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Broadcasters Take Auction Arguments to Court

Broadcasters and the FCC squared off in federal court Thursday over the commission's incentive auction framework, and specifically how it proposes to protect, or broadcasters argue, not protect, TV station contours and population coverage in the repacking of stations after the incentive auction.

The decision could determine how broadcasters are relocated after that auction, and potentially even the timing of the auction depending on the decision.

The three-judge panel of the U.S. Court of Appeals for the D.C. Circuit hearing the oral arguments was particularly focused on broadcasters' contention that, per statute, the FCC should not have used updated 2010 census figures in its calculations, but instead relied on the 2000 figures in use when the 2012 incentive auction legislation was passed.

Both sides had skillful advocates, and both appeared to score some points, though broadcasters may have the tougher climb given the "Chevron" deference usually accorded agencies for their subject matter expertise.

"Chevron, Chevron, Chevron" said one gallery member before the arguments began, explaining to what appeared to be a group of students taking in the legal festivities what the case was about. "It's all about the FCC defending its turf."

Of course, the FCC did not get a lot of deference from a different panel of the same court for its legal defense of network neutrality rules ultimately remanded by the court.

Judges David Sentelle, Sri Srinivasan and Karen Lecraft Henderson presided, with Srinivasan and Sentelle asking almost all the questions, Srinivasan taking the lead with a persistent stream of drill-down questions—fill-in translators, OET-69—and Sentelle delivering his queries in almost folksy, Southern-accented tones worthy of a Disney wildlife film narration.

The meaning of "methodology" and whether those fill-in translators were separately licensed or not were among the issues in arguments that got into the technical weeds, unavoidable given that at issue was TV Study software, data inputs and the Longley-Rice methodology for evaluating TV service coverage and interference.

Representing the National Association of Broadcasters, Miguel Estrada said the FCC had run the incentive auction statute's requirement to take all reasonable efforts to protect broadcast coverage areas and contours in service of its goal to reclaim as much spectrum as possible. In the process, he said, the FCC had turned the congressionally mandated voluntary auction into a coercive process. He said the FCC's decision to change the calculations for population served and signal contours from the OET-69 methodology and inputs as of the Feb. 22. 2012 legislation date was rife with legal errors and massive procedural failings.

Estrada provided the majority of broadcaster arguments, aided by John Hane representing Sinclair, which also challenged the FCC's May 2014 incentive auction order, particularly the FCC's decision to auction spectrum in markets with fewer than two bidders, and its 39-month hard deadline for broadcasters to move off spectrum.

On the other side were the FCC's lawyers, Jacob Lewis and Dominic Perella, who represented the Competitive Carriers Association and others who intervened on behalf of the FCC.

Srinivasan focused on the Feb. 22 date, suggesting that the language in the statute could be read to mean that the FCC should use the OET-69 methodology, not necessarily only the 2000 census inputs rather than the 2010 figures.

Sentelle also said there was a difference between methodology and data points, and asked whether Estrada was saying the FCC could not change those data points. The main weakness in the broadcaster argument is that the FCC should have to use 2000 census figures when the 2010 update was available.

Estrada in his rebuttal time at the end acknowledged the judges' difficulty with the census issue, but said the FCC had previously treated it as part of the methodology and that Congress had favored predictability over precision. Whether the judges can be persuaded on that point could be key.

Estrada argued that the FCC was trying to empty out the OET-69 vessel so it could employ it in its overall strategy to prioritize reclaiming spectrum over protecting broadcasters, which did not square with the statute's mandate that the FCC take all reasonable efforts to protect broadcasters in the repack after the incentive auction.

Waxing metaphorical, Estrada said Congress had supplied the FCC with a Julia Child recipe for chicken, it had interpreted that as a mandate to "heat and eat" and the result was it served up fried lamb.

Estrada also argued the FCC had essentially written coverage area out of the statute by focusing on recreating signal contours, but then concluding that where there was no population in that contour, it could accept interference from other stations as it repacked them into smaller spectrum space. He said the FCC was engaging in textual misdirection, and that its methodology was not about preserving broadcasters after repacking, but about what spectrum the FCC could get on the back end.  He said the FCC had made that clear when it said that preserved broadcasters but prevented spectrum reclamation would not, by definition, be reasonable.

Hane, arguing for Sinclair, seconded Estrada's argument that the FCC had steamrolled the "all reasonable efforts" statutory broadcast protections in its rush to reclaim as much spectrum as possible, including setting the unreasonable 39-month timetable for repacked stations that could push some stations off the air.

Srinivasan pointed out that the FCC's construction deadline for new stations is 36 months, but Hane said that was not when 1,000 stations were trying to construct new antennas at the same time. He pointed to the tower companies that told the FCC the 39-month deadline was unworkable and that many antenna suppliers have gone out of business.

One key to the court's decision is how much deference it gives the FCC's expertise to make judgments, like how to interpret the OET-69 language—but Hane said its prediction that tech companies could handle the 39-month deadline should get no deference given the evidence to the contrary that the FCC relegated to a footnote.

FCC attorney Jacob Lewis focused on how the FCC viewed the OET-69 methodology, which he said was a three-part process of identifying a signal contour, dividing that into a grid, and then using the Longley-Rice method for determining if that grid is served by a TV station signal.

Sentelle interrupted to say he thought it might have been nice if the FCC had put more of that explanation in the body of the incentive auction item and less in the footnotes and added that he was not sure that the FCC had defined exactly what it meant by "methodology."

Lewis conceded the explanation was essentially confined to a fat footnote (#435), but suggested that sufficed. Estrada argued it did not. Among broadcaster arguments are that the FCC did not sufficiently notify them about the update/change to the OET-69 calculation.

Lewis said what was clear is that data and software are not methodology, the argument being the FCC can change the data and software, which it did, and square with the legislative language that it use the OET-69 methodology.

Sentelle briefly pressed Lewis on whether Congress might have meant a specific algorithm, rather than just a general methodology. Lewis suggested Congress' specificity was directed at the use of the Longley-Rice model, which seemed to satisfy the judge.

Lewis said it just did not make sense for Congress to have compelled use of the 2000 census data.

There was some back-and-forth between Srinivasan and both sides over whether fill-in translators were counted as part of a station's service area.

Lewis said no, but as low powers they had always been secondary in the eyes of the FCC.

It is not clear when the court will rule, but both sides asked for and got an expedited schedule for briefs and arguments. Since filing the suit, the National Association of Broadcasters has pivoted toward support for an early 2016 auction date, so win or lose it is not looking for a drawn out process.