FCC: Spectrum Auction Rules Fulfill Congressional Mandate, Despite NAB Claims

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By Bryce Baschuk

Aug. 19 - The Federal Communications Commission said its spectrum auction rules are likely to survive broadcasters' recent legal appeal because they adhere to terms of the 2012 Spectrum Act.

The National Association of Broadcasters filed a lawsuit Aug. 18 to challenge the rules outlined in FCC's May spectrum incentive order (GN Docket No. 12-268). NAB's petition for review, filed with the U.S. Court of Appeals for the District of Columbia Circuit, claims that the FCC exceeded congressional intent by electing to use new software for calculating broadcast coverage areas, among other concerns.

FCC spokeswoman Kim Hart said the agency is "confident that the report and order fulfills the mandates established by Congress on this complex matter," in an e-mail to Bloomberg BNA.

The FCC is preparing to hold the world's first spectrum incentive auctions of broadcast TV licenses in mid-2015, roughly the date set by FCC Chairman Tom Wheeler. Hart wouldn't say whether the FCC is considering any new delays of the auction timeline.

Mid-2015 Timeline

Next year, the FCC will endeavor to hold a reverse auction that will enable TV broadcasters to voluntarily release their spectrum in return for a portion of the proceeds from a subsequent forward auction of the relinquished spectrum. The remaining revenue generated from wireless carriers in the forward auction is to fund the $7 billion development of FirstNet, a nationwide interoperable communications network for first responders, and help pay down the nation's debt.

The FCC will initiate a repacking process to assign channels to the broadcast television 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. The Middle Class Tax Relief and Job Creation Act of 2012 (Pub. L. No. 112-96), which authorized the auctions, specified that the FCC must use the methodology described in the Office of Engineering and Technology Bulletin No. 69 (OET-69) to "make all reasonable efforts to preserve, as of the date of the enactment of this Act [Feb. 22, 2012], the coverage area and population served of each broadcast television licensee."

The FCC decided to use new software, called TVStudy, to implement the OET-69 guidelines, also known as the Longley-Rice Methodology for Evaluating TV Coverage and Interference. Broadcasters argue that use of the TVStudy software would fundamentally alter the methodology of the OET-69 guidelines and harm broadcasters who don't participate in the auctions.

'Right the Ship.'

The NAB suit requested that the D.C. Court of Appeals hold "unlawful, vacate, enjoin and set aside the commission's adoption of TVStudy in the order."

NAB said the commission's new methodology will reduce the coverage area for broadcasters whose spectrum licenses are relocated as a result of the auction's repacking process. "Unfortunately, the FCC order oversteps congressional mandate and is likely to cause significant harm to broadcast television," said Rick Kaplan, NAB's executive vice president of strategic planning, in a news release .

NAB's lawsuit is "not designed to derail the auction, or even slow it down," Kaplan said in a separate blog post . "We are looking for a mid-course correction that better reflects Congress' intent and that protects broadcasters and the millions of vulnerable over-the-air TV viewers."

"We believe strongly that the FCC itself can achieve a better balance," Kaplan said. "If not, with this litigation we can right the ship that puts more spectrum out in the marketplace while ensuring a vibrant and robust broadcasting service for the American people."

Preston Padden, the executive director of the Expanding Opportunities for Broadcasters Coalition, said he was "pleased that the NAB acted promptly after the release of the auction report and order so that any legal issues can be resolved well before the mid-2015 scheduled start of the auction," according to an e-mailed statement. Padden's group represents more than 70 broadcast stations that are interested in participating in the broadcast auctions.

FCC Should Be Wary

Some telecommunications analysts said the FCC should be concerned about the NAB suit's potential impact on the auctions, according to interviews with Bloomberg BNA.

"The NAB's appeal focuses on three of the decisions most harmful to broadcasters--and there are several others--that go beyond what Congress allowed," said John Hane, an attorney with Pillsbury Winthrop Shaw Pittman LLP. "I hope the FCC corrects these overreaches on reconsideration, but if it doesn't, I'd give the NAB's appeal very good odds."

At least one analyst said the NAB lawsuit could persuade the FCC to delay the auction beyond Wheeler's mid-2015 target. "People believe it may slip into 2016 now," said Spencer Kurn, an analyst at New Street Research LLC.

The FCC's auction timeline "has shifted back because the broadcasters are uncomfortable with their relocation," Kurn told Bloomberg BNA. "There are also likely some bandwidth constraints at FCC, though it is hard to quantify this. We are expecting to see a revised timeline in spring 2015, and actual auction between fall 2015 and mid-2016."

Commission officials told Bloomberg BNA they had anticipated NAB's appeal and that nearly all the commission's high-profile orders have been subject to appeal. This year broadcasters have already sued the FCC over a pair of rulemakings aimed at tightening the FCC's media ownership rules.

'Expedited Process' Sought

Wireless groups generally said broadcasters' concerns should be addressed but urged a rapid legal review in order to keep the FCC's auction timeline intact.

"While we would prefer to work together collaboratively to address NAB's concerns rather than resort to litigation, we are hopeful the court addresses these issues quickly and that the NAB adheres to its commitment for an expedited process without unnecessary delays," said Scott Bergmann, vice president of regulatory affairs at CTIA-The Wireless Association. CTIA represents the nation's top four wireless carriers--Verizon Communications Inc., AT&T Inc., Sprint Corp. and T-Mobile US Inc.

"The wireless industry needs more spectrum as soon as possible to be able to meet mobile broadband demand," Bergmann said. "To help meet that need, we will continue to work with the FCC, NAB and other affected stakeholders to ensure that the Commission is ready to hold the auction on schedule in mid-2015."

"Broadcasters should feel comfortable with the process so that they can see the enormous benefits of participating in the incentive auction," said Steven Berry, the president of the Competitive Carriers Association. "I urge expedited action so as not to unduly delay the auction for the benefits of carriers, broadcasters and most importantly consumers," Berry said in an e-mail statement. "I am glad to see NAB recognizes consumers and the economy should not suffer from unnecessary protracted delays."

Gary Shapiro, president of the Consumer Electronics Association, warned that the lawsuit might slow the FCC's process. "Litigating against the incentive auction undermines and delays innovation," Shapiro said in a news release.

To contact the reporter on this story: Bryce Baschuk in Washington at bbaschuk@bna.com

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

Read the NAB lawsuit here: http://www.nab.org/documents/newsRoom/pdfs/081814_IA_Petition.pdf .


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