TV Incentive Auction Won't Start Next Year, FCC Says

Epstein said the briefing schedule in the NAB lawsuit means oral argument will take place before the Court of Appeals for the D.C. Circuit in mid-2015. The FCC is “confident” it will prevail in court, he wrote. “But given the reality of that schedule, the complexity of designing and implementing the auction, and the need for all auction participants to have certainty well in advance of the auction, we now anticipate accepting applications for the auction in the fall of 2015 and starting the auction in early 2016,” Epstein wrote (http://fcc.us/1pIvxRK).

The FCC still has a major spectrum auction next month, the AWS-3 auction. An industry lawyer who represents carriers said the delay in the incentive auction could give providers needed time to rationalize their AWS-3 purchases before they have to bid in a second auction.

T-Mobile expressed disappointment, in a statement by Senior Vice President Andy Levin. T-Mobile, the most spectrum constrained of the national carriers, is widely expected to make a major play in the incentive auction. “T-Mobile encourages the FCC to move quickly to make necessary changes to the auction rules that will help create a more competitive market, namely by increasing the amount of spectrum reserved for bidding by the non-dominant carriers, and by removing any artificial price barriers that would trigger the reserve,” Levin said.

The FCC "couldn't have held the auction by mid-2015 even if no appeal had been filed," Sinclair Vice President-Advanced Technology Mark Aitken told us. That the auction is being pushed to 2016 is "not a surprise" said NAB Executive Vice President-Strategic Planning Rick Kaplan, who said he has long publicly predicted a 2016 auction. "The incentive auction is a hard thing to do, and it takes time," he said.

Kaplan and several other broadcast attorneys characterized Epstein's blog post as "spin." Sinclair "bent over backwards" to get an accelerated briefing schedule, Aitken told us. "People who object to FCC decisions have a right to challenge them," said broadcast attorney Jack Goodman. It was clear to the FCC before it released the incentive auction order that broadcasters would have strong objections to aspects of their rules, Goodman said.

Blaming broadcasters for the start of the auction's being pushed back creates the uncertainty the commission has said it's trying to avoid, Kaplan said. In challenging the auction rules, Sinclair is trying to protect the interests of the American public, Aitken said, and he believes its efforts have led the FCC to take a closer look at broadcaster issues related to the auction.

Other wireless carrier officials took the news in stride. “Some modest scheduling adjustments” were expected, due to the complexity of the auction and the NAB challenge, said Joan Marsh, vice president-federal regulatory at AT&T. “The adjustments announced today are reasonable and will provide both the commission and interested stakeholders with additional time to resolve open issues and prepare for a successful auction." Sprint said delaying the auction was a “wise choice.” Verizon had no comment.

The delay isn’t a surprise “due to the many issues that the FCC is competently juggling,” said Julie Kearney, CEA vice president-regulatory affairs. “The decision to modify the auction date was clearly not the FCC’s first choice, but it’s obvious that staff is continuing to work on an aggressive schedule.”

Other broadcast attorneys not involved in the court challenge of the auction order also said pushing back the auction was expected. "This is maybe just a nod to reality," said Fletcher Heald broadcast attorney Frank Jazzo. "There was always a realization that the date might slip," said former FCC Chairman and Wiley Rein communications practice head Dick Wiley. Since the FCC never had a firm date, it's not correct to describe the adjusted date as a delay, Aitken said.

Carriers need access to more spectrum as quickly as practical, said Scott Bergmann, CTIA vice president-regulatory affairs. The litigation must be resolved “expeditiously,” he said. “When the auction is held, mobile companies will have their checkbooks ready to participate in this critical auction that will be key to our nation’s wireless future.”

Competitive Carriers Association President Steve Berry also wasn't surprised. “This is a reasonable if not expected short delay for a very complicated auction and will allow time for the industry to plan for the acquisition and integration of the most valuable low band spectrum made available to the wireless industry in over a decade,” he said. Every carrier needs low-band spectrum like that for sale in the incentive auction, Berry said.

BTIG analyst Walter Piecyk said there are many implications from the delay. Sprint and T-Mobile will have more time to make their case for more favorable bidding rules (see 1409260032) and Verizon might be more interested in buying Dish Network, he said. “A delay or increased uncertainty in the incentive auction could result in T-Mobile bidding more aggressively in the AWS-3 auction, driving up the price for AT&T and Verizon and the perceived value of Dish,” he said. “A delay could also give wireless operators more time to improve their balance sheets.”

Most broadcasters, whether considering to participate in the auction or not, will not be affected by the delay, several broadcast attorneys told us. One exception could be speculators, who will likely not relish the extra amount of time they must pay to operate stations they plan to sell anyway, Jazzo said. However, the Expanding Opportunities for Broadcasters Coalition, made up of broadcasters planning to sell in the auction, said it's not miffed by the delay. "We understand the slight delay that was announced today and it makes perfect sense," said Executive Director Preston Padden. The coalition has joined the incentive auction challenge case as an intervener on the FCC side.

Broadcast attorneys and the FCC blogs on the incentive auction appeal now discuss the case as ending after the court reaches a decision after oral argument, but when it was originally filed industry observers had predicted the matter would likely end early through an out of court settlement. Kaplan said the FCC's blaming of auction delays on broadcasters makes such a settlement increasingly unlikely. "It's my strong hope that it will [be resolved through negotiation], but its my head that has doubts," Kaplan said.