The auction provisions were adopted as part of the legislation that just extended the Social Security payroll tax deduction rollbacks, extended unemployment benefits, and fixed certain limitations that had arisen on Medicare reimbursements to doctors. All these benefits needed offsetting revenues to avoid unduly increasing the Federal deficit, and the one seemingly easy place to “find” money, was through spectrum auctions. So Congress ordered the President to identify certain Federal spectrum that could be made available for wireless users, and also authorized the FCC to conduct auctions of broadcast spectrum, but under the very specific guidelines set out below.

• The FCC will need to conduct two sets of auctions – the reverse auction to determine how much a station will be willing to take to abandon spectrum that can be used for wireless, and a “forward auction” looking at how much the wireless carriers will pay for the spectrum
• The reverse auction will only be held if there is more than one broadcaster in a particular area looking to give up spectrum – presumably to see who would be willing to give it up for the least amount of money
• In the reverse auction, television broadcasters can get paid for any of the following:
  • Turning in their licenses
  • Turning in their channel to share spectrum with another station (e.g. to use part of their digital capacity). Where stations share a single channel in order to make another channel available for auction, both stations will retain their must-carry/retransmission consent rights
  • Abandoning a UHF channel to move to a VHF channel (less suitable for digital transmissions)
• In any reverse auction, the FCC is to do its best to protect the identity of the participating station until a decision has been made to take their channel (presumably to not let competitors know that they are open to getting out of the TV business)
• A fund of $1,750,000,000 will be established to pay the costs of broadcasters incurred in repacking the spectrum to make any abandoned spectrum more interesting to wireless bidders. Cable systems will also be eligible for payments to cover the costs of channel changes of television stations that they carry.
• In lieu of cash payments, TV broadcasters can opt for relief from FCC regulations requiring that their channels be used for broadcast use, providing waivers for mixed use of the spectrum as long as at least one broadcast channel is retained.
• The following limitations on spectrum repacking will limit what the FCC can do:
  • The FCC will “make all reasonable efforts” to preserve the coverage area and population served by each television station
  • No station will be forced to move from a UHF to a VHF channel, or from a high VHF channel to a low VHF channel (which are even worse for digital broadcasting – especially mobile digital transmissions)
• Proceeds of the forward auction will be used for the following purposes:
  • To provide funds for the repacking
  • To provide funds for the payments required to pay the winners in the reverse auctions
  • To provide $2,000,000,000 to fund the build out of a public safety network on part of the television spectrum already reclaimed as part of the original digital transition
  • To provide $300,000,000 to move users of channel 37 (currently used for radio astronomy)
  • To fund all FCC administrative costs of the auctions
  • Finally, after all of these costs are funded, the remaining proceeds would go to general Treasury obligations to help balance the Federal budget
• If there are insufficient funds raised from the forward auction to meet all the costs of the auction, there will be no reassignment of channels and repacking of the spectrum, and parties in the reverse auction will not give up their channels
• The statute specifically says that there is no status change for LPTV stations – which would seem to mean that they remain secondary services
• Nothing in the statute is to prevent the continued deployment of White Spaces devices (about which we last wrote here)
• The FCC can only repack the TV spectrum once, and it can do only one reverse auction. All auctions must be done within 10 years

All in all, these restrictions seem to make television broadcasters secure from their fears that their spectrum would be pulled out from under them, or that their service areas would be undermined to force their participation in an auction. We will be interest to see how the FCC proceeds to implement this auction authority. Look for rulemaking proceeding to implement this legislation in the not too distant future. 

The Spectrum Bridge database was tested a few months ago, and the FCC's letter outlines a number of concerns expressed about its operations.  These include several problems encountered by the NAB in registering sites that were supposed to be protected by white spaces devices.  While licensed facilities of TV stations and land mobile users are available from the FCC's own database, receive sites for MVPDs and translators need to be registered, as do the location of certain mobile broadcast auxiliary stations.  The FCC ordered Spectrum Bridge to re-open its database for the registration of additional sites to be protected, and said that this would provide registrants the ability to test the modifications to the system in the coming weeks before the system becomes operational. 

Practically speaking, the vast majority of cable headends, TV translators, and MVPD receive sites that rely on the reception of an over-the-air broadcast signal are located well within the broadcast station’s standard protection zone. Thus, the April 5th deadline applies only to those unique cases in which an existing over-the-air receive site is located more than 80 kilometers (49.7 kilometers) beyond the edge of the broadcast station’s protected contour.

As the filing deadline is less than a month away, we encourage potentially affected parties to promptly review their operations. Television broadcasters, who may not themselves operate a facility eligible for a waiver, should consider if there are cable headends, TV translators, or other MVPD receive sites far beyond their contour that might benefit from a waiver request.  In such cases, the broadcaster should coordinate with the operators of those facilities to ensure a timely submission. 

See today's advisory for further details on this upcoming deadline, as well as our earlier postings here and here for more information about the white spaces rules and the forthcoming white spaces database. 

The conditional nature of the designation reflects the fact that these administrators had requested designation in late 2009, before the recent Order on Reconsideration which adopted the new requirements that all white spaces devices must communicate with these administrators instead of relying on any sort of spectrum sensing.  Thus, the FCC is requiring the proposed administrators to update their filings to reflect that they can meet the new requirements for the maintaining the database.  One of these new requirements is one of security - so that it can be ensured that the users will have an accurate data base from which to operate, without fear of tampering or other abuses.  The FCC will also require that each administrator attend an education session conducted by the FCC, and to go through a rigorous testing period - with tests conducted by the FCC to make sure that the administrator's service will actually provide the necessary information to protect incumbent TV spectrum users from interference from white spaces devices.

Television operators should watch this proceeding, and be sure that the information about their operations is correct in each of the databases developed by these companies.  The multiplicity of operators may make this task somewhat more cumbersome for TV stations, but it is crucially important given the risks of interference that may arise if all information is not complete and accurate. 

Television Issues

Spectrum issues have been the dominant TV concerns in past years, first with the digital transition, and more recently with the "white spaces" rulemaking and the proposals advanced as part of the FCC's Broadband Plan to reclaim part of the TV spectrum for wireless broadband uses.  These issues remain on the FCC's agenda, as do new issues dealing with the carriage of television stations by cable and satellite television providers.  Specific issues for TV include:

Spectrum reclamation:  The initial proposals for the reclamation of part of the TV spectrum for wireless broadband were laid by the FCC's Notice of Proposed Rulemaking released in November, looking at how the TV spectrum could be used more efficiently, and how incentive auctions encouraging some TV stations to vacate their channels could be conducted.  Congress still has to pass legislation to allow such auctions, and it will probably also mandate a spectrum inventory to determine if the reclamation of the TV spectrum is really necessary to provide for wireless broadband needs.  At the same time, some TV operators have begun to talk about television stations themselves providing broadband service with their excess spectrum.  While Congress will probably act on the auction bills this year, and there will be much debate about the details of the reallocation issue, so don't expect final resolution of this matter in 2011.

White Spaces:  The FCC has authorized the operation of wireless devices in the television spectrum, resolving many of the concerns about interference to television operators by requiring all wireless users to protect operating TV channels in specific areas based on databases of existing users, not on spectrum sensing techniques.  But implementation issues still need to be worked out - including finding parties to compile and administer the databases to make sure that all existing spectrum users who are to be protected are registered.  Expect action on these matters this year, but no actual white spaces use until after these implementation efforts are completed.

LPTV Digital Transition:  While many members of the general public may consider the digital television transition to be complete, many Low Power TV stations and TV translators are still operating in analog.  The FCC has commenced a proceeding to require the transition of these stations to digital, suggesting that the transition be complete as early as the end of 2012.  Expect controversy on this issue.  Many LPTV stations feel that being forced incur the costs to covert to digital is premature and could imperil broadcast service, especially to rural areas and minority populations who rely on translators and LPTV stations, if spectrum repacking caused by any future repurposing of TV spectrum for broadband forces further technical changes.  These issues will be considered by the Commission this year.

Retransmission Consent Reform:  At the end of 2010, there was much controversy over retransmission consent issues, as there were instances where broadcasters and cable operators and other multichannel video programming distributors had difficult negotiations over the carriage fees to be paid to the TV stations.  FCC sources stated at the end of the year that a proceeding will be initiated to determine if the rules governing the negotiation process should be changed.  The multichannel video programming distributors and some public interest groups argue that the FCC should protect viewers who may have their TV service disappear if a TV station does not reach a deal with a MVPD, while the broadcasters argue that the ability to remove the station is the heart of the negotiation, and removing the risk of the MVPD losing the right to carry the station would negate the negotiation.  Look for this proceeding to commence early in the year but, as it will no doubt be very controversial, it may take some time to resolve.

DMA Boundary Issues:  The FCC has also begun a proceeding to look at DMA boundaries that cross state lines to see if every television viewer should be guaranteed to receive service from cable or satellite providers of a station in his or her state.  Television stations fear that this guarantee could upset traditional television markets, and could have an impact on retransmission consent negotiations in border counties.  Comments in this proceeding are due on January 24th, 2011.

Radio has fewer unique issues on the front burner in Washington, but at least one is of incredible significance - the performance royalty.  Here are some of the issues facing radio broadcasters:

Performance Royalty:  Even though the performance royalty will have to start from scratch in the new Congress after dying in the Congressional session that just ended (despite having cleared both the House and Senate Judiciary committees for the first time), advocates of the royalty have made clear that they will be pushing on this bill again in the new session of Congress which began this week.  Look for the settlement talks with the NAB to restart now that everyone has returned from their holidays.  As with most issues, this is not an easy one, as the NAB put what many broadcasters thought was its best deal on the table in the Fall, only to have that deal rejected out of hand by the pro-royalty forces.  So don't look for any quick resolution of the issues this year. 

LPFM/FM Translator Issues: At the very end of 2010, Congress passed the long-delayed legislation clearing LPFM stations to operate on channels that are third-adjacent to full power FM operations.  Look to the FCC to adopt rules to implement this legislation, and to finally resolve the issues of what to do with the FM translators left from the 2003 translator window.

General Broadcast Issues

There are numerous issues before the FCC that affect both radio and television broadcasters, some of which have been pending for many years, ripe for resolution, while others are raised in proceedings that are just beginning.  These include:

Multiple Ownership Rules Review:  Last year, the FCC issued its Notice of Inquiry to start its Quadrennial Review of the FCC's ownership rules.  Broadcasters hope that the FCC looks at the relaxation of small market duopoly rules for television and the sub-caps (limiting the number of AM and FM stations that one party can own) for radio, while some public interest groups are seeking tighter rules on ownership, including potentially cracking down on shared service agreements in television.  While the FCC had hoped to have this proceeding close to resolution by this point, the Commission has yet to even issue a Notice of Proposed Rulemaking setting out specific proposals, as certain academic studies on which the FCC planned to rely in making conclusions about the media marketplace, have been delayed.  Delay in resolving ownership issues should  really not be a surprise, as the appeals of the 2003 FCC decision revising the ownership rules, and of the FCC's decision in 2007 slightly relaxing the broadcast-newspaper cross-ownership rules, are still pending.  Look for more action in this proceeding, though probably no decision, this year.

Localism Rules and the Future of Media:  FCC's proposals to impose specific rules on how broadcasters serve the public interest, advanced in its "localism proceeding," are over 5 years old.  The rules that it adopted for television stations mandating on-line public files and detailed reporting on the quantity of news, public affairs, local programming, civic programming , election programming, independently produced programming and many other categories of programing, were adopted over 3 years ago, but have never become effective.  Some had thought that the FCC might be spurred to final action on some of these proposals after its special task force on the Future of Media issued its report as to how media should best serve the needs and interests of residents of their communities.  That report was supposed to have been issued by the end of 2010.  Obviously, that target was not met, so the consideration of all the localism issues seem to be stalled.  But don't be surprised to see that report in the first part of this year, spurring more FCC discussion about these issues - though probably in the form of further comments on the meaning of the report and the impact of its findings on these pending proceedings. 

EEO Rules:  The FCC recently issued some fines for EEO violations by broadcasters, but there are fundamental issues about the FCC's policies that have not been addressed in the 7 years since these rules were first adopted.  Proposals to extend the rules to part time employees, and to require the filing of FCC Form 395 (the form that classifies all employees by race and gender), are still pending.  Also pending are proposals sought in requests for reconsideration of the adoption of the EEO rules that would make the EEO rules comport with today's reality - such as the proposals to allow Internet-based EEO recruiting.  More recently, minority organizations suggested that the enforcement of the rules be suspended until they could be made tougher, as these organizations did not believe that the rules were sufficiently stringent to encourage diversity in the broadcast workforce.  Maybe this will be the year that some of these outstanding issues are finally resolved.

Political Rules:  As more and more money makes its way into the broadcast marketplace for political advertising following the Supreme Court's Citizens United decision, some have suggested that a comprehensive review of the FCC's political rules is in order.  These rules were last reviewed almost 20 years ago, and since then, there have been major campaign reform acts (e.g. the McCain-Feingold campaign reform act or BCRA), and significant Supreme Court decisions repealing portions of that Act.  Sales practices at broadcast stations have also changed, and the FCC has a long-outstanding proceeding on how Internet-based ad sales of remnant broadcast advertising inventory affect lowest unit rates.  With this being an off year before what will no doubt be a huge political year in 2012, if the FCC is going to review the political rules, this would be the time that it should be done.

--------------------------------------------------------------------

Many other issues may be decided through Court actions.  We just saw a ruling on indecency issues this week, and the appeals on that subject may well bring the issue back to the Supreme Court.  So expect more thrashing about on indecency this year, as a final court decision will likely be some ways down the road. 

While not really DC issues, copyright proceedings to determine ASCAP and BMI rates for both radio and TV could also be important.  Renewing old agreements or, particularly for radio, the potential reduction of obligations for music royalties to these organizations, are likely to be the subject of litigation that will take place this year.  Noncommercial broadcasters may also have to asses these issues, as the Copyright Royalty Board has just issued a notice commencing a proceeding to decide the royalties paid ASCAP, BMI and SESAC by noncommercial broadcasters for the next 5 years.

With their online activities becoming more and more important to broadcasters, actions that could affect advertising and on-line programming become ever more important.  One of the major areas likely to be considered this year that could affect online businesses is in the area of privacy regulation.  Both the FTC and the Commerce Department recently issued proposals for privacy regulation (see summaries of these reports from our firm's Broadband Law Advisor Blog, here and here), and Congress has been considering this area as well.  Look for more action here, and assess its potential impact on Internet advertising, recommendation software and other business practices. 

These are but some of the legal and regulatory issues that will be facing broadcasters in the upcoming year.  Each year, we make these predictions, and there are always numerous other issues arise that we did not anticipate.  So watch the trade press and the pages of this blog to see what trouble Washington can make for broadcasters as this year progresses.

• No change in the interference protections given to TV broadcasters.  Some had suggested the use of various alternative propagation methods to be used instead of the standard FCC method of predicting the protected contours of television stations.  The FCC rejected these proposals, finding that alternatives would not be more accurate in predicting potential interference.  One minor correction including in the database that will be used by wireless devices to protect stations from interference will be included - information on a television station's antenna beam tilt.
• No change in the protection of LPTV station protected contours.  LPTV advocates had suggested that greater protection was required for LPTV stations that were still operating in an analog mode.  This was rejected by the Commission, given the impending digital transition for LPTV (see our summary of the LPTV digital transition, here)
• Greater protection was afforded to cable headends, TV translator receive sites, and the receive locations for Satellite television providers (like DISH and DIRECTV) and other Multichannel Video Providers (MVPDs), so that existing television reception, no matter how it is received will be protected.  The current rules provide that such sites within 80 km from the edge of a television station's protected contour can register in the database to be used by white spaces devices to determine where they can operate.  The Commission recognized that sites beyond that 80 km distance may also need protection.  Such sites can petition the FCC for waiver of the 80 km distance within 90 days of the effective date of this order, and the FCC will seek comment on whether or not to accord the site protection.  New sites need to register within 90 days of being put into service. 

Some of the other issues addressed by the Commission, including a big change in how these devices will operate to prevent interference, are summarized below.

The Commission also rejected requests to increase the permissible power of these devices and the height from which fixed white spaces devices can operate, and for the operation on channels adjacent to television stations, so as to limit potential interference.  Similarly, requests for more protection for "direct pickup devices" (e.g. the connection between a cable box and a television set that uses a television channel to transmit information from one device to another) were rejected, as the Commission found that manufacturers of such devices could provide more shielding for their connections or otherwise engineer around the issues that might be presented by white space operations.  

On the wireless microphone issue, the FCC decided to set aside certain channels in each market to be dedicated to their use, to establish a specific set of frequencies in each location that can be entered into the database.  Provisions for temporary operations outside of those set-aside frequencies were also established so that accommodations could be made for increased use of such microphones when employed for some big event (e.g. a political convention or major sporting event). 

As is clear from the discussion above, the protection of all current users of these frequencies will rely on the establishment of an accurate and up-to-date database that can be accessed by all of the white spaces devices that may be developed.   The Commission reaffirmed rules that allow for the selection of multiple database operators, and required that their information as to FCC licensees, and other information required by FCC rules, be publicly available so that it can be reviewed for accuracy.  Issues as to fees to be charged to wireless operators by the database operators were left to the discretion of the operator.  Certain other technical rules were adopted.  Of course, before any of these operations can be implemented, the database operators must be selected and approved by the FCC's Office of Engineering and Technology  (see our post here on the FCC's RFP seeking applications for database managers).  The FCC delegated the Chief of that office to oversee the operation of these databases once they are put into use.

When will these devices be operational?  At this point, given the need to establish the databases, and to engineer devices to work with the databases that are established, it is safe to say that the operation will not occur overnight.  When the Commission first approved the concept of white spaces devices, many had predicted operations at points that have long come and gone .  As with everything else in the technology world, when it will happen, and the impact that the rule changes will have in the real world, will only be apparent at some point in the future.  We will all see how this new service develops, and its actual impact on the existing users of these channels but we won't see it tomorrow. 

In its Request for Proposal, the FCC has asked that proposed Database Managers provide extensive information by the January 4, 2010 filing deadline.  Information requested includes the following:

1. The entity must demonstrate that it possesses sufficient technical expertise to administer a TV band database. It must demonstrate that it has a viable business plan to operate a database for the five-year term the rules. To the extent that the proponent will rely on fees from registrations or queries, the proposal should describe the fee collection process.

2. The entity must describe in detail the scope of the database functions that it intends to perform, such as managing a data repository, performing calculations to determine available channels, and/or registering fixed unlicensed devices and licensed services not listed in the Commission’s databases, or how it will have functions performed in a secure and reliable manner by another entity. The entity must also describe how data will be synchronized between multiple databases if multiple databases are authorized and how quickly this synchronization of data will be accomplished.

3. The entity must provide diagrams showing the architecture of the database system and a detailed description of how each function operates and how each function interacts with the other functions.

4. If the entity will not be performing all database functions, it must provide information on the entities operating other functions and the business relationship between itself and these other entities. In particular, it must address how the Commission can ensure that all of the requirements for TV band database administrators in the rules are satisfied when database functions are divided among multiple entities, including a description of how data will be transferred among these various related entities and other databases if multiple databases are authorized and the expected schedule of such data transfers (e.g. real-time, once an hour, etc.)

5.  The entity must describe the methods that will be used by TV band devices to communicate with the database and the procedures, if any, that it plans to use to verify that a device can properly communicate with the database. It must include a description of the security methods that will be used to ensure that unauthorized parties can not access or alter the database or otherwise corrupt the operation of the database system in performing its intended functions. In addition, the entity should describe whether and how security methods will be used to verify that Mode I personal/portable devices that rely on another device for their geographic location information have received equipment authorization, interfaces, protocols) that will be used by TV band devices to communicate with the database and the procedures, if any, that it plans to use to verify that a device can properly communicate with the database. It must include a description of the security methods that will be used to ensure that unauthorized parties can not access or alter the database or otherwise corrupt the operation of the database system in performing its intended functions. In addition, the entity should describe whether and how security methods will be used to verify that Mode I personal/portable devices that rely on another device for their geographic location information have received equipment authorization.

The proposals to be the Database Manager are sure to be scrutinized by broadcasters and other users of the television spectrum to ensure that whoever assumes this important position provides reliable service that allows the wireless White Spaces devices to identify and protect the incumbent users.  The Commission has allowed interested parties to comment on the filings.  Comments are due on February 3, and Replies on February 18.  For television operators, this is an important process to be watched closely.