FCC delays 60-69 scramble

Regulators last week gave themselves an extra three months to figure out how to persuade TV stations to relinquish ahead of schedule a valuable swath of spectrum that the government plans to auction to telecommunications companies.

But by postponing until Sept. 6 the bidding for spectrum now used for TV channels 60-69, the FCC will be deluged over the summer by broadcasters and wireless companies angling for new auction rules that give them better deals.

Some TV owners hope the government's eagerness to get them off the band quickly can be parlayed into revived chances for powerful cable-carriage rules guaranteeing that a station's multiple digital signals will be offered by local cable franchises.

On the other hand, telecommunications conglomerates expected to bid on the frequencies will push for rules that, while not overtly forcing stations to forgo their rights to remain until the industry's digital conversion is complete, will increase chances that broadcasters will exit the channels by 2002.

The FCC says winning bidders should buy out broadcasters if they want the spectrum before 2006, but wireless companies say they need more leverage to prevent holdouts from "extorting" exorbitant offers. One idea being floated: Single stations should be forbidden to remain on the band after other stations in their market have accepted offers.

Broadcasters are opposed to a "lone holdout" rule or any other provision that would make buyout deals anything other than voluntary. If the FCC considers TV station owners' demands for additional digital carriage rules, the cable industry will be angered.

"It's a nightmare," says Barry Friedman, Washington attorney for Entra-vision, a Spanish-language station group operating on chs. 62 and 67 in Venice, Fla., and Monterey, Calif. "What is the price for giving these channels up? I don't know how to figure it out. You're essentially asking us to put our stations on ice for a couple of years."

FCC officials say prospects for buyout deals are bright and dismiss such negative statements as the veiled attempts to better bargaining positions.

Accepting buyouts would require stations to cease analog operations on the 60-69 channels and rely solely on digital broadcasts long before audiences are equipped to receive digital transmission and without clear rules for digital carriage.

"The operative term in any deal to vacate chs. 60-69 early is voluntary agreement,'" says Mark Hyman, vice president of corporate relations for Sinclair Broadcasting, which has five stations that will have their frequencies auctioned.

Stepping up the pressure on the FCC last week was Lowell "Bud" Paxson, who says the government's effort to get broadcasters off chs. 60-69 quickly will fail unless the FCC gives stations the right to demand cable carriage for all their new digital signals.

"There is an inevitable linkage between the commission's decision on DTV must-carry and your agency's success in maximizing the public benefits from the ... auction" of chs. 60-69, he wrote in a letter to FCC Chairman William Kennard.

The chairman of Paxson Communications, which owns 19 of the 138 TV stations licensed to operate on the channels, says he would be willing to vacate the frequencies early only if granted digital cable-carriage rights.

He wants FCC rules requiring cable companies to carry a station's primary digital signal when it vacates an analog channel. Also, stations that multicast up to six video digital signals can demand carriage for them all, when their local cable franchises begin offering digital service with expanded channel capacity.

Paxson first suggested the digital-only carriage rule March 31 but is stepping up efforts to link the idea with the upcoming auction.

The cable industry, however, opposes any plans that would give a broadcaster multiple carriage rights.

Wireless providers, on the other hand are trying to play off government hopes to make as much money as possible from the auction. They argue that new users won't be willing to pay the full value for the spectrum unless they know they can put the spectrum to use quickly for mobile Internet and have a clear idea of what it will cost to buy out broadcasters.

"We are having a difficult time determining what amounts should be paid for the licenses at auction and what amounts should be held in reserve to clear the incumbent broadcasters," US West corporate counsel Julia Kane told the FCC in a request to delay the June 7 auction.

Efforts to strike pre-auction deals between broadcasters and the wireless bidders are in their infancy. None of the station groups with a large number of stations on chs. 59-69 have received any specific buyout bids, but several have received queries. (Ch. 59 is included in the channel package because of possible interference problems.)

Paxson, USA Broadcasting and Sinclair have been approached by Spectrum Exchange Group, a Maryland company teamed with New York investment bank Allen & Co. to broker deals with wireless companies. "We're targeting stations in top-20 markets," says Spectrum Exchange Group Chairman Peter Crampton.