The FCC’s planned incentive auction, by which the Commission hopes to pay broadcasters to surrender some of their TV licenses so that these stations’ spectrum can be repurposed for wireless broadband uses, is almost impossible to define in a simple blog post. The FCC issued its Order on the Incentive Auction process several months ago and, despite that order being over 300 pages long, many issues remain unresolved. Last month came the announcement that the National Association of Broadcasters had filed a court challenge to that order (on the first business day after the order was published in the Federal Register, meaning that there is still two weeks in which additional challenges may be filed in Court). While the NAB is seemingly limiting its current challenge to a few issues (according to a Blog post on the NAB website), there still are many other issues to which broadcasters have no final answers as there are further proceedings yet to come that will help to decide exactly how the process will play out for TV stations in the coming years. What did the NAB challenge, and what other issues for broadcasters are left to be resolved?
So far, the NAB has only needed to file a notice with the court stating that it is challenging the order. That is a very limited pleading that gives only the most cursory outline of the NAB’s grounds for its objections to the rules. Details of all of the grounds for the objections to the ruling do not need to be included in the appeal notice. Instead, the details will be set out in the NAB’s brief in the case, which will likely not be due for several months. In the interim, there have been some pleadings asking for expedited processing of the appeal, supported by both the NAB and the FCC, so as to not delay the auction (or to avoid having the auction take place before the appeal is resolved). From these pleadings, and from an NAB press release and the Blog post referenced above, the principal reasons for the NAB’s challenge can be discerned. Essentially, there appear to be two issues that are raised.
First and apparently most important, the NAB expressed concern about the FCC’s adoption of a new standard for predicting interference to a television station – a standard never before used, and one adopted only for purposes of the incentive auction. The NAB fears that the new standard would underestimate the interference that stations cause to each other so that TV stations that are repacked into what is left of the TV band after the incentive auction might, in actuality, have a smaller effective coverage area than they currently serve. While the FCC contended in its Order that the new system is simply a more accurate prediction methodology that updates the existing interference prediction methodology (the use of which was required by the statute enabling the incentive auction, a statute we summarized here), the NAB provided declarations in connection with its request for expedited consideration of the appeal that suggested that, at least in some cases, the methodology could drastically reduce the coverage of certain stations should they be forced to change channels after the incentive auction.
The NAB also indicated that they had concerns about the reimbursement of expenses to be made to broadcasters who were forced to change channels after the auction in the repacking of the broadcast spectrum that is to take place. The exact concerns of the NAB have not been specified. In the FCC’s order, how stations would be reimbursed for their expenses in changing channels – but exactly what the costs that would be reimbursed would be will be developed on a case-by-case basis, though the Media Bureau staff is supposed to provide further guidance in the near future. The FCC plans to request that a station provide an estimate of its repacking costs when the FCC figures out the channel on which it will ultimately operate. After that estimate is received, the broadcaster will receive 80% of its estimated expenses (90% for noncommercial stations) with the remainder to be paid within three years from the incentive auction, after the station has finished its relocation to its new position on the TV band.
While these issues are being debated, there are many other issues that are not yet final. At a recent FCC update I did for the Michigan Association of Broadcasters at their summer convention, a number of questions and concerns were raised by TV broadcasters – concerns that I heard many times this summer at other broadcasters meetings around the country. The million dollar question (or perhaps billion dollar question would be more accurate) – and the one that everyone involved with the auction is wondering – is whether or not the auction will be successful. As we wrote here when Congress authorized the auction, the money received from the auction must be sufficient to pay the broadcasters who are giving up their channels, and to also cover the costs of the relocation of the stations who are not giving up their channels into what would be a reduced television band and the costs of the auction itself, plus some money is also supposed to be allocated to public safety radio. Will there be enough channels surrendered to get enough money from wireless users to pay these costs? That is what everyone wants to know. Many smart people are working to make that happen, but there is no certainty until we see which stations decide to put up their channels for auction.
And maybe no one will know for sure until there is some idea as to how much broadcasters will be paid to surrender their channels. The FCC Chairman had suggested in a Blog post on the FCC website that by the end of the summer (which is now upon us) that there would begin a series of discussions with television stations about what they can expect from the broadcast auction. Once these discussions start taking place, there will no doubt be much more certainty about the likely outcome of the auction process.
But there are other issues to be resolved as well. Stations in Michigan, as well as those in every other state that borders Canada and Mexico, are concerned about the reaction of these countries to the incentive auction, and whether these countries will be cooperative so that there will be the spectrum necessary to repack the remaining television stations into the remaining television band.
LPTV stations, and operators of TV translators, are also concerned about how they will be treated after the auction. The Commission has promised to review that question in a separate rulemaking at some point before the auction. As we wrote here, there is also a proposal to delay the expiration of LPTV construction permits until after the auction, as many permit holders are concerned about spending any money at the current time until their post-auction status is clearer. If there is no spectrum in which they can operate, and if the auction takes place next year as originally proposed, spending money now when there may not be room for the station in a short time makes no sense.
With the questions of what the repacking will look like, as raised in the NAB appeal, there are obviously still concerns about the auction in the TV community. The FCC has begun some outreach during the summer to talk about these issues with TV broadcasters, but will have to spend considerable additional time as the auction processes and procedures become clearer in the coming months. Watch as the appeals of the auction proceed, and the Commission takes further steps to spell out its auction processes. If the auction is going to proceed on anything like the timetable that was proposed, much will need to be done in a relatively short time frame.