FCC Reveals Pricing for Spectrum Auction

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By Brandon Ross

Oct. 16 — The FCC has determined that many TV broadcasters can get hundreds of millions of dollars each for the sale of their spectrum airwaves to wireless operators.

The Federal Communications Commission on Oct. 16 released the pricing details and a rough time frame for its highly anticipated incentive auction of broadcast spectrum airwaves to wireless operators.

Senior FCC officials estimated the auction will take about two to three months to conclude from its start in late March, they said on an Oct. 16 press call.

The agency is offering eligible broadcasters three tiers of pricing to correspond with three selling options those broadcasters have: highest pricing for the broadcasters to go off the air completely; medium pricing for broadcasters to relocate their station to a lower frequency channel; and lowest pricing for a broadcaster to relocate their station to a high frequency channel.

“For all practical purposes, we’ve fired the starting gun: the release of final opening bid prices—combined with the detailed application procedures and other data released yesterday—provides broadcasters with all of the information they need to decide whether to apply to participate in the auction,” FCC Chairman Tom Wheeler said in an Oct. 16 statement following the pricing detail release.

Interested broadcasters must submit their applications to sell their spectrum to the FCC between Dec. 1 and Dec. 18.

“Stations that miss the December 18th deadline will not be able to participate in this historic auction,” Wheeler said. “Commission staff stand ready to educate and assist applicants as they prepare.”

TV broadcasters operate in the 600 megahertz (MHz) spectrum band and many large stations plan to sell their spectrum licenses for wireless operators, like Verizon and AT&T, to acquire during the auction. Small stations, often called low-power stations, like many local TV stations, foreign language stations or public broadcasting stations (PBS) will be forced to vacate, without compensation, their stations to clear space for wireless licensees to take over.

In order to make room for wireless operators on the 600 MHz band, the FCC will be relocating many broadcasters off the band or to a certain, segment of the band.

Telecommunications lawyer Trey Hanbury, a partner at Hogan Lovells, told Bloomberg BNA Oct. 16 that, “Every full power television station and class A [station] will be subject to potential repacking.” He added: “There will be some repacking in most markets.”

Prices Likely to Come Down

The opening bid prices aren't likely to directly correspond to the prices wireless carriers will be paying come the auction's end, Hanbury, who represents wireless carriers, told Bloomberg BNA following the FCC price release.

“Opening prices are just that: opening prices,” Hanbury, who previously served as director of government affairs for Sprint Nextel, said. “For the vast majority of licenses, they’re going to come down substantially.”

Hanbury said that the expectation is for the prices to fall about five percent for reach round of bidding they're subjected to.

Senior FCC officials on the Oct. 16 press call said many rounds of bidding were expected.

Some Broadcasters Eager

Some broadcasters see the auction as a clear money-making opportunity.

“We've been active at the FCC, together with Fox, Univision, and Ion, working with the FCC staff on a rulemaking process,” Peter Liguori, President and Chief Executive Officer of Tribune Media Co., said during an Oct. 16 earnings call. “And we're leaning forward on potential approaches to the auction, including channel sharing in major markets, which may allow us to monetize spectrum with minimal impact to our operating revenues and profits.”

“[W]e have spectrum in very valuable markets, and we're keenly focused on the potential opportunities presented by the auction,” Liguori said.

Pricing Breakdown

The pricing gives the exact figures that each eligible station could get for their spectrum sale.

For example, WCBS-TV in New York is eligible for a $900 million opening bid if it sells its station and stays off the air—the highest bid amount in the whole auction. If, however, WCBS-TV relocates to the low part of the very-high-frequency (VHF) band, it is eligible for $675 million. If it wants to relocate to a high VHF channel, then it will be offered $360 million.

Many opening bids are set in hundreds of millions, but even at the lowest ends, most bids are between $10 million and $100 million.

The National Association of Broadcasters said it was reviewing the pricing information and wouldn't be commenting at this time.

The FCC announced Oct. 15 that it would be voting on new rules for managing the auction at its Oct. 22 open meeting. Those rules will, among other things, tell broadcasters when they must vacate their channels, and tell wireless carriers when they can assume control of the airwaves following the auction.

By Brandon Ross

To contact the reporter on this story: Brandon Ross in Washington at bross@bna.com

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

The full pricing breakdown is available here: http://src.bna.com/Cx.