Broadcaster Coalition Presses for Higher Opening Bids in TV Incentive Auction
The Expanding Opportunities for Broadcasters Coalition (EOBC), which represents broadcasters considering the sale of their spectrum in the TV incentive auction, Wednesday proposed a revised formula for determining the value of TV stations headed into the auction. A spreadsheet released by EOBC shows the starting prices for more than 2,000 TV stations based on the FCC’s proposed starting formula and the alternative offered by EOBC.
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EOBC Executive Director Preston Padden said on a call with reporters the change reflects the high values for spectrum seen in the AWS-3 auction. “We’ve talked to a lot of broadcasters who previously had no interest at all, but who, mostly because of the high prices they saw in the AWS-3 auction, are now reconsidering their position,” he said. Those include commercial and public stations, he said. With discounts, the AWS-3 auction tallied just more than $41.3 billion in provisionally winning bids, by far the highest totals for any FCC spectrum auction (see 1501300051).
The coalition looked at “hundreds” of alternatives to the FCC’s starting formula, Padden said. “Some of them were complicated and a complete departure from what the FCC had proposed,” he said. FCC officials didn’t have “much appetite” for something very different from what they already put forward, he said. The 600 MHz spectrum, with its superior propagation characteristics, is superior to AWS-3 spectrum, he said. Both are beachfront bands, but if AWS-3 is Dewey Beach, Delaware, the TV spectrum is comparable to the Hamptons, New York, a much tonier location, Padden said.
The proposal “raises all boats” and should be attractive to both the FCC and industry, Padden said. Many of the stations listed in EOBC spreadsheet are unlikely to sell their spectrum in the auction, but the FCC has never offered a more narrow list of target stations so the group felt compelled to look at all stations, he said. The biggest single price difference, the NBC affiliate in Bristol, Virginia, would have an opening price of $597 million under the EOBC formula, versus $362.9 million under the FCC’s. Some of the biggest changes would be seen in the valuation of public stations. The PBS station in Hagerstown, Maryland, would have an opening bid of $476 million under the EOBC formula, vs. $257 million under the FCC formula.
“Our proposal is a modest change to the FCC formula that more appropriately reflects a station’s true spectrum value,” the coalition said in a blog post. “The FCC’s constraint files and ISIX methodology both demonstrate that a station’s impact extends far beyond its protected contour. A single station in New York City can interfere with other broadcasters or wireless operations from Boston to Baltimore. Our reweighting of the FCC formula gives broadcasters the credit they deserve for the spectrum they occupy beyond their own service area -- spectrum that the FCC wants to buy at a discount using its proposed formula.”
Roger Entner, analyst at Recon Analytics, said it’s no slam dunk that carriers will bid more for incentive auction spectrum than they did in the record-setting AWS-3 auction. “Things, to a certain extent, have changed,” he said. The reclassification of broadband as a common carrier service and the huge amounts carriers spent in the AWS-3 auction could end up depressing prices in the incentive auction, he said. AT&T spent more in the AWS-3 auction than the auction was expected to bring in total and there are now big questions about the ability of ISPs to go to capital markets to borrow money given their revised regulatory status, he said. Dish Network also appeared to drive up prices in the AWS-3 auction in a way that may not happen in the incentive auction, he said.
The EOBC also appears to represent mainly mid-sized market broadcasters, though EOBC doesn't say who its members are, Entner said. “This auction stands and falls with the top 10 markets,” he said. “We need spectrum in the densely populated urban markets.” Unlike in urban markets, the low-band spectrum won't be that much more valuable to carriers in mid-sized markets than the mid-band AWS-3 spectrum, he predicted.
It's not clear different starting bids will mean more money for broadcasters, said Goldin Associates Managing Director Armand Musey. “The bidding ends when the price is low enough that only the number of broadcasters the FCC wants to buy in each market are left,” Musey said. “The FCC might decide to increase the starting bids out of an abundance of caution, but they were set to be high enough that they would yield more than enough broadcasters in each market.”