The race to turn a valuable swath of TV spectrum into the home of the next generation of mobile communications services is slowing to a crawl.
Last week, the FCC said it will delay for the second time a federal auction of frequencies now used for TV channels 60 to 69. The bidders are expected to be among the country's largest wireless providers, including Verizon, AT & T, Nextel and Qwest. The winners are being counted on to develop the so-called third generation of wireless services, including broadband applications.
The tough question for broadcasters now occupying the band is whether the delay will result in eager bidders and higher prices for their vacating the spectrum early or lead to a backlash that strips stations of their leverage to negotiate high-priced buyouts.
"What's troubling is, we're getting blamed by wireless users and even the press for being obstructionist in the rollout of 3G technology," said Jeff Baumann, regulatory counsel for the National Association of Broadcasters. "But we've done everything we agreed to when the auctions were first ordered. Yet the new delay gives the wireless guys more time to paint us as evil."
The wireless providers prodded the FCC to postpone the auction by six months-a move they say will give the FCC time to write spectrum-clearing rules that give bidders a better idea of how much it will cost to get the 138 broadcasters off the band. Without that knowledge, they maintain, wireless companies will be reluctant to bid the high prices the government hopes for.
"It is undisputed that factors surrounding this spectrum, including the incumbency of the UHF television broadcasters in this band, make bidder planning for this auction unusually complex," FCC Chairman William Kennard said in announcing the delay.
Wireless providers were quick to congratulate Kennard. "The problems we have seen in this process can hopefully be avoided in the future by adopting a long-term, comprehensive spectrum-management policy," said Verizon Wireless President Denny Strigl.
To carry out the auction on the new March 6 date, the FCC is considering several proposals, including ways to allow bidders to share the costs of clearing broadcasters from the band and whether it has authority to implement band-clearing contracts. Comments on the proposals are due Aug. 16, replies Sept. 15.
It's unclear, though, whether the FCC can delay the bidding without congressional approval. Congress set a Sept. 30, 2000, deadline for depositing the proceeds. Although several lawmakers have asked the FCC to delay the auction, some broadcasters say Congress still must put the delay into law. (Originally, the auction was set for last May.)
Paxson Communications Chairman Lowell "Bud" Paxson, who has 19 stations operating in the 700 MHz band, wants a less drastic delay. "I will fight like crazy to get this auction moved back into this year."
He worries that further delays are likely unless the bidding is conducted before the next presidential administration remakes the FCC. "The next FCC will say, 'We've got a mess, and we need another postponement,'" he said.
Another delay is bad, Paxson said, because a slow transition to digital signals would quash his plan to switch from analog signals on the band to digital signals located at lower portions of the TV spectrum without a costly transition period offering both. "If I had a deal to turn off those analog stations before 2002, I would not build a second signal," he pointed out, "and it would save me legal fees, construction costs, financing-a tremendous amount of money."
Not all broadcasters operating on ch. 60-69 share Paxson's concern about the March date. "This gives the wireless companies additional time to put some order where there may be chaos and possibly could lead to higher prices," said Kent Lillie, president of Shop at Home, which has stations in Boston, Houston and Cleveland on the band.
But the broadcasters complain that they are getting a bum rap when they are painted as greedy and holding the wireless industry hostage. They cite House Commerce Committee Chairman Thomas Bliley's comments two weeks ago when he said it would be "pure nonsense" and a mockery of Congress if broadcasters timed their exit from the spectrum to leverage a big financial gain.
In reality, broadcasters say, they have made several overtures to potential bidders, but all have refused to negotiate. "Nobody who is a potential bidder has contacted us," said Mark Hyman, government affairs chief for Sinclair Broadcasting, which has a big presence on the band.
Paxson acknowledged that his company, Sinclair and others stand to reap billions from the buyout negotiations and makes no apologies if the windfall detracts from the government's auction proceeds. "I went out and created an oasis in the desert of the UHF band. Now it's worth billions, and some say this is terrible and that broadcasters shouldn't get the money."
He noted that some analysts predict the spectrum could be worth $30 billion to wireless companies, even though the budget prediction calls for only $6 billion going to the government. If broadcasters can negotiate buyouts at half what the spectrum is worth, however, the government could still more than double its projected take. "If you hand broadcasters $15 billion," Paxson said, "you will see the spectrum cleared so fast the FCC won't be able to handle it."
But the wireless providers insist they aren't trying to rob broadcasters of a fair price. "Broadcasters have a legitimate issue," said AT & T Wireless spokesman Ken Woo. "The FCC and Congress really need to think about how to meet the needs of all sides."
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