the Commission will attain the once unthinkable goal of reallocating at least 126 MHz of broadcast spectrum," it said. "The Expanding Opportunities for Broadcasters Coalition and its members are committed to continuing to work with the FCC to achieve this result."

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