TV broadcasters remain wary of 600 MHz incentive auction

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SAN ANTONIO, Texas--Rick Kaplan, executive vice president for strategic planning for the National Association of Broadcasters, said that it's too early to say whether TV broadcasters will widely support the FCC's proposed incentive auctions of 600 MHz broadcast spectrum. Further, Kaplan said that "one thing that concerns me is the trust factor."

Kaplan explained that TV broadcasters are worried that the FCC will change or modify its auction rules during the 600 MHz auction or after it is completed. He said such changes could imperil the revenues broadcasters are hoping to gain from the spectrum the FCC is asking them to give up in the auction.

"You need to create trust," Kaplan explained here at the at the Competitive Carriers Association spring show, noting that the FCC needs to reassure broadcasters that whatever rules it establishes for the 600 MHz auction, those rules will remain intact so that broadcasters can be confident in their participation in the auction.

Kaplan also noted, though, that broadcasters are largely taking a wait-and-see approach to the 600 MHz auction. He said most are holding off on agreeing to participate until the agency issues official rules for the event, rules that most expect to be released in May.

"First you have to have some rules," said Kaplan, a former chief of the FCC's Wireless Telecommunications Bureau. Kaplan joined the National Association of Broadcasters in 2012. "You have to have some structure."

The FCC's incentive auction of 600 MHz spectrum from TV broadcasters, currently scheduled for 2015, stands as perhaps the government's last significant auction of low-band spectrum. As a result, wireless carriers are desperate to entice TV broadcasters to participate in the event--the more broadcasters that agree to give up their spectrum in the auction, the more spectrum wireless carriers will be able to acquire to build out their networks.

"The auction presents a once-in-a-lifetime opportunity for broadcasters, and we are committed to providing them with information about both our process and the financial opportunity the auction represents to enable them to make informed business decisions about whether and how to participate," FCC Chairman Tom Wheeler said this week at a media event.

A key job for Wheeler will be to convince broadcasters to participate in the 600 MHz auction. "I came to this position after almost a decade as a venture capitalist and even longer as an entrepreneur myself. Seldom have I seen such a risk-free opportunity as that represented to broadcasters by the incentive auction, including the opportunity to continue their existing business on shared spectrum and take home a check for the spectrum they vacate."

Under the FCC's proposed rules, broadcasters will submit bids to relinquish their 600 MHz pieces of spectrum in a reverse auction where the FCC will pay them. The FCC is also contemplating having unlicensed wireless use in the guard bands between spectrum blocks.

The process is voluntary for broadcasters, but many worry that broadcasters might not give up their spectrum based on their previous resistance to the auctions and uncertainty over how much money they will ultimately receive, as well as how their operations will be affected by giving up their spectrum. Wheeler sought to address those concerns.

After broadcasters give up their spectrum, it will be "repacked" so that broadcasters that do not give up their spectrum can stay on the air. Then the FCC will conduct a traditional "forward" auction in which wireless carriers will bid for the freed spectrum. There is an ongoing debate over what the band plan should be for the spectrum once broadcasters are repacked. Additionally, the FCC may decide on rules that limit how much spectrum AT&T (NYSE:T) and Verizon Wireless (NYSE:VZ) can bid for in the auction.

On that front, the FCC is indicating it is still contemplating rules that might cap how much spectrum an individual carrier might be able to bid for the incentive auctions. Such rules would likely benefit Sprint (NYSE:S), T-Mobile US (NYSE:TMUS) and other smaller carriers.

"The FCC retains its authority to design these auctions in a way that promotes competition including ensuring licenses are available only to certain kinds of carriers and a cap on how much spectrum you can acquire. All those things are being considered," Roger Sherman, acting chief of the commission's wireless bureau, told Reuters at the CCA show.

Sherman added that FCC Chairman Tom Wheeler is "totally committed to having as many people as possible show up and have a real chance to win."

For more:
- see this Reuters article

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