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Exclusive: Study: Broadcasters Need FCC Repacking Info

Former FCC chief economist Thomas Hazlett and the National
Association of Broadcasters have been on opposite sides of the spectrum
reclamation debate, but there is one thing they agree on, according to a new
paper of which Hazlett is co-author. They both agree the FCC needs to release
its model for repacking TV stations after reverse incentive spectrum auctions
in time for broadcasters to figure out whether it is in their interests to give
up spectrum.

Hazlett and company also say that broadcasters should be
given bidding flexibility, and that there should be no maximum reserve price in
the reverse auction -- no maximum price broadcasters can get for clearing off spectrum in each relevant market.

In the paper, "Incentive Auctions: Economic and Strategic
Issues," co-authored by Hazlett, David Porter and Vernon Smith of Arlington
Economics, they outline options for both the reverse incentive auction, in
which winning broadcasters are the ones giving the government the lowest price
for reclaiming their spectrum, and the ensuing auction of that reclaimed
spectrum by the government to the highest bidders, presumed by most to be
wireless companies clamoring for it.

Hazlett is one of the panelists at a Brookings Institution
event, "Improving Spectrum Access Through Reverse Auctions," on
Friday in Washington where he will discuss those options.

The paper authors argue for allowing broadcasters the
flexibility to offer multiple bids -- one bid if they wind up channel sharing
and another to exit entirely, for example. They also suggest TV station group
owners should be able to place "combinatorial" bids, which are
contingent on multiple station bids being accepted.

"The whole purpose of the auction is to get the
spectrum where it has the most value," Porter told B&C/Multichannel News.
"That might mean staying with broadcasters or it might not. Everybody is
saying that it will be wireless companies, but we don't know what the bids will
be or the repacking costs," he says. "Until all those things are
determined, who knows what the best hands are."

"Accommodating combinatorial and channel-sharing bids
is essential for efficiency, increasing reverse auction participation and
lowering the costs of band clearing," the study says. "Unfortunately,
the added complexity to the auction and optimization process might limit the
FCCs ability to allow such bids."

In order for the government to get the stations at the
lowest possible exit costs -- as cheaply as possible -- they said the auction
"must be simple enough for broadcasters to place informed bids";
"must encourage broadcasters to reveal their true exit costs"; and
"must allow all reasonable bid configurations."

Other suggestions for a successful reverse auction:

  • "All full-power, Class A U.S. TV stations should be
    invited to participate in the (one) reverse auction.
  • "Bidders should be given as little information as
    possible while participating in the auction.
  • "Promises restricting future reverse auctions could help participation,
    but would require tying regulators' hands in ways that could more than offset
    short-term gains.
  • "The FCC should set a date certain for the release of the spectrum to
    winners in the forward auctions, prior to the auctions."

The paper's auction advice is based on the government
getting 120 MHz in the broadcast spectrum auctions, but it acknowledges that is
a "challenging regulatory task," which they say argues for the FCC to
get moving and for the auction process to be transparent, simple and