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Padden Pitches Value Of Auction Payout

Preston Padden, the former Disney and Fox exec representing TV stations eyeing giving up spectrum in the FCC's incentive auction, says that those broadcasters could see a 10-fold increase in spectrum value in those auctions. He also argues that contributing to that payout is the fact that the FCC doesn't need to keep broadcaster payouts below wireless pay ins since it will be getting "free spectrum" in most markets.

In a speech Friday at a George Mason University conference, Padden makes the case for why broadcasters might prefer putting spectrum into the auction rather than bet on being able to offer a future wireless overlay service.

"Among the potential future opportunities is the development of a new digital broadcast technical standard and the possibility of deploying the 'Tower Overlay' model," he told his audience, according to a copy of the speech. "Under this model a broadcaster might be able to lease capacity to wireless carriers creating long-term annuity like value potentially exceeding the proceeds they might receive in the Incentive Auction."

He concedes that some broadcasters are "strongly attracted" to this potential future opportunity.

Sinclair, for example, has said it plans to hold on to its spectrum and has pushed for a new standard that will allow broadcasters more flexibility in the services they can deliver, including offloading wireless broadband traffic.

But Padden's argument, meant to suggest selling spectrum was perhaps a more attractive option, was that those future gains are "highly speculative." He suggested that a lot of things had to fall into place to make that long-range play pay off. His suggestions included that broadcasters would have to agree on a standard, that the FCC would need to adopt a new standard, that broadcasters would have to invest in the set-tops or dongles to make that new transmission standard work with current sets, and a handful more.

As for the FCC having to "score" stations or otherwise hold prices down, Padden says "not necessary," given that the FCC only needs to pay for spectrum in the top 30 or so markets, plus a few scattered elsewhere.

"All the revenue from wireless carriers in 180 or so markets is 'free' (paying only repacking costs) and will build up a huge reserve that the FCC can use to help pay what it needs to pay to broadcasters in the biggest markets," he told B&C. "Some observers have completely missed this. They think that the FCC will have to pay, for example, the NY and LA stations less than the wireless carriers pay in those markets. But that is not true.  The "closing conditions" will be determined on a national basis.  So "free" wireless revenues from 180 markets can be used to get the spectrum the FCC needs in the biggest markets. And this makes sense since getting the spectrum in NY and LA adds tremendous value to the spectrum in smaller markets since the big wireless carriers need a national footprint."

Padden also put in a pitch for not limiting who can bid in the forward spectrum auction, and for sticking with its goal of trying to recover 120 MHz from each market, both of which would benefit stations looking to sell.

Padden is executive director of the Expanding Opportunities for Broadcasters Coalition. The group, representing some 70 TV stations eyeing a government payout for their spectrum, has been pressing the FCC not to shortchange smaller stations at the auction pay window, given they have the same 6 MHz as anyone else.

Those stations don't have to identify themselves.