Some Changes for a More Balanced Auction

Yesterday, NAB filed a limited petition for reconsideration of the Federal Communications Commission’s (FCC) recent “Procedures Public Notice” laying out additional details concerning the forthcoming broadcast spectrum incentive auction. First, we’re asking the Commission to reconsider its decision to relocate TV stations in the duplex gap, which eliminates the only remaining exclusive use spectrum available for wireless microphones broadcasters use to cover breaking news and emergencies. Second, we’re asking the Commission to reconsider the level of market variability it will permit in light of recent progress made in international coordination with Canada and Mexico. We’re limiting our request for reconsideration to those two issues primarily because they are subject to quick fixes. The Commission could grant our request without in any way threatening its target March 29, 2016 start date for the auction.

Separately, we are also seeking clarification as to whether the FCC’s current incentive auction design is consistent with the Spectrum Act’s requirement that the incentive auction be voluntary for broadcasters – or whether the FCC’s chosen mechanism will effectively nudge broadcasters into participating.

Here’s the issue. The natural consequence of the FCC’s variable band plan is that some broadcasters will be assigned channels that are in the new wireless band – that is, they will be operating on channels that are used by wireless carriers in other markets. For a long time, the FCC had been suggesting that broadcasters would be randomly selected to be placed into the wireless band, and it would not be based on whether and to what extent they participated in the auction. Obviously, it would be alarming if the FCC made judgments based on participation.

The recent Procedures Public Notice, however, could be read to suggest the FCC has decided that only non-participating stations will be placed in the wireless band if the auction successfully closes at the initial clearing target. In addition, it appears that the only other stations that could be added to that list are broadcasters who participate but drop out in one stage, only to see the auction move on to another stage because it could not close. In other words, if the auction fails to close at that initial stage, the only additional stations that can be relocated to the wireless bands are stations that drop out because their asking price is too high. This doesn’t exactly sound “voluntary” to most broadcasters.

While the Commission doesn’t seem to believe there is any harm to broadcasters if they are assigned a channel in the wireless band because they will receive the same protections in the repacking process as other stations, no broadcaster would voluntarily choose relocation there.

Television stations operating co- or adjacent channel to new wireless licensees will be extremely limited in terms of their ability to expand their facilities after the auction. As a practical matter, this may constrain their ability to relocate, increase their service area or even innovate. Further, broadcasters, as well as the Commission itself, are all too familiar with the uncertainty and disputes surrounding television stations operating on channel 51 and wireless carriers operating in the 700 MHz Lower A Block. Stations on channel 51 are protected by the Commission’s rules, just as the Commission is now promising to protect stations stranded in the 600 MHz band. Those protections, however, have not prevented costly and time-consuming disputes. Similarly, a broadcaster that has a station relocated in the 600 MHz band will have to factor the prospect of ongoing inter-service interference issues into its business plans.

The bottom line is that a broadcaster placed in the wireless band will be surrounded by wireless operations that are incompatible with, and hostile to, the broadcaster’s continued operations. It would be as if one’s home was forcibly relocated to a commercially-zoned neighborhood; the home might be identical, but it would not be as comfortable, and certainly not as valuable.

Our hope is that the confusion emerging from the Procedures PN is just that and that broadcasters do not now have to factor in their participation decision the potential penalty of being shipped to the wireless band. The incentive auction can be a tremendous success as a voluntary auction and broadcasters – not just the speculators – are eager to keep the process moving swiftly.