The Incentive Auction, by which the FCC is to pay TV stations to surrender their spectrum and then resell that spectrum to wireless carriers, is to begin on March 29, 2016 (see our article here which broke that news). At the end of last month, my law partner Jonathan Cohen and I presented a webinar to members of 11 state broadcast associations on the auction process, as clarified by the FCC last month in its Incentive Auction Bidding Procedures Public Notice (here). The slides from our state association presentation are available here. These slides set out the background of the proceeding, the process that broadcasters will go through to participate in the auction, an outline of the issues that come up in channel sharing agreements, the post-auction repacking of the TV spectrum into the fewer channels that will remain dedicated to TV use, and the deadlines for stations to either end their service or implement any facility changes ordered as part of the repacking.
Even more light was shed on the process yesterday, in remarks made by FCC Chair Tom Wheeler at the CTIA convention in Las Vegas. In his remarks, he reiterated the intention of the FCC to begin the auction next March. He also indicated that more specific advice about auction procedures would be coming by a subsequent FCC Applications Procedures public notice in October. Chairman Wheeler said that broadcasters will be indicating their intent to participate in the auction around Thanksgiving (by filing initial auction applications), and wireless companies will be filing their initial applications around the first of the year indicating their intent to participate in the second phase of the auction to buy up the spectrum surrendered by broadcasters. Note that these dates are all very general, so you’ll need to watch as specific guidance is provided by the FCC. Given that the FCC has said that broadcasters will be given 60 days of advance notice of the amount that they will be offered to surrender their spectrum before being required to file their initial application, if the Applications Procedures public notice is the document where the opening bids are provided, the Thanksgiving date, for instance, may well actually be sometime in December.In any event, these dates are fast approaching, and broadcasters should be firming up plans for the auction right now. As detailed in the slides from our presentation, the filing of the broadcasters’ initial application triggers a quiet period, in which broadcasters are forbidden from conveying their intentions about auction participation and any information about their bidding strategy to any other party, including any other broadcaster, except as specifically identified in a channel sharing agreement filed with the FCC before that application date. Broadcasters who are interested in channel sharing need to be negotiating those deals now, to have them completed by the auction deadline (for more about channel sharing, see our article here).
In addition, the quiet period may disrupt other station operations – by limiting normal business operations that might in some way reveal a station’s auction intentions – including whether or not it will be participating in the auction – to any other station (whether or not that station is in their own market or some other market). Theoretically, signing a tower lease, news-sharing or other programming agreement with another station, indicating a commitment to a long-term obligation, could be seen as a signal that you are not participating in the auction. Public stations are worried about messages that might be conveyed during pledge drives. All sorts of routine business arrangements may be impacted by the limitations imposed by the quiet period. We understand that the FCC will be providing more guidance on the quiet period in the next few weeks, though the nature and extent of such advice is unclear. But all broadcasters should be discussing this issue now with counsel, as it may well limit your operations and planning from December of this year through the middle of next year – and perhaps longer – depending on how long it takes before the auction and post-auction processes are completed.
Another interesting aspect of the auction for TV broadcasters is the fact, revealed in Auctions Procedures Public Notice released by the FCC last month, that broadcasters who indicate that they will accept the Commission’s opening offer to surrender their spectrum, but who ultimately remain in the TV business, will be guaranteed to be repacked into the new core TV band. By contrast, some broadcasters who, in their initial application, reject the opening bid by the FCC, could end up being repacked into portions of what would ultimately be parts of the wireless spectrum, either into the spectrum used by the carriers or into the “duplex gap” between channels used for the upload and download of information by the wireless providers (see our article here about this possibility). There are concerns about interference to those stations, and perhaps, long-term, issues about receivers and whether they will “find” stations left in portions of the spectrum which, in most of the country, will be dedicated to wireless not TV use. So that is one more issue for broadcasters to consider in assessing their desire to participate in the broadcast auction.
Obviously, it is time to make some serious decisions about your participation in the auction, and the impact that it may have on your operations. The deadlines are fast approaching. Review all the information you can get, including our slides here (and the video from the webcast is available to members of the participating state association members).