HARRY MARTIN /
Originally featured on BroadcastEngineering.com
The wireless industry’s raid on spectrum is about to materialize.
In February, CTIA-the Wireless Association (CTIA) and the Consumer Electronics Association (CEA) submitted a white paper to the FCC purporting to demonstrate that voluntary or incentive auctions of 120MHz of broadcast television's spectrum will produce more than $33 billion in net proceeds for the U.S. Treasury. According to the accompanying press release, such an auction would “fulfill the vision of the FCC's National Broadband Plan.” Key findings from the paper include:
The licenses auctioned in the broadcast TV band would produce net auction revenues of approximately $33 billion or much higher if valuations are consistent with recent auctions for similar spectrum.
Only a small percentage of the nation's broadcast stations need participate in the auction in order to address the nation's broadband spectrum shortage. Indeed, in the vast majority of broadcast markets, an incentive auction will still be successful even if no broadcast stations participate. In a limited number of markets, the number of licensed broadcasters will exceed the channels that will remain available for TV use following a reallocation. As a result, a number of potential voluntary avenues to freeing additional channels have been proposed that rely on commercial incentives, including “paying” broadcasters to exit the market through an incentive-based auction mechanism, paying broadcasters to share channels, paying broadcasters to adopt a cellularized architecture and paying broadcasters to relocate to low VHF spectrum.
The estimated enterprise value of those broadcast TV licensees that might voluntarily surrender their channels ranges from $1.2 billion to $2.3 billion assuming participating stations surrender their licenses rather than accept lower-cost options such as channel sharing or cellularization.
Remaining broadcast facilities operating on TV channels 31-51 would need to be relocated or “repacked” to the new core channels at TV channels 7-30. Based on NTIA data, CTIA and CEA estimate repacking would cost approximately $565 million.
After deducting the costs of voluntary exits and repacking, the estimated net proceeds from auction of 120MHz of broadcast TV spectrum are $33 billion. In light of spectrum valuations at recent FCC auctions, this number may be much higher. Furthermore, while incumbent broadcasters may require a price over their market value to exit, the net revenues from a TV spectrum auction would still be considerable.
CTIA and CEA contend that the wireless industry needs more spectrum to remain the world's wireless leader. In the joint press release, CEA's Gary Shapiro said, “The spectrum crisis is real and must be addressed to ensure that our innovation-driven economy can recover and thrive. Additional spectrum for licensed and unlicensed wireless broadband is crucial to our national competitiveness. A voluntary incentive auction will create jobs, enhance innovation, provide the government resources to reduce the national debt, and even give broadcasters a windfall of billions of dollars for spectrum they don't own. CEA and its members look forward to working closely with the FCC to ensure competitive broadband and innovative new wireless services are available to all Americans.”
TV broadcasters beware: The wireless industry's raid on spectrum as described above is about to materialize. Congress is actively considering legislation that would authorize incentive or voluntary FCC auctions in which television station owners could share in auction proceeds if they agree to give up all or part of their spectrum for wireless use. At least one version of the legislation includes value-based spectrum fees that would have the effect of forcing participation by financially-weak stations.
Harry C. Martin is a member of Fletcher, Heald and Hildreth, PLC.
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