The $38 Billion Non-Payout

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National Association of Broadcasters president Gordon Smith told an NAB Show audience in Las Vegas that broadcasters left a boatload of money on the table rather than sell out in the broadcast incentive auction, proving just what the highest and best use of that spectrum really was.

The FCC had argued that the auction was structured so that the marketplace would decide what the value of the spectrum was and in whose hands it should fall. More broadcasters would have been willing to exit at a higher price, but the forward auction bidders weren’t willing to pay it, though the FCC argued their initial prices to TV stations to give up spectrum were high to get them in the tent in the first place.

In his opening speech to the convention, Smith said, “TV stations turned down $38 billion during the recent spectrum incentive auction, choosing to keep their channels, compared to speculators and wireless companies that paid $19 billion for a portion of the TV band.”

Interestingly, among those speculators was NAB member NBC, whose parent, Comcast, both sold spectrum in the auction — in three major markets, including New York — and paid $1.7 billion for spectrum in the forward auction as well.

The FCC released figures on how much broadcasters were paid for their spectrum — $10 billion and change — and the individual price each station received, but did not include a figure on what broadcasters didn’t spend.

Asked how the NAB had arrived at the $38 billion figure, an NAB source on background said that it had taken markets where stations had been bought and multiplied the price of the winning bid by the number of stations that elected to keep their spectrum. For example, the lowest winning bid in the D.C. market was $124.8 million, times the 15 stations in D.C. that didn’t participate or accept that price, and that is $1.87 billion in D.C. alone.

The source suggested that $38 billion was a conservative figure since it did not include the value of stations in markets where the FCC did not bid to buy stations such as Atlanta, for example.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.