Broadcasters, Wireless Industry Look to Auction's End
With the final stage rule satisfied and the incentive auction's end in sight, broadcasters need to start getting ready for the repacking, and a relaxation of anti-collusion rules and accompanying quiet period would be a big help, said broadcasters and their lawyers in interviews Thursday. Though the FCC already may be calculating optimized new channel assignments and letters announcing them are expected to go out in weeks, the assignment amounts to “an empty suggestion if you can't talk to anyone,” said broadcast attorney Jack Goodman. Broadcasters also are waiting on the FCC to issue its transition plan, which went through the notice and comment process in the fall (see 1610170063).
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Analysts and others said it's hard to predict how long the current stage of the forward auction, which starts again Monday, will take. Most didn’t expect it to take too long to close. Bids were at $18.3 billion after a six-hour bidding round Thursday, up from $17.65 billion Wednesday.
Under the auction rules, broadcasters bound by the quiet period would continue to be until the incentive auction is complete. But numerous commenters on the FCC's transition plan asked the commission to drop the ban on communication once the final stage rule is satisfied, and that's what the agency should do now, said attorneys and a broadcast executive. With all the bidding action now taking place on the forward end of the auction, there's “no reason” to require broadcasters to stick to the anti-collusion rules, said Wiley Rein broadcast attorney Ari Meltzer.
Industry officials and analysts said how much longer the forward auction will run is hard to predict and depends on bidding strategy and to what extent the FCC speeds up the process by increasing the number of bidding rounds per day. A bidding war over even a tiny market could slow the closing, since bidding will end only when supply and demand reach equilibrium in all 416 markets.
“The forward stage of the incentive auction has now cleared the first and second criteria of closing,” BTIG analyst Walter Piecyk said in a blog post. “This auction could close by the end of February and the anti-collusion period be lifted by mid-March. …This also removes the risk that the auction could extend to a 5th Stage, ensuring the broadcasters will receive $10 billion for their spectrum.”
“I think it will take a few more rounds,” said Roger Entner, analyst at Recon Analytics. “Should be over within days; at least that's what I hope.”
A lawyer who represents wireless clients said the auction likely will run another week or two. “The duration will depend on bidder behavior,” the lawyer said. After round two, there were more than 140 markets with excess demand, but “it’s hard to know what strategies are in play,” said a wireless industry lawyer.
Broadcaster Complexities
Stations face multiple complications, experts said. In addition to anti-collusion restrictions that remain in effect, they also will face challenges in the repacking once the auction is done.
Restrictions prevent broadcasters from having necessary discussions with engineers, antenna manufacturers, land-use boards and other broadcasters, and will hold back planning for the repack, Goodman said. Several broadcast lawyers said they believe the commission will soon take some sort of action to relax or clarify the anti-collusion rules to allow repacking planning, but many doubted it would fully relax them. Incentive Auction Task Force Deputy Chairwoman Jean Kiddoo said in October that the agency was considering relaxing the quiet period after the final stage rule was satisfied.
“Half of our TV stations are going to need to be rebuilt,” said Sinclair Vice President-Advanced Technology Mark Aitken. “That's going to take a lot of resources and planning.” Along with numerous TV stations, Sinclair owns antenna manufacturer Dielectric. Though Aitken said Dielectric made preparations for the resource crunch and high demands expected of the repacking, those efforts have been somewhat stymied by the lack of a definitive timeline.
The latest developments guarantee that 70 MHz of usable spectrum “will be repurposed for mobile broadband, and the U.S. Treasury will receive additional billions of dollars in auction proceeds,” said Diane Smith, interim chair of Mobile Future, in a statement Thursday. “This achievement is a critical step forward to meeting exploding consumer demand for mobile connectivity and ensuring the United States remains the global leader in wireless and 5G deployment.”
Government Proceeds
One repacking bright spot could be the revenue generated for the Treasury, Meltzer said. The forward auction has over $18 billion in bids, while the amount needed to pay broadcasters, cover the auction's cost, and reimburse repacked broadcasters is around $12 billion. This gives broadcasters more ammunition to ask Congress to add more money to the $1.75 billion reimbursement fund, since that money could come out of Treasury's profit, Meltzer said. Congress might not follow that logic, since it appears the profit for the Treasury will be vastly lower than originally advertised, Aitken said. When the auction was authorized, legislators were told it would raise $25 billion, Aitken said. That number is now unlikely to be above $10 billion, he said. “That money has already been spent,” Aitken said. “It appears that delay, complexity and shifting carrier priorities led to a result that was less than it could have been,” said auction consultant Preston Padden in a blog post.
The auction has been a “huge effort” but the continuing forward auction and repacking mean broadcasters still have a lot in front of them, Aitken said. That's also true for low-power TV broadcasters, said LPTV Spectrum Rights Coalition Director Mike Gravino. Though the 84 MHz clearing target means LPTV stations and translators will have more room to find new homes than in previous band plans, they must wait until after full-power repacking is complete. The coalition will be backing two possible paths for LPTV stations after the auction: flexible use of spectrum and Class A status, Gravino said. Both would require congressional or FCC action, but Gravino said loosening restrictions on LPTV transitioning to Class A status or how they use their spectrum are in line with the free-market philosophy espoused by the Republicans in control of both bodies.
“I want to congratulate the Commission and the staff at the FCC for their hard work in satisfying the Final Stage Rule for the incentive auction,” said NTIA Administrator Larry Strickling in a statement. “This 84 megahertz of spectrum for licensed and unlicensed wireless broadband represents significant further progress to meet the President’s 500 megahertz goal.”
“The 70 MHz of licensed spectrum and 14 MHz of unlicensed spectrum will unlock the next generation of wireless services, giving consumers access to faster, more robust mobile broadband while also unleashing innovation," said Rep. Anna Eshoo, D-Calif. “With global mobile data traffic expected to increase nearly eightfold between 2015 and 2020 and wireless carriers taking steps to deploy 5G, it’s critical that we continue efforts to free up more spectrum for both licensed and unlicensed use.”