Clearing target for spectrum auction signifies strong interest, possible high payouts

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Enough television stations have agreed to relinquish spectrum in the upcoming broadcast auction that the FCC was able to set a high clearing target of 126 megahertz.

That’s how much television spectrum the commission will repurpose for use by wireless providers, who need more bandwidth for the growing number of mobile devices. In a reverse auction, the FCC will acquire spectrum from stations; in a subsequent forward auction, it will sell the bandwidth to wireless companies. “The broadcasters have stepped up and done their part to fulfill that demand,” FCC Chair Tom Wheeler said in a statement Friday.

A 126 MHz target may also result in many public TV stations receiving “significant payouts,” according to a February auction analysis by Public Media Co.

Vinnie Curren of Breakthrough Public Media Consulting agreed with that prediction. “It also means, though, that the auction could take longer to complete since it’s not clear that forward auction prices will be high enough to support the 126 MHz clearing target,” Curren said in an email. He predicted the auction may not be completed until the end of this year or early 2017.

Pat Butler, president of America’s Public Television Stations, called the clearing target “ambitious” in a statement to Current.

“We remain hopeful that the auction can be successfully and expeditiously concluded while ensuring that Americans continue to have access to local public television service,” Butler said.

CPB has expressed concern that viewers could lose access to PBS and other public TV service if stations in sole-service markets participate in the auction.

John Lawson of Convergence Services, which consulted with stations about the auction, also noted that the target of 126 MHz “is at the upper end of the range that we and others used for our auction-planning scenarios for station clients.”

That target “means that there is a high level of station participation in the auction,” Lawson said. “It might also mean that there is high interest on the buyer side in the forward auction. Either way, we can expect many bidding rounds. The band plan also underscores just how massive the repack of the reduced TV band will be. Fasten your seat belts!”

“We view this as positive news for all reverse auction participants,” said Michael Alcamo, president of M.C. Alcamo & Co., an investment banking firm that advised pubTV licensees regarding the auction. In addition to signaling robust broadcaster participation, “it also underscores the possibility that stations in a diverse range of markets could be successful in the reverse auction,” Alcamo said.

The FCC also set May 31 as the auction start date. Stations will have a chance to take part in a “mock auction” May 25 and 26 to familiarize themselves with the bidding procedures.

The commission will inform stations of their eligibility to participate in Final Confidential Status letters. Stations in some markets may not need to take part in the auction to meet the 126 MHz target.

Public broadcasters could potentially make big money from the auction. Among the top opening bids: $775 million for New Jersey Public Television and $672 million for WLIW, both operated by WNET in New York City; and $581 million for PBS SoCal in suburban Los Angeles.

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  • Mark Fuerst

    Small point: Does the state of New Jersey own the licenses for the New Jersey Network stations? If so, isn’t it likely that those proceeds will go state purposes other that public broadcasting?

    • Dru Sefton, Current

      Yes, that’s correct, while WNET operates NJTV the licensee is the New Jersey Public Broadcasting Authority, a state agency. Licensees reap the benefits for selling spectrum and can spend that windfall as they choose. There is no requirement that spectrum proceeds are to be spent on public broadcasting. We expect, for example, that cash-strapped university licensees probably will spend their spectrum revenues on the university and not the station.