An FCC-sponsored report projecting huge potential paydays for television broadcasters in next year’s spectrum auctions could prompt public TV licensees to reconsider decisions about participating in the complex proceeding.
A full-power station in Los Angeles could fetch up to $570 million by giving up its assigned channel, while a similar property in New York might generate up to $490 million, according to a report by the investment banking firm Greenhill & Co.
Issued Oct. 1 to spur interest in the voluntary proceeding, the report broadens the pool of prospective participants by projecting jaw-dropping values for TV channels outside of the top 30 markets. Full-power stations in Palm Springs, Calif., could bring to $180 million in the auction, for example, while a station in Providence, R.I., may be worth as much as $160 million, the report said.
The report estimates widely varying auction payments for full-power TV stations in the largest TV markets. In Philadelphia, a broadcaster could reap $400 million by giving up a channel; Detroit, $170 million; San Francisco and Boston, $140 million; Cleveland and Sacramento, Calif., $130 million.
Values bounce back up for some stations in markets below the top 20 — Baltimore could fetch $180 million; San Diego, $250 million; and Hartford, Conn., $280 million. Stations in Harrisburg and Wilkes-Barre, Pa., — markets 43 and 54, respectively, and roughly 100 miles from Philadelphia — are priced at $180 million and $150 million.
“Those are numbers that any governing board, commercial or noncommercial, cannot ignore,” said John Lawson, a public TV consultant who has been advising CPB on spectrum auction policy.
Following the report’s release, pubcasting’s Washington representatives urged station executives to keep their role as public-service broadcasters in mind.
“Public television stations will be making decisions regarding their participation in the spectrum auction based on their financial and public service interests,” said Michael Levy, CPB executive v.p., in a statement. “The decisions stations and their boards make, especially those in sole-service markets, will likely have a profound impact on the public media system,” Levy added.
A spectrum analyst who advises public television licensees, attorney Michael Alcamo, describes the reported values as inflated.
“We feel an estimate of $340 [million] to $570 million in Los Angeles is high,” said Alcamo, of the New York–based investment banking firm M.C. Alcamo & Co. Based on current comparables, Alcamo estimated a 6 MHz allotment in L.A. would be valued around $125 million.
Still, “reverse auction values will be substantial,” he noted. “Any broadcaster selling now gains the benefit of certainty, which has value; however, a licensee should ensure that as part of a transaction, it receives a meaningful share of the incentive auction proceeds.”
CPB has been alerting policy makers to the potential loss of public TV service in cities with only one station, and it identified 21 markets with so-called sole-service licensees in a white paper released in July. Many of the markets with the most valuable spectrum — Boston, Baltimore, Detroit, San Diego, Sacramento and Hartford — fall into this category. Projected values in other sole-service PTV markets range below $100 million: Albany, N.Y., is valued at $81 million; Buffalo, N.Y., $73 million; Dallas, $67 million; Houston, $52 million; Raleigh-Durham, N.C., $51 million; and Austin, Texas, $48 million.
In a statement, Association of Public Television Stations President Patrick Butler thanked the FCC for producing the report, which he described as a “highly practical document” that will help general managers “assess the business consequences of their spectrum decisions.”
“We are also mindful of our public service obligations to the American people,” Butler added, “and intent on maintaining universal service to everyone, everywhere, every day for free, and we hope the Commission will work with us to secure this result.”
The report, “Incentive Auction Opportunities for Broadcasters,” was overnighted to all TV stations as part of the commission’s campaign to persuade broadcasters to participate in the auction, which was ordered by Congress to repurpose TV spectrum for smartphones and other wireless services.
The estimates in the report are based on “reasonable” assumptions and apply to all stations qualified to participate in the auction, including noncommercial stations, according to FCC officials who briefed reporters on the analysis. The FCC asked that the officials not be named because they wanted to speak freely about the report and the incentive auction.
“It’s irrelevant whether it’s for-profit or not-for-profit,” an official said.
The FCC’s decision to distinguish between public and commercial TV is embedded in the commission’s proposed rules for running the auctions, but APTS, CPB and PBS have petitioned for reconsideration. In a Sept. 15 filing, the organizations asked the FCC to revise its auction rules based on its long-standing precedents that recognize noncom TV spectrum as distinct from commercial and thus protected.
The latest FCC estimates are similar to those that the consulting firm BIA/Kelsey has generated for interested broadcast clients, according to Mark Fratrik, a senior v.p. and chief economist for the firm.
“Broadcasters who haven’t considered participating probably will start thinking about it,” Fratrik added.
At least four public broadcasters have already put their channels up for bid:
- Spectrum speculator LocusPoint has an agreement with KCSM in San Mateo, Calif., to subsidize the financially strapped station for nearly $1 million a year until its spectrum can be auctioned off. Proceeds from the KCSM auction will be shared with licensee San Mateo Community College District.
- Connecticut Public Broadcasting has already received an undisclosed cash payout from LocusPoint to share a portion of future auction proceeds from its station in Bridgeport, WEDW.
- KCET and KLCS in Los Angeles will split an over-the-air channel to auction off spectrum and share proceeds.
- LocusPoint also purchased student-run WMJF in Towson, Md., from Towson University for $1.8 million and payments to cover operating costs for two years.