On September 28th, the Federal Communications Commission (“FCC”) took several steps related to the implementation of the “Spectrum Act,” which authorized the use of voluntary incentive auctions of broadcast television spectrum in order to provide additional spectrum for mobile (i.e., wireless) broadband use and the creation and funding of a nationwide, interoperable wireless broadband public safety notices. The actions taken by the FCC included the adoption of a Notice of Proposed Rulemaking (“NPRM”) to adopt rules establishing a three-part process (reverse auctions of broadcast spectrum, repacking the remaining broadcast spectrum, and forward auctions of the reclaimed spectrum). The FCC also adopted a separate NPRM to review and its mobile spectrum holding policies. Finally, the FCC announced that it was launching the “LEARN” Program to provide broadcasters with information about the incentive auction process. The FCC has now released the text of each of these items. A brief summary follows:
Incentive Auctions NPRM. Under the first step of the proposed incentive auction process, the FCC would conduct “reverse” auctions whereby broadcast television licensees (commercial as well as non-commercial and full power as well as Class A) would voluntarily relinquish their current spectrum use in exchange for payments. The Spectrum Act identified three options for broadcasters participating in the reverse auction: go off the air, move from a UHF to VHF channel, or share a channel with another broadcaster. One of the issues on which the FCC seeks comment is whether to establish additional reverse auction bid options beyond those identified in the Spectrum Act. The NPRM also asks for comment on several questions relating to the structure of these reverse auctions, such as whether to collect sealed bids or to use a multiple round bid collection format.
The second step of the process outlined in the NPRM involves repacking (i.e., reorganizing) the television bands so that television stations occupy much smaller portions of the UHF band. As proposed by the FCC, reclaimed television spectrum would be divided into 5 MHz blocks, with an uplink band consisting of spectrum currently occupied by current television channels 37 through 51 (698 MHz), and a downlink band at channel 36 and below. 6 MHz guard bands would also be established between wireless spectrum and broadcast spectrum, but that spectrum would still be made available for unlicensed use. The NPRM poses a host of technical questions regarding the repacking and also asks how to complete this repacking in a timely manner without interrupting access to television channels for over-the-air viewers.
The final step of the proposed incentive auction process is a forward auction of the reclaimed and repacked television spectrum. The FCC has indicated that this auction will resemble prior competitive bidding systems utilized by the agency in the past, but with “important differences” arising from the fact that the amount of spectrum that can be made available, the specific frequencies that will be available, and, perhaps, the geographic locations of such frequencies will not be known in advance. Therefore, the auction design will have to provide a flexible framework that can accommodate varying amounts of newly available spectrum in different locations. The NPRM also seeks comment on a timetable for implementing the entire process, including how to clear the reclaimed spectrum as expeditiously as possible while minimizing disruption to over-the-air broadcasting. In a separate statement, Commissioner Ajit Pai expressed hope that the FCC will be able to conduct incentive auctions by mid-2014.
Finally, two issues raised in the NPRM may be of particular interest to cable operators. First, the notice seeks input on its implementation of a provision of the Spectrum Act setting aside up to $1.75 billion of the forward auction proceeds “to “reimburse costs reasonably incurred by” broadcasters and multichannel video programming distributors (MVPDs) as result of the repacking process. In the case of an MVPD, such costs include those reasonably incurred in order to continue to carry the signals of a broadcast station that has had its channel changed as part of the repacking process or reverse auction. The FCC seeks comment, inter alia, on what types of costs MVPDs are likely to incur and how to determine whether such costs are “reasonable,” on whether MVPDs should be reimbursed in advance based on estimated expenditures or only on the basis of actual costs, and on the level of documentation required for reimbursement. Second, the NPRM asks for comment on whether the rules should require that broadcasters receiving new channel assignments or cease broadcasting as a result of the incentive auction process provide notice to affected MVPDs of these changes (or other technical changes) that could impact carriage, the timing and form of such notice, and what information it should contain.
Comments on the Incentive Auctions NPRM are due December 12, 2012; reply comments are due February 19, 2013.
Mobile Spectrum Holding Policies NPRM. Concurrently with the adoption of the incentive auction NPRM, the FCC commenced a separate proceeding to review its mobile spectrum holding policies. In the NPRM, comment is sought on a number of issues, including: (1) whether to continue to evaluate mobile spectrum holdings case-by-case in the context of proposed transactions and auctions, or to move to a different approach such as bright-line limits; (2) whether to update the applicable ownership attribution rules; (3) which spectrum bands should be included in evaluating spectrum holdings and whether different bands need to be analyzed separately; and (4) whether to change its geographic market analysis, including to consider the impacts of mobile spectrum holdings at the national as well as local levels. The overarching goal of the proceeding is to ensure that the FCC’s policies provide the certainty and predictability needed by mobile providers to make informed investment decisions, including participation in the incentive auction process.
Comments on the Mobile Spectrum Holding Policies NPRM will be due 45 days after the date the NPRM is published in the Federal Register; reply comments will be due 30 days after the initial comment deadline.
LEARN Program. In conjunction with the commencement of the two rulemaking proceedings described above, the FCC announced the launch of the Broadcaster “Learn Everything About Reverse-Auctions Now” or “LEARN” program to help educate broadcasters about the incentive auction process and the benefits it offers broadcasters. Chairman Genachowski characterized the incentive auctions as a “win for broadcasters – both those that will take advantage of a once in a lifetime financial opportunity and those that will choose to continue to be part of an even healthier and more diverse broadcast marketplace.” The first LEARN Program workshop is scheduled for October 26, 2012, with more details regarding the workshop to be forthcoming. The FCC has launched a webpage, www.fcc.gov/LEARNprogram, to serve as a central resource for the collection of auction-related material.