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Come on Down: FCC Lowers Spectrum Sights

Wireless bidders fail to cover broadcaster payouts 9/05/2016 8:00 AM Eastern

WASHINGTON — The Federal Communications Commission’s effort to reclaim broadcast spectrum for auction to what were billed as spectrum-hungry wireless carriers facing a crisis shortage failed to draw the big bucks the agency was required to dish out to broadcasters.

 

If the auction is meant to ferret out the higher, better use of the spectrum, just what that is has yet to be determined.

 

“Perhaps the notion of a ‘spectrum crisis’ peddled in Washington for the last seven years is not as acute as policymakers were led to believe,” National Association of Broadcasters executive vice president Dennis Wharton said.

 

That is because there was not enough interest in reclaimed broadcast spectrum by wireless companies in stage one of the auction to cover the $86 billion-plus the FCC was willing to pay broadcasters for their 126 MHz of spectrum.

 

After just two weeks of bidding by those wireless carriers and others in the forward portion of the two-sided incentive auction, the FCC called it quits on stage one, having raised only $22.45 billion, or a whopping $66 billion short of the mark, and with demand no longer exceeding supply in the top 40 markets.

 

The wireless industry said that would still have been the second-highest ever auction take for the FCC, though it is also more spectrum than is typically auctioned at one time.

 

The broadcasters’ asking price of more than $86 billion for stage one was essentially their opening price, and wireless carriers weren’t willing to pay it.

 

The FCC had said from the outset that it was setting the prices high to attract broadcasters, which it did. But wireless bidders would have had to pony up far more than the original projections of the spectrum’s marketplace value — $20 billion to $40 billion — to cover that payout.

 

The auction was designed with multiple spectrum-clearing targets, in terms of how much bandwidth the FCC could reclaim or wireless bidders could potentially get, in case demand did not meet supply in the initial stages. Obviously, though, the FCC wanted to free up as much spectrum as possible and raise as much for the U.S. Treasury as it could.

 

The next step is for the FCC to reset the spectrum target, which it already has, ratcheting it down one notch to 114 MHz. Bidding will resume in stage two of the reverse auction, with the FCC paying fewer broadcasters for spectrum.

 

That auction will resume Sept. 13 at the lower target, but with some markets getting more spectrum, including areas along the borders and in Los Angeles, the No. 2 market.

 

That is because with less spectrum for sale, there will be two more UHF channels in the broadcast band and less of a need to put stations in the wireless band. One possible upside for broadcasters is that with less spectrum on the block, fewer stations will have to be repacked, which means a better chance that the $1.75 billion Congress set aside to compensate broadcasters — and some cable operators — for the post-auction TV-station repack will cover costs.

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