The FCC has begun sending out info packets to broadcasters making the financial case for why broadcasters should participate in the incentive auction.
That includes breakdowns of what a station in each market, in an ideal scenario, could be paid for its spectrum, plus the median price in each market. The packets were prepared by FCC staffers in conjunction with investment banker Greenhill & Co., which the FCC turned to help turn policy into a financial case for giving up spectrum.
For example, in New York, the high-end price is $490 million and the median $410 million. In Los Angeles, the high end is $570 million and the median $340 million. Those prices are not based on the value of the stations as businesses, but for their spectrum, how valuable it is in terms of repacking stations after the auction and clearing swaths of contiguous spectrum for the forward auction.
That is based on the FCC clearing 126 MHz of spectrum and auctioning 100 MHz. Estimates have been much lower, but officials point out that broadcasters can adjust it downward. For example, if only 84 MHz is cleared, the value estimates would be reduced by a third. In New York, for example, the median would only be $287 million in New York.
Officials said they thought that 126 MHz was a reasonable effort, but it also creates a more impressive number for broadcasters to ponder than one based on lower estimates.
FCC staffers will also be making road trips to talk to broadcasters about the info and the auction opportunities.
An FCC official speaking on background said the FCC was not making the financial pitch because it sensed broadcasters were balking at participation.
"The FCC has the ability to unlock spectrum value, through the reorganization of the UHF band that cannot be matched by individual private spectrum sales or leases," said FCC Chairman Tom Wheeler in a cover letter with the packet. "Broadcasters who choose to participate can strengthen their businesses by funding new content, services, and delivery mechanisms."
"Whether or not you decide to participate in the auction is entirely up to you," said Wheeler. "You will have to make this decision based on your own assessment of your financial and business interests, but the Commission is committed to providing you with information to help you in your analysis."
"It is clear the FCC staff put a great deal of work into developing this piece on reverse auction pricing, which is a key component of the auction," said National Association of Broadcasters President Gordon Smith. "NAB commends the FCC for their efforts to get the ball rolling in this area. We will work with our members to sort through this comprehensive report as they do their own homework on the upcoming auction opportunity."
"The Greenhill Book released today by the FCC is a highly credible, first class piece of work that fully delivers on Chairman Wheeler's promise to provide Incentive Auction pricing guidance to broadcasters," said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. "If the FCC does end up compensating broadcasters in line with the guidance in the "Book", we expect next year's auction to be a great opportunity for many television broadcasters."
Here are the top 10 market valuation estimates according to the FCC/Greenhill packet.
For more, check out FCC.gov/LEARN.
As part of the outreach effort launched Wednesday, the FCC revamped the LEARN (Learn Everything About Reverse-Auctions Now) website to include a digital version of the packet, updated FAQ's, and a one-stop shopping page for info, as well as FCC contacts that broadcasters can reach out to confidentially.
The FCC will keep bidders confidential--winning bidders until the close of the auction and losers for two years.
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