FCC Downsizes Spectrum Auction

Wireless bidders fail to cover broadcaster payouts in first stage of process
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The FCC’S effort to reclaim broadcast spectrum toauction—to what were billed as spectrum-hungry wireless carriers facing a crisis shortage—has so far failed to draw the big bucks the FCC had to dish out to broadcasters.

If the auction is meant toferret out the higher, betteruse of the spectrum, just where that better use is has yet tobe determined. “Perhaps the notion of a ‘spectrum crisis’ pedaled in Washington for the last seven years is not as acute as policymakers were led to believe,” said Dennis Wharton, National Association of Broadcasters spokesman.

That is because there wasnot enough interest in reclaimed broadcast spectrum by wireless companies in the forward auction to cover the $86 billion-plus the FCC was willing to pay broadcasters in the reverse auction for their 126 MHzof spectrum.

After only two weeks ofbidding by those wireless carriers and others in the forward portion of the two-sided incentive auction, the FCC calledit quits on stage one having raised only $22.45 billion, ora whopping $66 billion shortof the mark, and with demand no longer exceeding supply in the top 40 markets (the other key benchmark).

Wireless trade group CTIA pointed out that would still have been the second-highest ever auction take for the FCC, though it is also more spectrum than is usually auctioned at one time.

The FCC had said from the outset that it was setting the prices high to attract broadcasters, which they did. But wireless bidders would have had to pony up far more than original projections of the spectrum’s worth to cover that payout.

The auction was also set up with multiple spectrum targets—how much spectrum the FCC could reclaim and how much wireless bidders could potentially get—though obviously the FCC wanted to free up as much spectrum as possible and raise as much money for the treasury.

The next step is for the FCC to reset the spectrum target, which it already has, ratcheting down one notch to 114 MHz, which nets to 90 MHz (a maximum of nine paired spectrum blocks in a market), with the rest going for guard bands.

A new broadcast reverse auction will resume Sept. 13 at the lower target with the FCC offering to buy less spectrum but with some markets getting more spectrum, including along the borders and in No. 2 market Los Angeles.

That is because with less spectrum for sale, there will be two more UHF channels in the broadcast band and less need to put stations in the wireless band.

One possible upside for broadcasters is that with less broadcast spectrum on the block fewer stations will have to be repacked, which means a better chance that the $1.75 billion Congress set aside to compensate broadcasters—and some cable operators—will cover the cost.

The FCC’S effort to reclaim broadcast spectrum toauction—to what were billed as spectrum-hungry wireless carriers facing a crisis shortage—has so far failed to draw the big bucks the FCC had to dish out to broadcasters.

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