This story originally appeared in TV Technology.
Regulators last week approved proposals to clear 84 MHz of TV spectrum, establish opening bid prices and develop procedures to close the 2016 incentive auction. In other words, they suggested rules to recommend for final adoption in a Public Notice approved in a 3–2 party-line vote.
“This is the considered opinion at this point in time on which we’re seeking your comment,” said Federal Communications Commission Chairman Tom Wheeler, emphasizing each word after protracted dissents from Republican commissioners Ajit Pai and Michael O’Rielly.
The PN calls for comment on reverse- and-forward-auction reserve bid pricing, clearing 84 MHz “near-nationwide” at a benchmark price of $1.25 per MHz/pop and dividing spectrum according to the predicted interference.
Opening bid prices in the reverse auction, which will determine how much broadcasters could get for their 6 MHz licenses, will be based in part on how much interference a station will create in the repacked TV band, and in part on what the commission decides it will be via “dynamic reserve pricing.” This would allow the commission it to tweak pricing based on the geographic and spectral location of a license, so it can offer “high opening prices to every broadcaster,” and let the auction determine final pricing, said Martha Stancill of the Wireless Bureau. (This was initially attributed to Margaret Wiener, chief of the Wireless Bureau. The author apologizes and regrets the error.)
Pai said he didn’t think so. The repack interference method could undermine license values if, for example, a small, interference-free station stands in the way of those in larger markets. He gave the example of a station in College Station, Texas, serving about 330,000 people. The station is within driving distance of Dallas, Houston, Austin and San Antonio, he said, and if it doesn’t give up its spectrum, “it will preclude certain stations in each of the large Texas markets from being repacked.”
He also said dynamic reserve pricing would devalue TV licenses.
“For certain television stations, the commission will continue to lower the price offered even when the station cannot feasibly be assigned a channel in its pre-auction band,” he said. “So essentially, the FCC will try to get away with paying some broadcasters a below-market price.”
When these orphaned stations drop out of the auction, they’ll end up on a channel where interference is more likely, creating more impaired spectrum in the auction, he said.
O’Rielly said dynamic reserve pricing could strand some TV stations in the duplex gap between wireless up- and downlink spectrum, or the guard bands between wireless and broadcast services.
Impaired spectrum refers to how much interference a frequency block is expected to have in the repack. The notice proposes two categories of impairment — zero to 15%, and 15 to 50%. Spectrum blocks above 50% impairment will not be offered for auction, Stancill said. Both impaired and unimpaired spectrum will be counted toward the 84 MHz goal, with a proposed limit of 20% impairment nationwide, based on market populations weighted according to the relative value of their spectrum in previous auctions.
The auction system will assess this impairment threshold after each round using an average price of $1.25 MHz/pop across 84 MHz. If bidding in high-demand markets does not reach $1.25 MHz/pop, the auction system will implement an extended round “to ascertain whether the incentive auction can conclude at that clearing target, or whether it can be moved to a new state with a lower clearing target,” Stancill said.
Extended round prices will be the same for all blocks in the same license category, she said. The notice proposes establishing a procedure to lower the clearing target if the 84 MHz at $1.25 goal isn’t met.
Finally, the PN proposes criteria for optimizing final TV channel assignments, including minimizing relocation costs and aggregate new interference above 1%.
Democrats Jessica Rosenworcel and Mignon Clyburn threw in with Wheeler to pass the Public Notice, which was voted on at the commission level according to its own established auction procedures. Public Notices typically are released at the bureau level.
Pai and O’Rielly came at it with elbow checks and flying scissors.
“The commission proposes a series of unnecessary outcome-driven machinations and tentative conclusions to bolster its ability to claim success at the close of the auction,” O’Rielly said. “I do not have confidence that the complex and confusing proposals in this Public Notice will maximize revenues or ensure that the spectrum goes to the highest valued use.”
Pai first criticized the rules released in May.
“They attempt to manipulate the results through the blunt levers of command and control, and they unnecessarily provoked litigation,” he said, referring to lawsuits filed by Sinclair Broadcast Group and the National Association of Broadcasters.
Pai said he made 12 proposed modifications to the Public Notice up for vote. Eleven were dismissed immediately; the 12th got a “maybe.”
“We could easily have had a unanimous vote on today’s Public Notice, but there was no interest in working toward consensus,” he said. “Virtually every line drawn in this item was one color — red. Accordingly, I dissent.”
Wheeler once again emphasized that nothing was written in stone.
“As we’ve all said up here, we’re seeking comment on proposals, not making final decisions,” he said.
The FCC will take its pitch for the incentive auction on the road next month.