Auction Delay Postpones Paxson Payday

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WASHINGTON -The Federal Communications Commission recently postponed the auction of TV-station occupied spectrum until the fall, a move that put off a potential lucrative payday for Paxson Communications Corp.

Congress has ordered the FCC to sell the spectrum occupied by TV channels 60 to 69. Spectrum is incredibly valuable: The most recent FCC auction, held two weeks ago, reaped about $17 billion for the U.S. Treasury.

Wireless phone companies like AT&T Wireless, Verizon Communications and Cingular Wireless are desperate to get their hands on as much of the airwaves as possible to roll out "3G," a new generation of cellular phones with advanced data capabilities.

But the FCC has repeatedly delayed the auction of channels 60 through 69 because about 100 analog TV stations occupy that segment of spectrum. Under digital-TV transition rules established by Congress, those stations aren't required to relinquish that bandwidth until 2006-or perhaps even later.

The auction was scheduled for March 6, but the FCC moved it to Sept. 12.

West Palm Beach, Fla.-based Paxson owns 18 stations on channels 60 to 69, scattered across the U.S. The FCC has left it up to Paxson and other TV-station owners to negotiate their exit from the spectrum with the wireless companies that plan to take part in the auction.

Paxson's 18 stations represent about 10 percent of those residing on channels 60 to 69. Were the government to reap another $17 billion in the next spectrum auction, Paxson could be in a position to demand roughly $1.7 billion for the surrender of its analog-TV licenses.

Paxson wouldn't confirm that dollar amount in an interview last week. It claimed the spectrum for channels 60 to 69 is better suited for 3G wireless services than the spectrum sold in the most recent bidding.

The wireless industry applauded the delay for two reasons: the fact that the $17 billion auction had just ended and because of companies' ongoing concerns about participating in a spectrum bidding process that depends on successful band-clearing negotiations with Paxson and other affected broadcasters.

"Any time you inject uncertainty into the marketplace, you're going to have bidders who are more cautious and more concerned about what they are bidding [for]," said Travis Larson, spokesman for the Cellular Telecommunications & Internet Association. "Certainly, broadcaster incumbency is a very big question mark at this point."

The FCC was supposed to conduct the auction last year and turn the proceeds over to the U.S. Treasury no later than last Sept. 30. But the FCC-under pressure from wireless bidders troubled over spending billions for licenses that could not be fully utilized until TV stations shut off their signals-let that legal deadline pass.

Paxson, who opposed postponement, said he hopes TV stations and wireless bidders would use the next nine months to craft a band-clearing plan for analog TV stations to end service by late 2002 or early 2003. He said the affected broadcasters need 18 months to construct digital-TV facilities.

"I think everybody is going to come to agreement," Paxson said.

Paxson's remaining digital-TV license will allow it to assert its must-carry rights in analog on local cable systems. That will preserve about two-thirds of the company's audience.

But millions of TV viewers who received Paxson's over-the-air analog signal would lose service unless they subscribe to cable or buy a digital receiver.

"I don't think there is any question that this a serious question." Paxson said. "We won't do it if we don't get paid."

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