FCC Adopts Rules for the Broadcast Spectrum Auction

Earlier today, the FCC held its monthly Open Meeting, where it adopted rules to implement the Broadcast Television Incentive Auction.You can watch a replay of the FCC’s Open Meeting on the FCC’s website.

Thus far, the FCC has released three documents relating to the actions it took today in this proceeding, as well as separate statements from four of the five commissioners, providing at least some initial guidance to affected parties: (1) a News Release, (2) a summary of upcoming proceedings, and (3) a staff summary of the Report & Order.

At the meeting, the commissioners noted that, when released, the Report and Order will contain a number of rule changes to implement the auction. The major takeaways are:

• The reorganized 600 MHz Band will consist of paired uplink and downlink bands, with the uplink bands starting at channel 51 and expanding downwards, followed by a duplex gap and then the downlink band;
• These bands will be comprised of five megahertz “building blocks”, with the Commission contemplating variations in the amount of spectrum recovered from one market to the next, meaning that not all spectrum will be cleared on a nationwide basis, and in some markets, repacked broadcasters will be sharing spectrum with wireless providers in adjacent markets;
• The FCC anticipates there will be at least one naturally occurring white space channel in each market for use after the auction by unlicensed devices and wireless microphones;
• The auction will have a staged structure, with a reverse auction and forward auction component in each stage. In the reverse auction, broadcasters may voluntarily choose to relinquish some or all of their spectrum usage rights, and in the forward auction, wireless providers can bid on the relinquished spectrum;
• In the reverse auction, participating broadcasters can agree to accept compensation for (1) relinquishing their channel, (2) sharing a channel with another broadcaster, or (3) moving from UHF to VHF (or moving from high VHF to low VHF);
• The FCC will “score” stations (presumably based on population coverage, etc.) to set opening prices in the auction;
• The FCC will use a descending clock format for the reverse auction, in which it will start with an opening bid and then reduce the amount offered for spectrum in each subsequent round until the amount of broadcast spectrum being offered drops to an amount consistent with what is being sought in the forward auction;
• The auction will also incorporate “Dynamic Reserve Pricing”, permitting the FCC to reduce the amount paid to a bidding station if it believes there was insufficient auction competition between stations in that market;
• The rules will require repurposed spectrum to be cleared by specific dates to be set by the Media Bureau, which can, even with an extension, be no later than 39 months after the repacking process becomes effective;
• The FCC will grandfather existing broadcast station combinations that would otherwise not comply with media ownership rules as a result of the auction; and
• The FCC continues to intend to use its TVStudy software to determine whether a repacked station’s population coverage will be reduced in the repacking process, despite NAB’s earlier protests that the current version of the software would result in reduced coverage for nine out of ten stations in the country.

Finally, the FCC will be asking for public input on numerous additional issues, such as opening bid numbers, bid adjustment factors, bidding for aggregated markets in the forward auction, dealing with market variations, setting parameters for price changes from round to round, activity rules, and upfront payments and bidding eligibility. The FCC will consider in future proceedings ways to mitigate the impact of repacking on LPTV/TV translators, how to address interference between broadcast and wireless operations, and how best to facilitate the growth of “white spaces” devices in the unlicensed spectrum.

Although today’s Open Meeting and these preliminary documents provide some guidance on many complex incentive auction issues, they only scratch the surface, and there are many blanks the FCC will need to fill in between now and the auction. One of those that broadcasters will be watching very carefully is how the Media Bureau will be handling reimbursement of stations’ repacking expenses. That has turned out to be a very challenging issue in past FCC efforts at repurposing spectrum, and the fact that the amount set aside by Congress for reimbursement might well fall short of what is needed has many broadcasters concerned.

We will know more about this and many other issues when the Report and Order is released, hopefully in the next week or two, but the real answers are going to reveal themselves only very slowly over the next year or two. The FCC has to hope that they will still have broadcasters’ attention by the time we reach that point.