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Hail to the Auctions - Broadcasting & Cable

Hail to the Auctions

Incentive auctions, expanding mobile broadband are Obama priorities
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Spectrum auctions may have been an afterthought on the deficit-reduction bill last month, but they are front of mind in the new jobs package the administration has sent to Congress—a document that carries a hypnotically repetitive “pass this bill” message from President Barack Obama.

The incentive auctions were excised from the deficit bill for procedural and political reasons. But with billions of dollars from the auctions earmarked for deficit reduction and the broadband first-responder network tied to them, the measure could have stronger legs this time.

TV broadcasters will be exempted from the spectrum fees authorized by the legislation, though apparently radio stations would not— a partial victory for the National Association of Broadcasters, which labeled spectrum fees a nonstarter. Last week, the NAB reiterated that its non-opposition to voluntary auctions still carries a big “but,” being that “the FCC can’t mandate a loss of local TV service to millions of viewers, and broadcasters are held harmless if they choose to remain in business.”

Going forward, much will depend on how the NAB defines holding harmless. The jobs bill currently authorizes the FCC to move broadcasters whether they want to move or not—participation in the auction is voluntary, but the FCC has the authority to “repack” broadcasters to free up spectrum, which the bill makes explicit. And while the bill authorizes the FCC to compensate broadcasters for that apparent forced move, it does not require it. The bill does require that the FCC cover the costs of such moves, voluntary or not, and pay cable providers for any costs to accommodate those moves.

While broadcasters have been pushing for more details on the incentive auctions, the bill would give the FCC until three months before the auction to tell the relevant committees in the House and Senate how it plans to calculate payments to licensees.

The bill also asks the FCC to consider “the value of the spectrum vacated in its current use,” which means the value as a broadcast channel rather than for wireless mobile—the latter is generally calculated by economists at a much higher value—combined with “the timeliness of clearing it.” There could, therefore, be a premium over the broadcast value.

The spectrum auctions had a short and uneasy tenure in the deficit bill, stripped in part because it was a revenue-raiser in a bill that the Republicans insisted be confined to budget cuts. But the spectrum reclamation from government and private broadcasters, the incentive auctions and firstresponder network portions are a central element of the jobs bill. Part of the National Wireless Initiative section, they take up 16 pages of the bill, or about 10% of the total tree-kill, with the president brandishing a thick copy of the legislation in his press conference unveiling it.

The president made expanding wireless broadband deployment to 98% of the country a State of the Union priority, and he has beat the drum hard for all the job proposals. Sounding like Peter Finch in Network, the president called for the American people to push Congress to get the bill passed: “So I want you to pick up the phone. I want you to send an email. Use one of those airplane skywriters. Dust off the fax machine. Or you can just, like, write a letter. So long as you get the message to Congress: Send me the American Jobs Act so I can sign it into law. Let’s get something done.”

The FCC is clearly champing at the bit, given that it will take years to reclaim the spectrum even after a successful auction.

Rick Kaplan, the FCC wireless bureau chief, said at a spectrum forum sponsored by the Information Technology and Information Foundation (ITIF) that it was time to attack the spectrum problem. He said the FCC needed to think long-term and flexibly about spectrum policy, but that incentive auctions are a “short-term step that we can do today.”

Suggestions have come from computer companies and others backing ITIF that broadcasters should be forced to share channels if they don’t give up spectrum—or else there needs to be a second digital transition. Kaplan said those were things for the FCC and Congress to think about carefully.

But he also acknowledged the issue carries political and practical realities. Kaplan said he could understand broadcasters saying: “I don’t want to be moved, what’s in it for me?” He added, however, that the incentive auctions were actually designed to say to broadcasters that there was a lot in it for them: “Instead of being forced to move, you can actually get a lot of money out of it, which seems great for the broadcasting industry to me.”

E-mail comments to jeggerton@nbmedia.com and follow him on Twitter: @eggerton

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