Michael Grotticelli /
02.17.2011
Originally featured on BroadcastEngineering.com
Study predicts government will reap $33 billion from broadcast spectrum auction

There’s no way to verify the accuracy of numbers, but if you believe those promoting wireless consumer electronics, the government stands to gain more than $33 billion from the auction of the 120MHz band now used by broadcast TV stations.

The Wireless Association (CTIA) and the Consumer Electronics Association (CEA) have jointly submitted a white paper to the FCC explaining how they arrived at such a “deficit-offsetting revenue” number and how the surrender of the spectrum would help get President Barack Obama’s National Broadband Plan off the ground, so to speak.

The FCC has proposed freeing up spectrum by paying broadcasters to share channels, adopt a cellularized architecture or to relocate to the low-VHF spectrum.

“The spectrum crisis is real and must be addressed to ensure that our innovation-driven economy can recover and thrive,” said Gary Shapiro, president and CEO of the CEA. “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.”

Among the findings of the white paper, licenses auctioned in the broadcast TV band should be valued at approximately 98 cents per MHz-POP, bringing net auction revenues to approximately $33 billion. The paper also notes that revenue could be higher “if valuations are consistent with recent auctions for similar spectrum rights.” Also, only a small percentage of the nation’s broadcast stations are needed to participate in the auction 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,” the paper states.

The estimated enterprise value of those broadcast TV licensees that might voluntarily surrender their channels ranges from $1.2 billion to $2.3 billion. This assumes those stations that participate in the voluntary incentive auction 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 TV Channels 7-30. Based on National Telecommunications and Information Administration (NTIA) data, the CTIA and CEA estimate that repacking would cost approximately $565 million.

In addition, while incumbent broadcasters may require a price over their market value to exit, which is not considered in the analysis, the net revenues from a TV spectrum auction would still be considerable.

“With support from the U.N. and thanks to the efforts of President Obama, the FCC, the NTIA and numerous policymakers, it’s clear there’s a recognition that our industry needs more spectrum so we can remain the world’s wireless leader,” Steve Largent, president and CEO of the CTIA, said in a statement. “Our members are willing to spend billions to purchase unused or underutilized broadcast spectrum to fuel the ‘virtuous cycle’ of innovation and competition.”

Of course, the NAB took issue with the findings.

“It’s hard to take seriously an analysis of broadcast spectrum values done by parties with a vested interest in forcing scores of broadcasters out of business,” said Dennis Wharton, NAB executive vice president of communications, in a statement. “NAB does not oppose spectrum auctions that are truly voluntary, and we look forward to an informed dialogue in coming months on the enduring value of free and local television for all Americans."



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