Lights, Camera… AUCTION!

Broadcasters meeting in Las Vegas this week at the NAB Show will likely be gearing up, literally, for a massive technological challenge. The national auction of broadcast spectrum is just weeks away, but already it looms as a transition vastly more complicated than the one that first took signals digital.

The incentive auction is part of a plan to reallocate spectrum based on efficiency, driven by the needs of the wireless and broadcasting demands of consumers, a plan years in the re-making. At the end, if all goes as planned, wireless companies will have more bandwidth to roll out 5G and meet the burgeoning demand for everything from online video to the Internet of Everything, and broadcasters will continue to deliver their life-saving emergency information and local news and high-value entertainment content, only in even smaller spectrum quarters.

Broadcasters that remain on their spectrum will only be able to use it for broadcasting, for now. Some who surrender spectrum could stay on the air via sharing arrangements with other stations. By contrast, those who bid on the reclaimed spectrum in the forward auction will get a flexible-use license that allows them to use it for wireless broadband, phone or private communications networks.

Broadband Momentum

While broadcasters initially balked at a second DTV transition so soon after the first, the momentum for broadband proved unstoppable, while the prospect of nine-figure payoffs softened the blow for many, particularly where duopolies offered the chance to cash out and still stay in the business. S&P Global last week issued a forecast of $13 billion in auction revenue for 12 of the biggest publicly traded station groups.

Broadcasters generally are now looking to both make some money—they can participate in the auction and remain on the air—and mitigate the cost in time and treasure of the TV station repack. The FCC has not revealed how many broadcasters have volunteered to give up spectrum, but FCC chairman Tom Wheeler has not seemed displeased with the turnout.

The auction itself is the kind of boring, logistical exercise only a mother (of an auction economic theorist) could love, requiring user guides and hundreds of pages of framework details and data.

But while the frame is set, the picture has yet to be filled in.

Broadcasters face a host of x-factors as the commission prepares to launch its first-ever double-sided auction—broadcasters vie to give up spectrum, wireless companies, and perhaps cable and even broadcasters, vie to buy it up.

The whole affair has been likened, in its complexity, to a Rubik’s cube. But it is more like a Rubik’s cube wrapped in duct tape and dropped in a corn maze to be solved blindfolded.

A host of variables remain as “x” or “y” in the sprawling equation scrawled, Beautiful Mind-like, across industry white boards. Among them:

• How many stations will participate—including how many stations the FCC tells, “sorry, we don’t need you.”
• How much spectrum the FCC can reclaim, which will be determined by the number of participants.
• How much new spectrum wireless and cable operators, venture capital firms, and even a couple of broadcasters, can bid on in the forward auction spectrum the FCC can reclaim.
• How much money the auction will generate (it should be a lot, based on the low whistles during many a recent earnings call and regulatory session).
• When the reverse auction bidding will be started and completed.
• When the forward auction will begin and end.
• Whether channels will be reserved for unlicensed wireless in each market.

Does that seem like a long list? It is not nearly exhaustive.

On the other side of the ledger, there are at least two of what Donald Rumsfeld would call the “known knowns.” First, Congress has reserved $1.75 billion to pay for the post-auction TV station repack. Second, stations still in business will have 39 months to move from their old channel—if they have to move—to their new one.

But even those are subject to change. Wheeler says that if the $1.75 billion is not enough, he will lead the parade back to Congress for more.

The 39 months is a budget of sorts, within which there will be rolling regional repacks—just how is still being debated—and the possibility of waivers and extra time within that 39 months. But it is not a case of everyone gets 39 months to do construction. Stations, likely grouped by geographic areas, will get a certain window, and the possibility for an extension, but no one is going to get an extension to stay on their channel beyond the 39 months.

Remaking the Band

The FCC has come up with nine different scenarios for remaking the broadcast band depending on how much spectrum broadcasters are willing to give up. They range between 42 MHz at the low end and 126 MHz at the high. (The others are 48, 60, 72, 78, 84, 108 and 114.)

The one the FCC will initially try for won’t be announced until early May. But once it is, the auction will start soon after.

If the FCC does not collect enough in the forward auction to pay broadcasters at the initial clearing target, then it will have to lower its target, which means it will need fewer stations.

The auction won’t start all over—Wheeler told Congress there could be multiple re-auctions, but that may have left the wrong impression. But the FCC will have to go back to the winning bidders and lower prices until enough drop out, then see if the forward auction participants bid enough to cover those prices at that lower clearing target; if not, it will start the process all over again.

That is why Wheeler told Congress the auction may last into fiscal year 2017.

Step Right Up!

Having said all of this, one main question remains: Who are the likely participants?

A UHF station has the most options, able to move to a high VHF channel, or low VHF, or give up the spectrum entirely (with the option to share if another station is willing). A high V has one fewer option, while a low V has only one: Give up their spectrum—then either share or get out of the business.

Stations giving up spectrum altogether will get more than those only agreeing to move to a new channel. For example, while WNJU New York’s bid to relinquish its spectrum is the high-water mark at $900 million, it is “only” $675 million to move to a low V, and $360 million to move to a high V.

Winning bidders giving up spectrum will have up to six months to go off the air. Winners who give up spectrum but are sharing with others will have up to a year to switch. They will retain must-carry protections and public interest obligations on the shared channel.

No Refunds

The FCC included this disclaimer in its reverse auction user guide, and not in small print, leading off the Feb. 29 document:

“The Commission makes no warranty whatsoever with respect to the Auction System. In no event shall the Commission, or any of its officers, employees or agents, be liable for any damages whatsoever (including, but not limited to, loss of business profits, business interruption, loss of business information, or any other loss) arising out of, or relating to the existence, furnishing, functioning or use of the Auction System that is accessible to bidders in connection with this auction.”

So, caveat emptor. And enjoy the ride.


Station pricesare calculated according to how much interference would be reduced by reclaiming them and how much population they serve.

The station with the highest opening bid price for going off-air is Telemundo’s WNJU at $900 million.

The lowest opening price for going off-air is KXGN Glendive (Mont.), Nielsen DMA 210, at $1.2 million. But it is at least luckier than any station in Las Vegas, which ironically given that it is the site of this week’s NAB convention, was shut out of the auction—none of its 14 stations was needed in any of the FCC spectrum clearing plans.

There are perhaps a dozen markets in addition to Las Vegas—Boise, Idaho; El Paso, Texas; Yakima, Wash.; Anchorage and Fairbanks, Alaska among them—that were shut out.

An FCC official explains. “You are talking about areas where, not just in those markets but in adjacent markets, there is enough room to rejigger without having to buy any spectrum at all.”

But wait, there’s less. There will be three more opportunities for the FCC to tell stations that did apply and did get opening bid prices that they aren’t needed in the auction: 1) after it figures out which spectrum auction target to start with, 2) during reverse (broadcaster portion) auction depending on what stations give up spectrum where, and 3) if the FCC has to recalibrate and go to a second round of bidding at a lower spectrum clearing target.


While there don't appearto be any legal impediments to the auction’s launch, there remain a handful of unresolved lawsuits by low-power TV station owners excluded from the auction that could, conceivably, throw a wrench in the works down the line.

The FCC is still likely looking at a mid-to-late May auction start. But whether the auction continues into October (as FCC chairman Tom Wheeler signaled it could) or must be reconfigured may in part depend on what a federal court has to say about those challenges. Their oral arguments start in May and, in at least one case, not until the fall.

John Eggerton

Contributing editor John Eggerton has been an editor and/or writer on media regulation, legislation and policy for over four decades, including covering the FCC, FTC, Congress, the major media trade associations, and the federal courts. In addition to Multichannel News and Broadcasting + Cable, his work has appeared in Radio World, TV Technology, TV Fax, This Week in Consumer Electronics, Variety and the Encyclopedia Britannica.