On Friday, the FCC released a new report by the investment bankers advising them on the incentive auction, Greenhill and Company.  This report summarizes proposed auction procedures, but also sets out, on a market-by-market basis, the expected opening bids to be offered to TV broadcasters for the surrender of their spectrum so that the spectrum can be repurposed for wireless broadband use.  And these numbers are high – seemingly meant to attract broadcasters to consider possible participation in the auction process.  The opening numbers suggested by this report range from a high offer of $870 million in New York City, to a couple of million even in the smallest TV markets. 

While this report, and the table of expected opening offers that is part of that report, are in a format similar very to the Greenhill report that was released several months ago (about which we wrote here), those two reports actually represent two very different numbers.  The report released in the Fall set out prices that stations willing to surrender their frequencies might be expected to actually receive in an incentive auction.  The numbers in this report are merely the opening offers that will be made to stations to surrender their spectrum.  If these numbers attract more broadcasters willing to surrender their spectrum than the FCC needs to meet their spectrum-clearing targets (as they quite well may given the numbers being proposed), then the Commission will lower the offer in subsequent rounds of the auction, and the FCC will continue to lower the bids until they receive willing sellers of just the right amount of spectrum necessary to clear the FCC’s targets (which are yet to be set) for spectrum to be resold to wireless users.
Continue Reading FCC Releases Tentative Amounts for Opening Offers to TV Stations to Surrender their Spectrum in the Incentive Auction – and the Numbers Are High

The FCC adopted proposed auction procedures for its incentive auction at its meeting on Friday, and thus far has released a Fact Sheet on these procedures by which it plans to buy back spectrum from broadcasters and resell it to wireless companies for wireless broadband uses.  The tentative procedures, along with the recent “Greenhill Report” setting possible prices to be paid to television stations who are willing to surrender their channels for the FCC to resell to wireless companies (see our summary here), are setting the stage for a series of meetings with broadcasters to attempt to convince enough to participate in the auction to satisfy the FCC’s goals for the auction – goals that also became a bit clearer from Friday’s releases.  Further information on the auction procedures is expected soon in a more detailed Public Notice fleshing out the proposals outlined in the Fact Sheet so that comments can be filed by the end of January. 

The fact sheet is not the detailed notice of auction procedures that some broadcasters may be familiar with from participating in past broadcast auctions – that will apparently come soon in the Public Notice that it summarizes.  But it does provide an outline of proposed general principles that will be applied to the incentive auction.  Initially, it proposes that the FCC would set opening prices for each station – prices at which the FCC would offer to pay the licensee to give up its spectrum.  The prices would be set based on an analysis of two factors: (1) the impact that the station would have on the repacking of the broadcast spectrum after the auction because of the interference that it causes and (2) the population covered by the station.  If a station agrees to move to the VHF band instead of surrendering its licenses altogether, it would receive somewhere between a third and a half of the opening price if it accepts a high VHF channel, and between 67 and 80% of the opening price for a low VHF channel.  According to the fact sheet, the prices that will initially be offered to the broadcaster will be initially set high, and will be lowered as the auction progresses until the prices reach a point where there are just enough broadcasters willing to take the lowered offer to clear the amount of spectrum that the FCC needs to fill the demands of the wireless users.  There has also been introduced the concept of a “dynamic reserve price,” setting a limit on how much the FCC is willing to pay some stations for giving up their spectrum, which could conceivably result in the amount that they are offered being lowered even when it is known that they cannot be repacked into the amount of the spectrum that remains available in the smaller post-auction TV band.   How much spectrum must be cleared for the auction to go forward?
Continue Reading Putting Details to the Incentive Auction – FCC Asks for Comments on Fact Sheet on Auction Structure, and Prepares for Meetings with Broadcasters