FCC Report to Make ‘Economic' Case for Broadcaster Participation in Auction

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By Lydia Beyoud

Sept. 30 — The Federal Communications Commission will be sending every broadcaster eligible to participate in its upcoming incentive auction a report intended to convince them of the auction's economic potential, Chairman Tom Wheeler said Sept. 30.

The announcement followed a 3-2 vote along party lines at the agency's September open meeting on a declaratory ruling on the May spectrum incentive order (GN Docket No. 12-268) to clarify the method by which that the agency will seek to preserve broadcasters' coverage areas following the repacking process associated with the broadcast spectrum auction.

overage Area

The ruling would preserve stations' coverage areas during the repacking process under an “equal area” approach which would enable stations assigned to new channels to replicate the areas within their current signal contours as closely as possible using their existing antenna patterns, FCC Office of Engineering and Technology Attorney Adviser Spasia Paroutsas said during the meeting.

The equal area approach would also be applied to preserving populations served by prohibiting channel assignments that would cause one station to interfere with more than 0.5 percent or more of another station's viewers, Paroutsas said.

The agency said the declaratory ruling was necessary to help the FCC meet its congressional mandate to “make all reasonable efforts” to independently preserve TV station coverage areas and populations served

“Giving clarity to broadcasters who may want to participate in the auction as well as wireless providers who desperately need spectrum, especially low-band spectrum, is a necessary step in the process,” Competitive Carriers Association President Steven K. Berry said in an e-mailed statement.

“There are several pieces of the puzzle that still need to fall in place, and I am very pleased the Commission has moved forward on this important component,” Berry said.

Dissenting Voices.

Republican Commissioner Ajit Pai said there was no need for clarity in the Incentive Auction Order, and that the declaratory ruling was an attempt by the FCC to get its way in case it fails to prevail in a lawsuit brought against it by the National Association of Broadcasters.

“At this point, the FCC cannot legally change its prior decision other than through notice-and-comment rulemaking. Once an FCC order has been challenged in court and the deadline for its reconsideration has expired, the time for deliberation is over,” Pai said.

Fellow Republican Commissioner Mike O'Rielly also dissented, saying the ruling would “sidestep normal commission procedures.”

Pai Warns of Litigation Delay

Pai said the ruling could “set off a new round of procedural wrangling” in the U.S. Court of Appeals for the District of Columbia Circuit that would ultimately end up delaying the auction. Pai urged the FCC and the NAB to settle the suit outside of court to prevent delays.

Wheeler said it was noteworthy that Pai's and O'Rielly's comments appear to be “a renewal of dissent by parties that were not supportive of the approach being taken to follow the statutory requirements created by Congress for the spectrum incentive auction.” He added that the declaratory ruling “does not modify the treatment of coverage areas” and that it constituted common regulatory practice.

“We will continue to bend over backwards to be clear and concise in explaining how the auction will function, even when it means clarifying a misunderstanding,” Wheeler said. NAB Lawsuit.

“NAB believes the FCC's procedure here is quite suspect. The court will have to decide if it passes legal muster,” Dennis Wharton, NAB executive vice president of communications, told Bloomberg BNA by e-mail

The NAB raised concerns about the ruling and repacking process in a Sept. 25 filing, saying that the clarification could violate the Administrative Procedure Act.

The NAB brought suit against the FCC Aug. 18, claiming that it exceeded congressional intent by electing to use new software for calculating broadcast coverage areas, among other concerns. The group said that passage of the clarification could cause that issue to be roped into the suit as well.

Investment Banking Approach

The FCC could be feeling a bit of pressure to resolve the case before Nov. 13, when the first of its two spectrum auctions is scheduled.

The agency has been wooing potential participants for months, but has encountered mixed levels of interest from broadcasters who would relinquish their spectrum in return for a portion of the proceeds from the sale of that spectrum in mid-2015 to wireless companies.

As part of the process, the commission will initiate a repacking process to assign channels to the broadcast TV stations that remain on the air after the incentive auctions in order to clear nationwide, contiguous blocks of spectrum suitable for two-way wireless broadband use.

Participation in the auction “is an economic decision that broadcasters have to make,” Wheeler said during a press conference after the meeting.

He asked broadcasters to approach their decision “like a traditional economic transaction involving the expertise of investment bankers.”

The report to be sent to broadcasters was prepared by Greenhhill & Co., an investment banking firm.

Wheeler said the report would underscore his previous statements that the reverse spectrum auction would be “a virtually risk-free and unique opportunity for broadcasters.”

“We are glad the FCC is providing more information publicly for potential broadcast participants in the auction. That is a key part of the auction,” NAB's Wharton said in an e-mailed statement.

“If we can just get balanced protections for those stations that choose not to participate, we think we'll see a terrific auction,” he said.

To contact the reporter on this story: Lydia Beyoud in Washington at lbeyoud@bna.com

To contact the editor responsible for this story: Heather Rothman at hrothman@bna.com