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Questions Mark Auction Launch

The FCC last week released what one commissioner’s aide called its “straw man” model of a reverse incentive auction. A “straw man,” according to various tech and definition websites, refers to a piece of software that is “not expected to be the last word,” but is more like a beta test, or something that is “refined until a final model or document is obtained that resolves all issues….” In terms of the FCC’s model, that description sums it up very well for broadcasters.

Although National Association of Broadcasters president Gordon Smith said broadcasters would work with the FCC to make the auctions a success, he suggested there were still a lot of questions the commission needed to answer about how the auction would be structured and how it would affect broadcasters, particularly those that choose to remain in business after the FCC auctions to reclaim and sell their spectrum. That is obviously and understandably the NAB’s focus, given that Smith does not run the National Association of Former Broadcasters.

The FCC has launched a broadcaster education campaign, including a first workshop slated for Oct. 26. But that appears to simply be more of an effort to encourage broadcasters to give up spectrum, given that the FCC pitched that program as an opportunity to educate broadcasters on “the unique financial opportunities of incentive auctions.”

Here are some of the key questions broadcasters need answers to before the FCC votes on final rules sometime next year:

1. How much of their coverage areas will broadcasters be allowed to retain after they are repacked—moved and relocated—to make room for large swaths of spectrum? Smith says the NAB “hopes” and “believes” that, as with the digital transition in 2009, broadcasters will lose no more than 2% of their coverage areas. But the incentive auction notice of proposed rulemaking (NPRM) issued last week also seeks comment on whether the FCC could pay stations to accept reducing their coverage areas even more.

2. Will there be enough money to cover the moving and relocation costs for broadcasters— and any for cable or satellite operators to retransmit the moved signals? The FCC has conceded that the $1.75 billion Congress authorized for those expenses may not be enough to cover them. What’s the FCC going to do about it? FCC commissioner Ajit Pai, who has plenty of questions about the auction process—he quoted Winston Churchill in calling it “a riddle, wrapped in a mystery, inside an enigma”—raised the compensation issue at the FCC meeting voting out the item. Pai wants to know whether covering broadcaster costs should be a prerequisite of closing the auctions.

3. What model will the FCC use to determine how to repack stations? The commission signaled that the allocation optimization model it’s been talking up since the National Broadband Plan proposing auctions was released in 2010 won’t be the model, but has asked for input from broadcasters. Broadcasters have been pushing the FCC to release that info so they can decide how much of a business the FCC is leaving them with. Last week’s NPRM asked plenty of questions, but leaves the answers for another day. Broadcasters, meanwhile, are hoping they do not put their business models in final jeopardy.

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