In Broadcast - April 2016 - 70


70

www.inbroadcast.com | Vol: 6 - Issue 4 | April 2016

InUSA

Many Questions Remain Over
Broadcast TV Incentive Auction
Contributing Editor and Columnist Michael Grotticelli examines some of the unresolved
issues surrounding the U.S. broadcast Television spectrum auction...

A

s this column went to press,
digitally speaking, the Federal
Communications Commission (FCC)
was preparing to commence with
auctioning off wireless spectrum on
March 29, 2016 - the airwaves in
the 600MHz spectrum now used by
television stations in the U.S. - to the
highest bidder. TV stations have the
choice of either selling all its 6MHz of
spectrum outright, engaging in channel
sharing with other stations in a market
or move to a lower channel or from a
UHF or VHF channel. No matter how
you slice it, all options will be disruptive
in some way.
Initially described in the 2010
National
Broadband
Plan
and
authorised by Congress in 2012, the
auction will use "market forces to
align the use of broadcast spectrum
with 21st century consumer demands
for video and broadband services,"
the FCC stated. "It will preserve
a robust broadcast TV industry
while enabling stations to generate
additional revenues that they can
invest into programming and services
to the communities they serve. And by
making valuable 'low-band' airwaves
available for wireless broadband,
the incentive auction will benefit
consumers by easing congestion
on wireless networks, laying the
groundwork for "fifth generation" (5G)
wireless services and applications, and
spurring job creation and economic
growth."
The FCC, which is calling it a "firstof-its-kind auction," began accepting
applications from broadcast stations
on December 8, 2015, and has worked
hard to inform interested parties,
both new bidders and current licensee
holders, who have the option of
participating in the auction or not.
According to the FCC, the U.S. leads
the world in key areas of wireless
infrastructure
and
innovation,
including being the first country to
have 4G Long-Term Evolution (LTE)
technology networks at scale, and to
enable unlicensed use of white space
spectrum. Across the country, in both

rural and urban areas, consumers
and businesses expect to have access
to wireless connectivity anywhere,
anytime. Today, there are more
connected devices than there are
people living in the U.S., and about
70% of Americans use data-hungry
smartphones.

Broadcasters see the auction as
nothing more than a raid on their TV
licenses. Yet, it's not big business - and
in particular large cellphone service
companies have the resources to win
at auction that most TV station owners
do not - that cause concern. It's the
people that have no real interest in the
spectrum itself. They are just looking
to make money for money's sake.
And the money will be sizeable.
The FCC has said that opening bid
prices, which will be based on a TV
station's interference and population
characteristics, could yield opening
bids of up to US$900m.

Free Spectrum
This increasing demand poses
a major challenge to ensure that
America's wireless networks have
the capacity to support the critical
economic, public safety, health care
and other activities that rely on
them. To meet this challenge, the
FCC has worked to free up spectrum Channel Assignments
for wireless broadband use, removed
The auction is a two-step process, at
regulatory and other barriers to the which the FCC will acquire spectrum
use of spectrum, and enabled more from television stations in a so-called
efficient use of spectrum in numerous "reverse
auction."
Participating
innovative ways.
stations will be offered progressively
A key part of the FCC's efforts lower payments through a series of
to meet the demand for spectrum bidding rounds. Bidding will end when
is the Incentive Auction, a way of the FCC reaches targets for the amount
repurposing spectrum by encouraging of spectrum to be cleared in each
licensees (TV stations) to voluntarily market. Stations that remain in the
relinquish spectrum usage rights in bidding round will receive payments
exchange for a share of the proceeds "at least as high" as the last price they
from an auction of new licenses to use agreed to take.
the repurposed spectrum. Should they
Once that phase is complete, a
choose to participate in the auction, "forward auction" begins, in which
that share could be lucrative; and not the FCC will sell the cleared spectrum
just for stations themselves.
to wireless providers. Because an
It's been reported that several auction like this has never occurred
visionary businessmen have quietly before, no one is sure how long it will
invested in small stations with little take. The FCC has estimated that the
ratings, in the hope of cashing out entire bidding process could take a few
during the auction. Michael Dell, weeks to a few months.
Chairman and CEO of Dell Inc.,
After the auction concludes and
stands to make up to US$4bn on an before spectrum is cleared for use
US$80m investment. Since 2011, Dell by mobile providers, television
and his partners have invested
stations' signals will need to be
over $80m to buy up
rearranged, or "repacked,"
independent TV stations,
to consolidate channel
according to government
assignments within each
records obtained by the
market. As a result,
Wall Street Journal.
many stations may move
Therein
lies
the
to new channels. This will
"problems" many in the
affect most stations, not
TV broadcast industry have
just those that participate in
with outsiders making The FCC is overseeing the the auction.
spectrum realignment
money off the spectrum.
Some wireless carriers

that have stated their intention to
participate in the auction, most
notably AT&T, have taken issue with
how the auction will be held. They
argue that if broadcasters are reassigned the remaining wireless bands
after the auction, as stated in the
rules for the auction, it could cause
harmful interference. Meanwhile, the
National Association of Broadcasters
has criticised the FCC for penalising
broadcasters that choose not to
relinquish their spectrum by making
those stations the only ones eligible to
be placed in the wireless band.
If it succeeds, the auction would
supply the necessary spectrum for the
next wave of mobile data services. It
would also put billions of dollars into
government coffers and TV stations'
bank accounts. Depending on where
the chips fall, the auction could also
open up more unlicensed frequencies
like those used for Wi-Fi - which tech
giants like Microsoft favour - or it can
further limit public use of the band.
Clear Progress?
Then there's the issue of repacking
some 1,200 stations that chose not
to participate into a smaller amount
of spectrum. Many have said this
could make or break television
"broadcasting" as we know it today.
What if sharing spectrum leads to
signal interference? What happens
to all of the low-power TV stations in
the U.S. that cannot participate in the
auction? These are tough questions
to answer as we sit here today, but
ones that must be addressed if the
industry is to thrive in the new wireless
landscape.
Nearly everyone wants the auction
process to succeed, if only to generate
new revenue for the U.S. government
and make more efficient use of
the spectrum at hand. But will the
software models being used by the FCC
to coordinate wireless channels after
the auction lead to a better tomorrow
for TV stations?
As the auction process begins, many
questions remain.
http://www.inbroadcast.com http://wireless.fcc.gov/auctions/default.htm?job=auctions_home
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