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FCC Provides Incentive Auction Payment Flexibility

Saying it hopes the clarification will be another spur to broadcaster participation in the incentive auction, the FCC's Wireless Bureau said Wednesday that it would make incentive auction payments to designated third parties, not just the broadcaster who applied for the auction. That issue would primarily come up in channel-sharing arrangements, where broadcasters will be transferring some of that wealth to another station as payment for sharing a channel.

Broadcasters who give up spectrum and share will get the same payout as those who just give up spectrum, though obviously some of that payment will then go to the station sharing its spectrum.

That "clarification" came in a public notice following-up on its auction procedures notice Oct. 15.

The FCC said it had received a number of questions about what range of payment instruction options the FCC would entertain beyond simply cutting a check to the licensee.

The FCC had said it would make the payment to the "reverse auction applicant," but that it would also “follow winning reverse auction bidders’ payment instructions as set forth on their respective standardized incentive payment forms to the extent permitted by law.”

The bureau clarified that the winning bidder need not be the holder of the account in which the FCC (actually U.S. Treasury) payment is made—potentially hundreds of millions of dollars. The FCC said it would relay the bidders payment instructions to Treasury.

"Winning bidders may instruct that their payments be disbursed to a third party, such as a 'qualified intermediary,' a 'qualified trust,' an escrow account, or an account jointly owned by parties to a channel sharing agreement (CSA) who are named as owners of that account," the bureau said, adding that "the flexibility to instruct that payments be disbursed to a third party will facilitate channel sharing and thereby promote voluntary broadcaster participation in the reverse auction."

But the FCC also clarified that payments will only be made to a single payee, be it licensee or trust or third party, and only into a single account, with the divvying up of the money that party's responsibility.

The FCC said the money would only go to a third party only if that party is designated on the incentive auction payment form.

The FCC has yet to release the disbursement forms, but said that when it does and broadcasters make their selection, they must agree to hold the U.S. "harmless" from liability regarding the ensuing disbursements and agree that the government can deduct from the payment to a licensee or third party any money owed to the FCC or the U.S. by either.

Why did the notice come from the Wireless Bureau when it was about payments to broadcasters in the reverse (broadcaster) part of the auction rather than the forward part where wireless companies bid on that reclaimed spectrum? An FCC source pointed out that the Wireless Bureau had the most experience with auctions, but also pointed out that the bureau released it as part of the Incentive Auction Task Force, which includes the Media Bureau, so it was a team effort.