The Expanding Opportunities for Broadcasters Coalition warned the FCC this week that its proposed formula for setting starting prices for TV station spectrum in the incentive auction is illegal.
That is according to an ex parte filing of a meeting between EEOB executive director Preston Padden and top FCC staffers with the offices of Democratic Commissioner Jessica Rosenworcel and Republican Ajit Pai.
According to written talking points for the meeting, Padden said that formula will result in "starting prices hundreds of millions of dollars apart for stations with identical impact on clearing spectrum." He used the example of a station in Rockford, Ill., that will block more viewers and create more interference in the Chicago market than a station in Chicago whose opening bid is $334 million higher. He gave the FCC a list of 1,100 stations also undervalued according to the FCC formula.
He said that given the FCC's statement in its Report and Order that “a station with a high potential for interference will be offered a price that is higher than a station with less potential for interference to other stations," the formula "unlawfully departs from that commitment" to value a station on its clearing impact.
Padden has long argued that the only relevant factor is a station's effect on spectrum clearing. EOBC represents stations interested in giving up spectrum at the right price, which Padden suggests means a starting price higher than the FCC has suggested.
"The proposed formula is unjustifiable, contrary to the statute, and is legally unsustainable," Padden told the FCC officials according to the filing. He also said it appeared to be "a 'backdoor' attempt to factor in enterprise value." That would be valuing a station as an ongoing business rather than simply for how it affects the spectrum.
Padden also took aim at the Dynamic Reserve Pricing that allows the FCC to continue dropping the price after EOBC and others say it should be fixed, as well as the decrements (the opposite of increments) by which the FCC is dropping those prices to stations. The FCC is suggesting dropping prices between 3% and 10% each round. EOBC says it should be a fixed 1%.
Padden says fixed 1% decrements have the advantage of predictability for stations, who will know what their offer will be in each round.