FCC Clarifies Auction Pricing, EOBC Disputes It

WASHINGTON—Organizers of the 2016 TV spectrum incentive auction said a pricing discrepancy in official documents represented a floor and a potential goal, not a vacillation. In October, the Federal Communications Commission’s auction team released the Greenhill Report, which predicted licenses could bring as much as $1.50 MHz/pop—a measure of how many people are covered by 1 MHz of spectrum. Two months later, the figure proffered in an official Public Notice was $1.25 MHz/pop.

The Greenhill numbers were a model to used to come up with an estimated high-end payout, an FCC official told TV Technology. The $1.25 is the minimum needed, under FCC rules, to declare that a particular stage of the auction closed.

The commission was called out on the difference by Wells Fargo Senior Analyst Marci Ryvicker, who said the discrepancy “sort of confirms broadcast distrust of the FCC…. We imagine there is going to be a lot of questions on that $1.25, given Greenhill—$1.50 MHz/pop—and the AWS-3 auction—$2-plus MHz/pop.”

The AWS-3 auction refers to the auction of 65 MHz of Advanced Wireless Spectrum in the 1.7 and 2.1 GHz range that is now under way. The AWS-3 spectrum has so far raised more than $44 billion, nearly three times what was expected. For this reason among others, an organization representing broadcasters looking to sell their spectrum says the FCC’s pricing method for the TV spectrum auction is skewed.

The commission is proposing to set opening bid prices based on a TV station’s interference-free population covered, and how much it would impede the commission’s ability to repack other TV stations. The idea is to offer a higher opening price to stations likely to interfere with others.

The Expanding Opportunities for Broadcasters Coalition, led by Preston Padden, said it would have the opposite effect.

“There is no evidence on the record that a station’s interference-free [populations] have anything to do with its ‘impact on the repacking process,” the Padden said in an EOBC ex parte filing with the commission. “In many cases, the use of [population scoring] prioritizes the wrong stations and will lead the commission to pay more money for a station with a smaller… ‘impact on the repacking process.’”

The Dec. 4 filing illustrates the point using KAMU-TV, a PBS member station in College Station, Texas, owned by Texas A&M University. KAMU covers an interference-free population of just 330,386, but its signal contour overlaps with stations in Dallas, Houston, San Antonio and Austin. Using the FCC method, this station would score low based on population, but nonetheless impede repacking in the four larger adjacent markets, the EOBC said.

The group said it had identified around “30,000 instances, including more than 1,400 using very conservative assumptions, where a station covering fewer interference‐free [populations] has a greater impact on the repacking process… than another station with which it is mutually exclusive.”

The pricing methodology will remain a work in progress until the commission issues its final order on the auction rules. Comments on the Public Notice proposing the $1.25 benchmark are due Jan. 30, 2015, with replies due Feb. 27, 2015.

The FCC official further clarified that the $1.25 figure is a proposed average for prices paid in the top 40 Partial Economic Areas, or PEAs, ranked according to how much spectrum sold for in those markets in prior auctions. If and when the $1.25 average is cleared across the top 40, the auction round could be closed, though it doesn’t have to be. That will simply be the point when the FCC knows it’s in the final stage of a round.

The auction system will recognize when $1.25 comes up, and all PEAs will come up simultaneously, he said.

The Public Notice also proposes clearing 84 MHz of TV spectrum. If 84 MHz isn’t reached, the auction system will move to the next stage at a lower clearing rate, the official said. The initial clearing target ultimately be determined how many broadcasters participate. The commission passed rules in May to pursue a near-nationwide” clearing target.

The commission’s auction team will look at who registers in the first stage of the auction and set the initial clearing target, the official said. They will know before the auction starts what the clearing target is, and what stations are likely to end up stranded in the 600 MHz wireless band.

There will be a lid on the number of stations placed in the 600 MHz band, which will impair that spectrum for use by wireless providers. The commission set a 20 percent population cap on how much spectrum it will allow to be impaired. The commission currently is running simulations on which stations may end up in the 600 MHz band. The results will be presented in the auction comments, Docket No. 12-268.

Oct. 2, 2014,
$45 Billion Auction Projection Rests on AT&T’s DirecTV Acquisition Pledge
The $45 billion being proffered as potential incentive auction proceeds was derived from AT&T’s commitment to spend $9 billion on 20 MHz of TV spectrum if its bid to buy DirecTV goes through.

Oct. 1, 2014, “FCC Interference Pricing Projects $45 Billion in Proceeds
A full-power TV station in Los Angeles could get as much as $570 million for its spectrum in the federal incentive auction. One in New York, the No. 1 market, could get as much as $490 million. That’s according to a model created by the FCC in conjunction with Greenhill & Co. LLC.