FCC Auction of 119 FM Permits May Not Raise Much Money
An auction of 119 FM frequencies may not raise much money for the U.S. Treasury. With radio stations still recovering from the Great Recession and lending for mergers and acquisitions tight, radio broadcasters may not have the financial wherewithal to bid up by much minimum payments for construction permits in FCC Auction 93, experts said. It seems unlikely to raise more money than auctions of a similar number of stations held by the commission last year and in 2009, said lawyers who represent radio stations before the agency. Last year’s auction had net winning bids of $8.54 million (CD April 28 p9), with $5.25 million (CD Sept 8/09 p7) in 2009.
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The bidding may raise significantly less than Auctions 91 and 79, the attorneys predicted. Auction 93 begins March 27, and applications to participate can be filed through 6 p.m. Eastern next Thursday (http://xrl.us/bmnntg). The auction features significantly fewer construction permits in California and Florida -- states where buyer interest often is brisk -- than in previous auctions, said lawyer Raymond Quianzon of Fletcher Heald. The coming auction has seven such permits, while the 2011 auction had 13 (http://xrl.us/big4gt) and the 2009 one had 16 (http://xrl.us/bmnntr).
Unless participants in the coming auction have a keen interest in the markets where frequencies are at stake, buyer interest may be muted, predicted lawyers. “If you don’t have anyone with a vested interest, then we will see tepid bidding, at best,” said Quianzon, who specializes in FCC spectrum auctions. “But any market can be skewed when there is bidding from extremely dedicated bidders.” Last year’s bidding sold 108 construction permits, with 36 unsold. There are about 18 permits in the coming auction that weren’t successfully sold in previous auctions, most from Auction 91, Quianzon noted.
A still-struggling economy may lead to curtailed interest in Auction 93, said radio lawyer David O'Neil of Rini Coran. “With the economy, there has been a little bit of less interest, although the last auction did well financially,” he said. “Although they had some nice-size markets that helped it out.” Broadcasters have seemed to bid on permits in markets where they already own stations, not where they don’t already operate, said O'Neil and radio attorney John Garziglia of Womble Carlyle.
The commission likely will have many unsold permits after this auction, predicted Garziglia. “I suspect that there will be some of these that some very smart people will bid on ... and be able to make a go of it, and I suspect that there are others that never should have been allotted in the first place” and so run the risk of going unsold, he said: “Despite all the wonderful things that the FCC says when they make allotments initially, there has been a fair amount of gamesmanship in the allotment process in recent years.” That happens when a single would-be buyer seeks an allotment that’s not very attractive to others, Garziglia noted. On a scale of 1-10, with 10 representing the highest potential interest, interest in this auction is probably at 1 or 2, Garziglia said.