Assignment Phase of Incentive Auction Seen Critical to Many Winners of 600 MHz Licenses
The TV incentive auction's assignment phase, in which winning bidders will bid for the actual spectrum blocks in which they will deploy service, is a relatively important part of the auction, said industry lawyers and analysts. The FCC released a public notice Tuesday on the final stage of the auction, saying bidding in the assignment phase will start March 6 and should be over by the end of the month (see 1702140064). Industry observers said the A and G blocks are expected to be the least attractive to winning bidders, especially in urban areas. Meanwhile, some broadcast consultants and a firm affiliated with Dell's founder met with Chairman Ajit Pai and others at the FCC.
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“Currently, the winners of the forward auction are educating themselves on how to bid in the next auction, or so-called Assignment Phase, where they will ultimately bid for and be assigned specific licenses in each market (right now, these bidders only know they have won generic blocks of spectrum in certain markets),” said Wells Fargo analyst Marci Ryvicker in a note to investors. “All we really care about is when the Assignment Phase ends, as this triggers the ultimate conclusion of the entire auction. According to the FCC’s website, the Assignment Phase will conclude on 3/30 & the entire auction likely deemed over on 4/10.” The agency didn't comment.
“It’s a critical part” of the auction, said Roger Entner, analyst at Recon Analytics, in an interview. “You want to have as an operator as much contiguous spectrum as you can have. Whereas if you are buying this as a speculative buyer, you want to be right in between two pieces of a spectrum that a given company owns.” With the AWS-3 auction, Dish Network followed the second course, buying spectrum that would be valuable to another carrier “basically raising the value of that spectrum to be bought out,” Entner said. If a small carrier is only buying a 5x5 MHz block, it doesn’t matter where it’s located, Entner said: “If you want to have more spectrum … multiples of licenses together, you want them next to each other.” Dish didn't comment.
“One presumes” winning bidders aren’t “writing big checks without a plan,” said Richard Bennett, free-market blogger and network architect. “There will probably be a lot of horse-trading to aggregate bands. But even without that, 4G is good at bonding discrete physical channels into large virtual ones.”
The good news is that the PN on the assignment phase says “[b]ecause all blocks are contiguous and of the same category (Category 1) under the band plan associated with the 84 megahertz clearing target of the final stage, it will be possible to assign every winning bidder from the clock phase contiguous blocks of frequency-specific licenses, regardless of whether they bid in the assignment phase,” emailed a lawyer who has been active in the auction. “This, the fact that there is no impairment at all (except for TV stations that have to clear out on the repack schedule), and the interoperability requirement the requires that all devices be able to work throughout the 600 MHz Band (unlike in 700 MHz initially), should make it easier for everyone.”
Representatives of OTA Broadcasting reported on a series of meetings at the FCC on the post-incentive auction transition timeline. Preston Padden, who advises TV stations on the auction, and representatives from MSD Partners met with Pai and aides, Incentive Auction Task Force leaders, the acting head and others in the Media Bureau and top aides to the other FCC members. The meetings focused on “OTA’s request for the Commission to release tools and data sufficient to: (1) identify stations that present a potential ‘bottleneck’ to the transition; and (2) eliminate certain ‘linked station sets,’” said a filing in docket 16-306. “The OTA representatives emphasized that this information could allow market forces to incentivize stations to voluntarily relinquish their licenses or use temporary channels, which the Commission has recognized will reduce dependencies and help streamline the post-Incentive Auction transition.” MSD Partners is affiliated with Michael Dell's MSD Capital.
A week after the end of the incentive auction quiet period for broadcasters (see 1702060065), Gray Television announced plans Thursday to buy two TV stations from Diversified Communications for $85 million. “We believe that under the ownership of Gray, WCJB [Gainesville, Florida] and WABI [Bangor, Maine] will have greater opportunities for long-term financial success which will ultimately benefit both our employees and viewers,” said Diversified’ Chairman Daniel Hildreth in a news release. “Each of WABI and WCJB consistently achieves #1 ratings in all major dayparts in its market, in both households and key demos,” said Gray. “Subject to receipt of regulatory and other approvals, we expect the transaction will close in the second quarter of 2017.”
CBS didn’t sell any spectrum in the incentive auction, said Wells Fargo analyst Marci Ryvicker in an email to investors. “CFO Joe Ianniello made it very clear that the proceeds dropped too low, making the auction an unattractive proposition from a cash flow perspective, “ Ryvicker said. Scripps also said it made no auction sales, and Fox Television Stations and Sinclair announced auction proceeds of more than $300 million each (see 1702100064). Gray announced a yield of $90.8 million and Tribune Media $190 million. CBS will look to expand “in a more favorable regulatory environment” but will be “DISCIPLINED and SMART,” and likely focus on the top 25 markets with American Football Conference teams, Ryvicker said. CBS had an “uninspiring Q4” but “things are picking up pretty much everywhere,” Ryvicker said.