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'Economic decision-making of broadcasters' will determine how much spectrum will be recovered

Gary Epstein, a senior adviser and co-leader of the FCC’s incentive auction task force, discussed the incentive auctions last week at the Media Institute in Washington. He said the amount of spectrum the government gains from the auctions will be up to broadcasters when they make their decision whether to participate after 2013.

The FCC’s job, Epstein said, is to make the auction understandable and clear for broadcasters to make a decision. After that, he said, it will be the “economic decision-making of broadcasters” that will determine how much spectrum will be recovered.

The incentive auctions, first proposed by the FCC two years ago in its National Broadband Plan, was originally expected to get up to 120MHz of spectrum. However, Epstein told the gathering that he was “not in the business of estimating” how much spectrum the auctions would yield.

“It’s a market-based decision,” he said. “Our real job is to make the reverse auction understandable and make it easier for folks to participate.”

In a question and answer session after his speech, Epstein noted there would be “tremendous benefits to broadcasters” that participate in the auctions. He said those who agree to share channels would get money to invest in new programming.

The rules concerning the auctions will not be finalized until a vote on the final rules projected for mid-2013. As to whether a 2014 target for completing the auctions was realistic, Epstein called them “aggressive but achievable” deadlines. However, he said, the timing for some issues will depend on the comments the FCC gets during the proceedings.

In his talk, Epstein addressed the criticisms of the 2014 auction target given the admittedly complex auction process with plenty of moving pieces. But, he said, there had been similar criticisms about all FCC auctions in the past. And, in the 80 or so auctions already held, he said the process has proven very successful — earning a total of more than $50 billion for the government.

“The incentive auction of broadcast television spectrum will have three major pieces: (1) a ‘reverse auction’ in which broadcast television licensees submit bids to voluntarily relinquish spectrum usage rights in exchange for payments; (2) a reorganization or ‘repacking’ of the broadcast television bands in order to free up a portion of the UHF band for other uses; and (3) a ‘forward auction’ of initial licenses for flexible use of the newly available spectrum,” Epstein said.

He continued, “Each of the three pieces presents distinct policy, auction design, implementation and other issues, and the statute in a number of cases imposes specific requirements for each piece. At the same time, all three pieces are interdependent: The amount of spectrum available in the forward auction will depend on reverse auction bids and repacking, winning reverse auction bidders will be paid from the forward auction proceeds, and our repacking methodology will help to determine which reverse auction bids we accept and what channels we assign the broadcast stations that remain on the air. For the incentive auction to succeed, all three pieces must work together, which requires a careful balancing of all interests.”

No estimate was provided as to how long after the auctions stations not giving up spectrum or sharing spectrum would be repacked. Epstein did note that the FCC has three years to pay broadcasters for making that move. But the commission has proposed giving broadcasters the option of either taking an upfront estimate of those costs or waiting to submit the real costs.

Epstein was re-hired to the FCC last April. He joined Ruth Milkman in managing the Task Force and the FCC’s implementation of the auctions.

He served as Common Carrier Bureau Chief under Chairman Mark Fowler, and as the first head of the Digital Television (DTV) Transition efforts under Acting Chairman Michael Copps. From 1993 to 1995, Epstein served as the Chairman of the FCC’s Industry Advisory Committee for the 1995 World Radiocommunication Conference.