Last month, FCC Commissioner Brendan Carr suggested a new incentive auction of TV spectrum is coming at the annual gathering of ATSC members in Washington, D.C..

I’m not surprised. In 2019 at a breakfast presentation during the NAB Show, then-FCC Commissioner Michael O’Reilly predicted another voluntary incentive auction would be on the way at some indefinite point in the future. 

While no plans yet are in place for Incentive Auction 2.0, it’s not too hard to see how one will be sold to the industry. First, an auction is a second chance at quick cash for broadcasters not chosen last time.  Second, the 3.0 lighthouse strategy has demonstrated NextGen TV’s bandwidth efficiency. So, no harm, no foul taking more spectrum, right? Third, many repacked stations will benefit from a new RF infrastructure thanks to auction proceeds.

However, taking this without a fight seems to be snatching defeat from the jaws of victory.

Fewer TV channels mean less bandwidth for datacasting, a business diversification strategy sure to take on greater importance as cord-cutting continues, threatening the foundation upon which retrans revenue rests.

Fewer post-buildout 3.0 sticks also mean fewer to provide the backbone of a future GPS alternative (see Section 4, Subsection h). While a NextGen TV-based Broadcast Positioning System (BPS) offers the government a fast-to-deploy, inexpensive backup, the Feds haven’t even yet decided to evaluate it. Shouldn’t they, before another auction takes place?

For broadcasters looking to cash out and claim auction proceeds, consider this: Incentive Auction 1.0 garnered $10.05 billion for exiting TV broadcasters, but BIA Advisory Services has estimated 3.0 datacasting could generate an additional $10.7 billion in yearly revenue by 2030. Even if that’s high, how can a one-time auction proceeds payment possibly exceed recurring 3.0 datacasting revenue?

New Bidder Requirements
Before the industry accepts another incentive auction, it should lobby Congress to legislate requirements for any bidder. 

First, mandate they all offload mass distribution video traffic to the most bandwidth-efficient wireless service available. If that’s 3.0, so be it. If it’s a 5G Broadcast network, fine. A mix? That’s good, too. But one thing it won’t be is a unicast network. 

Video accounts for a huge portion of wireless traffic. One-to-many is only a part of the total, so there’s plenty of other video traffic for wireless networks. Besides, the FCC wants to ensure the most efficient use of limited spectrum resources, right? 

Second, require bidders to make their cell networks at least as resilient to disasters as TV RF infrastructure. Mandate generators and fuel supplies at each cell tower as an auction condition. After all, how is it in the national interest to promote a less resilient wireless network at the expense of one that’s more resilient? 

Third, bidders should pony up big bucks (tens to hundreds of millions) for a Broadcast RF Vendor Compensation Fund. Payments should fund any TV broadcast chain hardware or software vendor suffering declining business resulting from the FCC closing its Construction Permit window. Remember, the industry lost some—and nearly lost other RF vendors—the last time around. Many other auction requirements surely exist, but at least this is a start.

Fade to Black
The propagation characteristics of high-band 5G may have run headlong into the economic reality of deploying antennas on every other light pole across America—making UHF spectrum all the more desirable.

As that realization has become apparent, broadcasters have been deploying their own new wireless system. It carries nearly as much data as can be carried on a noisy channel and is designed to use new, ever-more efficient data compression schemes as they come along.

The unintended consequence of this efficiency is that competitors will always be able to ask for more UHF spectrum because broadcasters will continue to do more with less for the foreseeable future.

Now is the time to address this head on. Lobby Congress, protect the UHF band from further encroachment, create new competition for wireless networks and earn new revenue to help pay the cost of serving the public with free over-the-air TV. If not now, when? Incentive Auction 3.0?

As 2017 gets underway and the spectrum auctions continue into the fourth round (which will quite possibly conclude by the time you read this), the assessment so far from most corners of the industry is that the results are underwhelming at least and disastrous at worst. The federal government will not reap the benefits of an anticipated revenue windfall (it may not even be enough to cover the costs); and many broadcasters feel duped that the so-called “spectrum crisis” alarm calls from the wireless industry over the past decade were way overblown. Since we’re still in the “quiet period,” we don’t exactly know how these results will affect the upcoming channel repack, but it’s safe to say that there are far fewer broadcasters that will benefit from this auction than anticipated even 12 months ago.

Scott Flick, a partner with the Washington law firm Pillsbury Winthrop Shaw Pittman, has been involved with the spectrum auction extensively; I recently spoke with him about his thoughts regarding the process so far.

“As an exercise in reallocating spectrum, it hasn’t been particularly impressive by anyone’s measure,” Flick said. “While I do think it has revealed important lessons that could make a future auction more productive, the experience has been sufficiently disappointing that I suspect it will be a long time before anyone wants to repeat this experiment.”

Flick acknowledged the complexity of the process and praised the FCC for attempting it in the first place. “The auction has been handled as a very serious endeavor on the part of the FCC, and the amount of brainpower the FCC has focused on it has been extraordinary,” he said. “For a first time at something that has never been done before, it is immensely impressive.” He added, “If there was one mistake that could have been avoided, it may have been electing to proceed with such a complex undertaking in the first place, knowing that there was only one chance to make it successful. In the end, it was the one factor that the FCC couldn’t control—the lack of demand for spectrum—that has been damaging to the prospects for a successful auction.”

Planning for the auctions began at the beginning of this decade; and the time lapse between their origins and their commencement last March offers a classic example of how technology timelines can trump Washington timelines nearly every time. Seven years is a lifetime in the technology industry, and some industry pundits believe that the increasing availability of unlicensed spectrum and advances in wireless technologies such as the emerging 5G standard over that time period dampened demand for broadcasters’ “beachfront property.”

Flick thinks the problem may be simpler.

“The real answer may be that it is always easy for someone to say they desperately need a particular asset, but then lose interest when they actually have to pay to get it,” he said. “The auction is making it clear that actual demand [what bidders are willing to pay for] was overstated.”

With a change in administration, some broadcasters are hopeful that a Republican FCC will provide more support for the industry’s transition in the repack. Commissioners Michael O’Rielly and Ajit Pai have certainly been more receptive to protecting and advancing free over-the-air broadcasting than their Democratic colleagues as the industry prepares to move to the new ATSC 3.0 standard. But before that happens, the auctions have to proceed to their formal conclusion.

“At this point, the auction rules are largely set in stone, and trying to change them midstream would only make matters more confusing for all involved,” Flick said. “The FCC is going to have to ride this horse until it either reaches a livable (albeit not ideal) destination, or the horse collapses underneath it. The change in control at the FCC is more likely to have an impact on the repacking process, where concerns have been raised about preserving broadcast service to the public while overcoming many obstacles, both known and unknown, that such a complex endeavor inevitably involves. That includes not just the technical and construction issues but addressing the mechanics and substance of how the costs of the repacking are handled as well.”

WASHINGTON—Next Tuesday, Dec. 13, will see the start of stage IV of the Broadcast Television Spectrum Incentive Auction, with a new clearing target of 84 MHz. The commission has also announced a handful of rule changes to the bidding process from previous rounds.

After stage III, with 108 MHz clearing target, closed quickly on Dec. 5, the FCC has once again lowered it to find something broadcasters and wireless companies can agree on. In addition, after the reverse auction closes for stage IV, the commission has announced that the spectrum will translate to a uniform 70 MHz supply of unimpaired spectrum for forward auction bidders to vie for in all 416 partial economic areas, with stations not required to be located in the wireless band or duplex gap or guard bands, which is reportedly supposed to reduce the chance for post-auction interference among services.

A number of rule changes have also been announced involving the bidding process. Rounds at the beginning of the round will now be one hour instead of two, and starting on Dec. 19, three rounds will take place a day rather than two.

The clock price has also been adjusted, now coming in at $900. This means that at least one station that has never bid will now have to start accepting lower prices. This is a result of the FCC reducing the amount of spectrum it is clearing and thus has more space in which to repack broadcasters.

The FCC is required to keep the auction going until the forward auction bidders at least match the broadcasters’ asking price. At the start of the auction it was $86 billion, it then dropped to $55 billion, and most recently fell to $40 billion.

For more, check out TV Technology's spectrum auction silo.