Independent Public Media has unveiled a new program to provide bridge funding to financially troubled pubTV stations. The loans will help them stay on the air through the FCC’s incentive spectrum auction, and require a payout from auction proceeds.
IPM designed the loan program to assist noncommercial broadcasters until they can sell off some, but not all, of their spectrum bandwidth through the FCC auction, and assumed that stations will gain big payoffs by participating. Once auction proceeds begin rolling in to a borrower station, IPM will pay off expenses incurred by participating in the auction and then recoup the principal and interest on its loan. The remaining auction revenues would be evenly split between IPM and the station.
“Instead of cashing out and turning the license over to the FCC, we will work with them to provide bridge financing,” said Ken Devine, IPM c.o.o. “We feel that when it comes to spectrum — once an AT&T or whoever gets it, it’s not going to come back — it’s gone.”
The FCC plans to conduct the spectrum auction in 2014. The first phase will be a “reverse” auction in which licensees can offer to sell all or a portion of their broadcast spectrum to the FCC. There is no guarantee the FCC will pick up on a licensee’s offer or pay the asking price; in markets where multiple stations offer their spectrum, the commission will choose the bid with the lowest price.
In the second phase, the “forward” auction, the FCC will offer the frequencies to wireless carriers. If carriers aren’t willing to pay the prices set for the spectrum, then the deal is off.
Colorado-based IPM, which was founded in 2011 by public media activist John Schwartz, has allocated $40 million to assist noncommercial TV stations from going dark or being sold to religious broadcasters. With the new loan program, IPM aims to prevent noncommercial broadcasters from being sold off and going out of business. The loans are being offered through IPM’s Public TV Financing subsidiary.
Whether struggling stations can take advantage of the loan program, and the auction, will depend on which markets they serve, said Dennis Haarsager, president of public TV’s Major Market Group. Even if the FCC chooses a station’s market for a reverse auction, there’s still no guarantee that its spectrum offer will be accepted.
“And if you loan money to the station and they aren’t successful, then a big question will be, ‘How will the loan be secured?’” Haarsager said.
Devine acknowledged that uncertainties over the auction process make it difficult for licensees to weigh their options. IPM is offering the loan program in full recognition that the odds are “extremely low” that the auctions will be a bonanza for very many noncommercial broadcasters.
“From a business point of view, this is kind of crazy,” Devine said. “The risk is that there is no auction and that the licensee is unable to repay the bridge loan — and that is a substantial risk.” IPM’s goal in offering the loans is to help stations that are in dire financial situations continue operating.
“People can question our motivations, but at the end of the day we want the stations to survive this process,” Devine said. “That’s our goal, and we’re willing to accept the risk.”