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Divided FCC Passes Incentive Auction Order

WASHINGTON—The Federal Communications Commission passed an incentive auction order codifying the use of contested technology and giving broadcasters 39 months to move. It also establishes a 5 MHz band plan, assumes a set-aside channel in each market for unlicensed devices, and allows low-power TV stations and translators to continue operating in reassigned channels until the new airlords take over.

The order itself was unavailable at press time, but discussion during the commission’s open meeting on Thursday suggested little new information. One item on the staff summary issued after the meeting was notable:

“The rules will grandfather existing broadcast stations that would otherwise no longer comply with media ownership rules as a result of the auction,” it stated.

The summary also gave cursory mention to an inferred set-aside channel for unlicensed devices and wireless mics:

The order “designates one naturally occurring white space channel in the remaining TV band in each area for use by unlicensed devices as well as wireless microphones.” 

The legal meaning of “naturally occurring” was not provided, nor were details on how the $1.75 billion repacking funds will be allocated. Congress designated $1.75 billion in auction proceeds to help cover the relocation costs of displaced broadcasters. During the staff presentation at the meeting, it was suggested that fund may be available for reasonable expenses before they are incurred.

The LPTV/translator easement allowing extended operation was new. LPTVs and translators are not allowed to participate in the auction and could be squeezed out in the repack. Commission Mignon Clyburn, an LPTV champion, said the FCC will undertake a separate rulemaking on potential auction-induced LPTV extinction.

The R&O was referred to by staff as a “framework only,” with details to come. This did not set well with Commissioner Michael O’Reilly.

“Too many pieces are punted to a later date,” he said.

O’Reilly and his fellow Republican, Ajit Pai, voted “no” on the Report & Order after each flamed it for the record. Both said it delegated too much responsibility away from the commissioners. Democrats Jessica Rosenworcel and Clyburn gave Chairman Tom Wheeler the votes to pass it after each of them deconstructed it.

Rosenworcel said it was short on information for broadcasters. Stations should be able to know what their options are without having to hire expensive consultants, she said. Every meeting she and her staff have had with broadcasters “yields the same refrain,” she said. “‘We need a number.’”

“Until the agency can provide broadcasters a better sense of what price their spectrum might yield, including tax consequences,” they lack information necessary to determine whether or not to participate, she said.

Rosenworcel also questioned the lack of guidance for property ownership between commercial and noncommercial broadcasters sharing facilities, and asked if there should be a sharing template.

Pai took the most umbrage. He said the R&O “forsakes simplicity for complexity in order to manipulate the market.” He said it wasn’t fair to taxpayers, safety officials, broadcasters and rural markets, offering his dissent just a few words into his statement.

He said the reverse auction design was unfair to broadcasters in that the FCC sets the price for each station via “scoring.”

“The commission should not impose a value on particular stations in a reverse auction. This should be market-based,” he said.

As for the forward auction, where wireless providers bid on spectrum paired in 5 MHz blocks, Pai said, “Let anyone bid on any block of spectrum and let the highest bidder win.”

Rather, the R&O limits bidders with more than one-third of the low-band spectrum in a given Partial Economic Area—the FCC’s artificial geographic parcel for each of the 5 MHz pairs. The use of PEAs is intended to give local providers an entrée into the bidding, while the big carriers can aggregate their winnings into a nationwide network if they so choose.

Pai said the R&O was unfair to taxpayers in that it would trigger a tax hike if the commission doesn’t raise the statute’s expected $27 billion in revenues, much of which has been spent.

Pai, who grew up in Western Kansas, said the R&O was unfair to non-participating broadcasters and rural Americans. He said the auction will require translators to relocate or shut down. The commission could have done more to mitigate the impact and allowed communities to preserve their own local services.

“As is too often the case, rural America could be left behind,” he said.

Pai also lobbed one for broadcast lobby with regard to the repack.

“I don’t believe the item stays true of Spectrum Act, including ‘all reasonable efforts’ to preserve coverage area,” he said. “From a policy perspective, I agree with commission’s decision in this regard—OET-69 changes seem for the better—but the courts could find them unlawful.”

The R&O adopts TVStudy as its methodology for repacking TV stations into fewer channels. TVStudy is an updated version of OET-69, which calculates interference based on a set of mathematical assumptions. TVStudy uses different inputs and therefore yields different results from OET-69. The National Association of Broadcasters ran trials with TVStudy that demonstrate less coverage for a majority of TV stations. (See “NAB: 1,978 Stations Lose Coverage With FCC Repack Software.”)

The NAB contends that TVStudy violates the 2012 Spectrum Auction Authority bill because OET-69 was in place when it passed, and the bill states that:

“The commission shall make all reasonable efforts to preserve, as of the enactment date of this act, the coverage area and population served of each broadcast television licensee.”

The NAB commended the FCC staff but registered their objection with the R&O:

"Simply put, a deeply-divided commission chose not to fulfill required obligations under the Spectrum Act. It adopted new coverage and interference software that has not yet worked, potentially jeopardizing hundreds of TV stations and millions of over-the-air television users.”

April 18, 2014:
“FCC Outlines Incentive Auction R&O on May Meeting Agenda
Broadcast TV reception will be preserved for the same viewers, rather than the same number of them, after next year’s spectrum incentive auction, FCC executives said Friday in a conference call.

Feb. 23, 2012:
Obama Signs Spectrum Auction Authority Bill
TV spectrum can officially go on the auction block.