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The next Children’s Television Programming Report must be filed with the FCC and placed in stations’ public inspection files by January 10, 2017, reflecting programming aired during the months of October, November, and December 2016.

Statutory and Regulatory Requirements

As a result of the Children’s Television Act of 1990 (“Act”) and the FCC rules adopted under the Act, full power and Class A television stations are required, among other things, to: (1) limit the amount of commercial matter aired during programs originally produced and broadcast for an audience of children 12 years of age and under, and (2) air programming responsive to the educational and informational needs of children 16 years of age and under.

These two obligations, in turn, require broadcasters to comply with two paperwork requirements. Specifically, stations must: (1) place in their online public inspection file one of four prescribed types of documentation demonstrating compliance with the commercial limits in children’s television, and (2) submit FCC Form 398, which requests information regarding the educational and informational programming the station has aired for children 16 years of age and under. Form 398 must be filed electronically with the FCC. The FCC automatically places the electronically filed Form 398 filings into the respective station’s online public inspection file. However, each station should confirm that has occurred to ensure that its online public inspection file is complete. The base fine for noncompliance with the requirements of the FCC’s Children’s Television Programming Rule is $10,000.

Broadcasters must file their reports via the Licensing and Management System (LMS), accessible at https://enterpriseefiling.fcc.gov/dataentry/login.html.

Noncommercial Educational Television Stations

Because noncommercial educational television stations are precluded from airing commercials, the commercial limitation rules do not apply to such stations. Accordingly, noncommercial television stations have no obligation to place commercial limits documentation in their public inspection files. Similarly, though noncommercial stations are required to air programming responsive to the educational and informational needs of children 16 years of age and under, they do not need to complete FCC Form 398. They must, however, maintain records of their own in the event their performance is challenged at license renewal time. In the face of such a challenge, a noncommercial station will be required to have documentation available that demonstrates its efforts to meet the needs of children.

Commercial Television Stations

Commercial Limitations

The Commission’s rules require that stations limit the amount of “commercial matter” appearing in children’s programs to 12 minutes per clock hour on weekdays and 10.5 minutes per clock hour on the weekend. In addition to commercial spots, website addresses displayed during children’s programming and promotional material must comply with a four-part test or they will be considered “commercial matter” and counted against the commercial time limits. In addition, the content of some websites whose addresses are displayed during programming or promotional material are subject to host-selling limitations. Program promos also qualify as “commercial matter” unless they promote children’s educational/informational programming or other age-appropriate programming appearing on the same channel. Licensees must prepare supporting documents to demonstrate compliance with these limits on a quarterly basis.

For commercial stations, proof of compliance with these commercial limitations must be placed in the online public inspection file by the tenth day of the calendar quarter following the quarter during which the commercials were aired. Consequently, this proof of compliance should be placed in your online public inspection file by January 10, 2017, covering programming aired during the months of October, November, and December 2016.

Documentation to show that the station has been complying with this requirement can be maintained in several different forms:

  • Stations may, but are not obligated to, keep program logs in order to comply with the commercial limits rules. If the logs are kept to satisfy the documentation requirement, they must be placed in the station’s public inspection file. The logs should be reviewed by responsible station officials to be sure they reflect compliance with both the numerical and content requirements contained in the rules.
  • Tapes of children’s programs will also satisfy the rules, provided they are placed in the station’s public inspection file and are available for viewing by those who visit the station to examine the public inspection file. The FCC has not addressed how this approach can be utilized since the advent of online public inspection files.
  • A station may create lists of the number of commercial minutes per hour aired during identified children’s programs. The lists should be reviewed on a routine basis by responsible station officials to be sure they reflect compliance with both the numerical and content requirements contained in the rule.
  • The station and its network/syndicators may certify that as a standard practice, they format and air the identified children’s programs so as to comply with the statutory limit on commercial matter, and provide a detailed listing of any instances of noncompliance. Again, the certification should be reviewed on a routine basis by responsible station officials to ensure that it is accurate and that the station did not preempt programming or take other action that might affect the accuracy of the network/syndicator certification.
  • Regardless of the method a station uses to show compliance with the commercial limits, it must identify the specific programs that it believes are subject to the rules, and must list any instances of noncompliance. As noted above, commercial limits apply only to programs originally produced and broadcast primarily for an audience of children ages 12 and under.

Programming Requirements

To assist stations in identifying which programs qualify as “educational and informational” for children 16 years of age and under, and determining how much of that programming they must air to comply with the Act, the Commission has adopted a definition of “core” educational and informational programming, as well as license renewal processing guidelines regarding the amount of core educational programming aired.

The FCC defines “core programming” as television programming that has as a significant purpose serving the educational and informational needs of children 16 years old or under, which is at least 30 minutes in length, and which is aired weekly on a regular basis between 7:00 a.m. and 10:00 p.m. Each core program must be identified by an E/I symbol displayed throughout the program. In addition, the licensee must provide information identifying each core program that it airs, including an indication of the program’s target child audience, to publishers of program guides. The licensee must also publicize the existence and location of the station’s children’s television reports in the public inspection file. The FCC has not prescribed a specific manner of publicizing this information, but enforcement actions indicate that the FCC expects the effort to include an on-air component. We suggest placing an announcement on the station website and periodically running on-air announcements.

Under the current license renewal processing guidelines, stations must air an average of at least three hours of “core programming” each week during the quarter in order to receive staff-level approval of the children’s programming portion of the station’s license renewal application. Stations that air “somewhat less” than an average of three hours per week of “core programming,” i.e., two and one-half hours, may still receive staff-level approval of their renewals if they show that they aired a package of programming that demonstrates a commitment at least equivalent to airing three hours of “core programming” per week. Stations failing to meet one of these guidelines will have their license renewal applications reviewed by the full Commission for compliance with the Children’s Television Act.

FCC Form 398 is designed to provide the public and the Commission with the information necessary to determine compliance with the license renewal processing guidelines. The report captures information regarding the preemption of children’s programming, and requires stations to create an addendum to the form called a “Preemption Report” which provides information on: (1) the date of each preemption; (2) if the program was rescheduled, the date and time the rescheduled program aired; (3) the reason for the preemption; and (4) whether promotional efforts were made to notify the public of the time and date that the rescheduled program would air.

Filing of FCC Form 398

Form 398 must be filed electronically on a quarterly basis. As a result, full power and Class A television stations should file a Form 398 electronically by January 10, 2017.

Preparation of the Programming Documentation

In preparing the necessary documentation to demonstrate compliance with the children’s television rules, a station should keep the following in mind:

  • FCC Form 398 and documentation concerning commercialization will be very important “evidence” of the station’s compliance when the station’s license renewal application is filed; preparation of these documents should be done carefully.
  • Accurate and complete records of what programs were used to meet the educational and informational needs of children and what programs aired that were specifically designed for particular age groups should be preserved so that the job of completing the FCC Form 398 and creating documentation concerning commercialization is made easier.
  • A station should prepare all documentation in time for it to be placed in the public inspection file by the due date. If the deadline is not met, the station should give the true date when the information was placed in the file and explain its lateness. A station should avoid creating the appearance that it was timely filed when it was not.

These are only a few ideas as to how stations can make complying with the children’s television requirements easier. Please do not hesitate to contact the attorneys in the Communications Practice for specific advice on compliance with these rules or for assistance in preparing any of this documentation.

Class A Television Stations Only

Although not directly related to the requirement that Class A television stations file children’s programming reports, it is important to note that Class A television stations must certify that they continue to meet the FCC’s eligibility and service requirements for Class A television status under Section 73.6001 of the FCC’s Rules. While the relevant subsection of the public inspection file rule, Section 73.3526(e)(17), does not specifically state when this certification should be prepared and placed in the public inspection file, we believe that since Section 73.6001 assesses compliance on a quarterly basis, the prudent course for Class A television stations is to place the Class A certification in the public inspection file on a quarterly basis as well.

A PDF version of this article can be found at 2016 Fourth Quarter Children’s Television Programming Documentation.

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The next Quarterly Issues/Programs List (“Quarterly List”) must be placed in stations’ public inspection files by January 10, 2017, reflecting information for the months of October, November, and December 2016.

Content of the Quarterly List

The FCC requires each broadcast station to air a reasonable amount of programming responsive to significant community needs, issues, and problems as determined by the station. The FCC gives each station the discretion to determine which issues facing the community served by the station are the most significant and how best to respond to them in the station’s overall programming.

To demonstrate a station’s compliance with this public interest obligation, the FCC requires the station to maintain and place in the public inspection file a Quarterly List reflecting the “station’s most significant programming treatment of community issues during the preceding three month period.” By its use of the term “most significant,” the FCC has noted that stations are not required to list all responsive programming, but only that programming which provided the most significant treatment of the issues identified.

Given that program logs are no longer mandated by the FCC, the Quarterly Lists may be the most important evidence of a station’s compliance with its public service obligations. The lists also provide important support for the certification of Class A television station compliance discussed below. We therefore urge stations not to “skimp” on the Quarterly Lists, and to err on the side of over-inclusiveness. Otherwise, stations risk a determination by the FCC that they did not adequately serve the public interest during the license term. Stations should include in the Quarterly Lists as much issue-responsive programming as they feel is necessary to demonstrate fully their responsiveness to community needs. Taking extra time now to provide a thorough Quarterly List will help reduce risk at license renewal time.

It should be noted that the FCC has repeatedly emphasized the importance of the Quarterly Lists and often brings enforcement actions against stations that do not have fully complete Quarterly Lists or that do not timely place such lists in their public inspection file. The FCC’s base fine for missing Quarterly Lists is $10,000.

Preparation of the Quarterly List

The Quarterly Lists are required to be placed in the public inspection file by January 10, April 10, July 10, and October 10 of each year. The next Quarterly List is required to be placed in stations’ public inspection files by January 10, 2017, covering the period from October 1, 2016 through December 31, 2016. All TV stations, as well as commercial radio stations in the Top-50 Nielsen Audio markets that have five or more full-time employees, must post their Quarterly Lists to the online public inspection file. Note that, effective as of June 24, 2016, the website for the new online public inspection file for both TV and radio stations is https://publicfiles.fcc.gov/.

Stations should keep the following in mind:

  • Stations should maintain routine outreach to the community to learn of various groups’ perceptions of community issues, problems, and needs. Stations should document the contacts they make and the information they learn. Letters to the station regarding community issues should be made a part of the station’s database.
  • There should be procedures in place to organize the information that is gathered and bring it to the attention of programming staff with a view towards producing and airing programming that is responsive to significant community issues. This procedure and its results should be documented.
  • Stations should ensure that there is some correlation between the station’s contacts with the community, including letters received from the public, and the issues they have identified in their Quarterly Lists. A station should not overlook significant issues. In a contested license renewal proceeding, while the station may consider what other stations in the market are doing, each station will have the burden of persuading the FCC that it acted “reasonably” in deciding which issues to address and how.
  • Stations should not specify an issue for which no programming is identified. Conversely, stations should not list programs for which no issue is specified.
  • Under its former rules in this area, the FCC required a station to list five to ten issues per Quarterly List. While that specific rule has been eliminated, the FCC has noted that such an amount will likely demonstrate compliance with the station’s issue-responsive programming obligations. However, the FCC has noted that some licensees may choose to concentrate on fewer than five issues if they cover them in considerable depth. Conversely, the FCC has noted that other broadcasters may address more than ten issues in a given quarter, due perhaps to program length, format, etc.
  • The Quarterly Lists should reflect a wide variety of significant issues. For example, five issues affecting the Washington, DC community might be: (1) the fight over statehood for the District of Columbia; (2) fire code violations in DC school buildings; (3) clean-up of the Anacostia River; (4) reforms in the DC Police Department; and (5) proposals to increase the use of traffic cameras on local streets. The issues should change over time, reflecting the station’s ongoing ascertainment of changing community needs and concerns.
  • Accurate and complete records of which programs were used to discuss or treat which issues should be preserved so that the job of constructing the Quarterly List is made easier. The data retained should help the station identify the programs that represented the “most significant treatment” of issues, e.g., duration, depth of presentation, frequency of broadcast, etc.
  • The listing of “most significant programming treatment” should demonstrate a wide variety in terms of format, duration (long-form and short-form programming), source (locally produced is presumptively the best), time of day (times of day when the programming is likely to be effective), and days of the week. Stations should not overlook syndicated and network programming as ways to address issues.
  • Stations should prepare each Quarterly List in time for it to be placed in their public inspection file on or before the due date. If the deadline is not met, stations should give the true date when the document was placed in the public inspection file and explain its lateness. Stations should avoid creating the appearance that a document was timely placed in the public inspection file when it was not.
  • Stations should show that their programming commitment covers all three months within each quarter.

These are just some suggestions that can assist stations in meeting their obligations under the FCC’s rules. The requirement to list programs providing the most significant treatment of issues may persuade a station to review whether its programming truly and adequately educates the public about community concerns.

Attached is a sample format for a “Quarterly Issues/Programs List” to assist stations in filling out the Quarterly List. Please do not hesitate to contact the attorneys in the Communications Practice for specific advice on how to ensure your compliance efforts in this area are adequate.

Class A Television Stations Only

Class A television stations must certify that they continue to meet the FCC’s eligibility and service requirements for Class A television status under Section 73.6001 of the FCC’s Rules. While the relevant subsection of the public inspection file rule, Section 73.3526(e)(17), does not specifically state when this certification should be prepared and placed in the public inspection file, we believe that since Section 73.6001 assesses compliance on a quarterly basis, the prudent course for Class A television stations is to place the Class A certification in the public inspection file on a quarterly basis as well.

A PDF version of this article can be found at 2016 Fourth Quarter Issues/Programs List Advisory for Broadcast Stations.

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Pillsbury’s communications lawyers have published FCC Enforcement Monitor monthly since 1999 to inform our clients of notable FCC enforcement actions against FCC license holders and others. This month’s issue includes:

Headlines:

  • Broadcaster Loses Appeal of $20,000 FCC Fine
  • FCC Issues Citation for Violations of Radio Frequency Equipment Authorization and Labeling Rules
  • FCC Proposes $392,930 Fine to Telecom Provider for Excessive USF Fees, Unauthorized Transfers, and Delinquent Regulatory Fees

Ninth Circuit Upholds $20,000 Fine Against FM Broadcaster for Unauthorized Operation

The U.S. Court of Appeals for the Ninth Circuit upheld a $20,000 FCC fine against a New Mexico FM broadcaster for operating outside the parameters of the broadcaster’s construction permit.

Section 301 of the Communications Act bans the unlicensed transmission of “energy or communications or signals by radio.” Section 503 of the Act authorizes monetary fines where the FCC finds “willful[] or repeated[]” failure to comply “with the terms and conditions of any license, permit, certificate, or other instrument or authorization” issued by the FCC.

In November 2009, the FCC issued a $20,000 fine to the broadcaster for operating at variance from the broadcaster’s construction permit. Specifically, the FCC found that the station was broadcasting without authorization, and was being operated at a facility 34 miles from its authorized location.

When the broadcaster failed to pay the $20,000 fine, the FCC referred the matter for collections to the Department of Justice (“DOJ”), which, in turn, sued the broadcaster in Nevada District Court to recover the $20,000. The District Court granted the DOJ’s motion for summary judgment, and in doing so upheld the fine against the broadcaster. The broadcaster, representing himself in court, subsequently appealed the District Court’s ruling to the Ninth Circuit.

The Ninth Circuit affirmed the District Court’s ruling, stating that the DOJ provided “substantial” evidence that, for more than a year, the broadcaster “willfully and repeatedly” transmitted radio signals from a different location and at different technical parameters than those specified in the broadcaster’s construction permit. In contrast, the court explained, “taking his submissions in the most generous light, [the broadcaster has] not shown a genuine issue of material fact for trial.” The broadcaster failed to contradict any of the facts underlying the alleged unauthorized operation: (1) because his construction permit required FCC approval before commencing program testing—which the FCC never granted—the transmissions were not valid under the FCC’s Rules; and (2) because the broadcaster transmitted at variance from the terms of the permit, he was not conducting valid equipment tests, which only allow transmission to assure compliance with the permit’s terms. In reviewing the amount of the fine, the Ninth Circuit found the FCC’s decision to impose the full $10,000 base fine for each of the two instances of unauthorized operation “reasonable and not an abuse of discretion.”

Going, Going, but Not Gone: FCC’s Parting Gift to Company Winding Down Business Is Citation for Equipment Authorization and Labeling Violations

The FCC’s Enforcement Bureau issued a citation to a company for marketing radio frequency (“RF”) transmitters that were not properly certified or labeled.

Section 302 of the Communications Act prohibits the manufacture, import, sale, or shipment of home electronic equipment and devices that fail to comply with the FCC’s regulations. Section 2.803 of the FCC’s Rules provides that a device subject to FCC certification must be properly authorized, identified, and labeled in accordance with Section 2.925 of the Rules before it can be marketed to consumers. Continue reading →

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Being close observers of the FCC, Congress, and the federal government in general, we get a lot of questions about what the next year will likely bring in DC.  While changes in administrations tend to increase the number of questions like that, rarely have I been as deluged with such requests as this year.  Everyone wants to know what a Trump presidency will bring, particularly to the FCC.  In the absence of solid information, many have rushed in to fill the information vacuum.

These prognosticators tend to fall into two camps: those who project onto the new FCC all their hopes and wishes (and who inevitably will be disappointed when the FCC charts its own path), and those who are just plain guessing, figuring that they will turn out to be right 50% of the time (overlooking the fact that there are way more than two answers to most problems in Washington).  As a result, the only somewhat reliable chatter remains characteristically vague, focusing on very general trends (deregulation anyone?) and avoiding specifics.

However, even with a level of uncertainty at the FCC rarely seen in its 82-year history, there are quite a few things we can predict for 2017 with near certainty.  You’ll find all of them in the Pillsbury 2017 Broadcasters’ Calendar, published earlier this week.

For example, without even knowing what proceedings a reconstituted FCC will elect to launch this coming year, we can already predict with a high degree of certainty that the most likely day for the FCC’s filing system to implode will be December 1.  Why?  Because with the FCC’s announcement this week that NCE stations will join commercial stations in having a unified December 1 ownership report filing deadline (yes, our Broadcast Calendar is that up-to-the-minute), pretty much every station in America will be making at least one filing by that deadline, with most making multiple filings (it is also the deadline for TV stations to file their DTV Ancillary Services Reports, and for stations in eleven states to file Mid-Term EEO Reports).

There are many other deadlines and requirements spelled out in the Broadcasters’ Calendar, so at least in that regard, broadcasters will know what is coming at them in 2017.  And, as new developments occur in what promises to be a singularly interesting year at the FCC, you can be certain we’ll be discussing them here at CommLawCenter.

So if all the uncertainty is stressing you out, keep a copy of the Broadcasters’ Calendar close at hand, stay tuned to CommLawCenter, and remind yourself that 2017 isn’t a complete unknown.

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Noncommercial stations caught a break today.  For many years, broadcast stations filed annual ownership reports on the anniversary date of their license renewal deadline.  Since those deadlines varied from state to state (and even between radio and TV in the same state), determining whether a station had filed its reports on time could be challenging.  That task was further complicated by the fact that a licensee owning stations in multiple states could elect to consolidate the filing of its ownership reports for all stations on the license renewal date for any one state in which it had a station.

Ultimately, the FCC concluded that the reports didn’t need to be filed annually, and made them biennial.  The result was that it became even more difficult for the FCC to keep track of whether a station had filed on time.  In fact, a licensee that had consolidated its ownership report filing date across multiple states might not even be filing in the same year as the FCC would normally expect.

Ultimately, the FCC gave up and decided to adopt a unified national deadline for commercial TV and radio stations in 2009.  At the same time, it expanded the list of entities that were required to file the reports (previously, sole proprietorships, general partnerships composed only of individuals, and LPTV licensees were exempt).  It set November 1 of odd-numbered years as the consolidated filing deadline, and indicated that it planned to eventually adopt a unified national deadline for noncommercial stations as well.

However, the FCC quickly discovered that given the increased complexity of the reports, and the fact that the information reported in them was required to reflect a station’s ownership as of October 1 of that same year, broadcasters were having trouble generating all of the required ownership reports in just 30 days.  The FCC also had some teething pains with the new electronic form, with the result that the November 1, 2009 deadline ended up being extended multiple times, ultimately resulting in a deadline for the 2009 reports of July 8, 2010.

After that painful ordeal, the FCC in 2011 permanently moved the commercial station deadline to December 1 of odd-numbered years, providing stations with a 61-day period to file the reports.  Perhaps because of how difficult and drawn out the process of establishing a unified deadline for commercial stations had been, the FCC moved very slowly in establishing the promised unified deadline for noncommercial stations.  It wasn’t until January 8, 2016 that the FCC moved forward on that front, adopting an Order creating a new online form (FCC Form 2100, Schedule 323-E) and establishing a unified national deadline for noncommercial stations to file it.  Because the new form had to be approved by the Office of Management and Budget (and that approval published in the Federal Register) before it could be used, it has still not gone into effect, meaning that throughout 2016, noncommercial stations have continued to file on a state-by-state basis using the old form.  It therefore seemed likely that a lot of noncommercial stations would end up filing two sets of ownership reports in 2017—one set on a station’s license renewal anniversary, and one set on the likely December 1, 2017 unified filing date.

Thankfully, the FCC announced this afternoon that it would not be burdening noncommercial stations with dual filings in 2017, releasing an Order suspending all 2017 biennial ownership reporting deadlines for noncommercial stations and announcing that 2017 will indeed be the year that noncommercial stations will finally have a common ownership reporting deadline.  That deadline will be December 1 of odd-numbered years, the same as the deadline for commercial stations.

That’s good news for noncommercial stations in general, and particularly for those with limited resources to make such filings.  Consider it an early Christmas gift from the FCC.

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‘Twas the night before Christmas,
and all through the station,
staffers laughed and sang carols,
and enjoyed jubilation.

Except for the staffers in charge of the file,
who were sweating and cursing a deadline most vile.
A Christmas Eve deadline that was set by the fed,
a public file deadline that kept them from bed.

With December 24 approaching, radio stations across the country are checking their quarterly programs/issues lists twice, lest the FCC leave coal in their stocking this holiday season (and no, nothing even comes close to rhyming with “quarterly programs/issues lists”).

As we’ve posted previously and detailed in our Public Inspection File Special Advisory, the FCC adopted a Report and Order earlier this year extending its online public file requirements to broadcast radio stations, starting with commercial radio stations in the Top-50 Nielsen Audio markets with five or more full-time employees.

Beginning June 24, 2016, these “First-Wave” radio stations were required to upload, on a going-forward basis, all public file materials created on or after that date (with the exception of letters and emails from the public, which, as we’ve explained before, should not be uploaded to the online file due to privacy concerns and instead must be maintained in the local public file).  The online public file requirements won’t kick in for all other radio stations until March 1, 2018.

These First Wave radio stations have until December 24, 2016 to upload all public file documents created prior to June 24.  There are a few exceptions.  The first (for the reason noted above) is letters and emails from the public.  The FCC has had a proceeding pending since May to eliminate this requirement entirely, but has not yet done so.  The other exception is political file materials, which stations need only upload on a going-forward basis.  First Wave stations may continue to retain political file documentation that existed prior to June 24 in their local public files until the expiration of the two-year retention period.

On the TV side, where online public files have been the norm since 2012, the FCC has handed out admonishments and thousands of dollars in fines to stations for failing to upload all required materials on time.  While many Americans try to save money by delaying their shopping until after Christmas, missing this Christmas Eve rush could be quite expensive.  The FCC’s Enforcement Bureau doesn’t believe in post-holiday discounts.

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At the end of Stage 2 of the Spectrum Auction, I wrote about bidder fatigue and the hope that the FCC would drop its spectrum clearing target a couple of notches for Stage 3 to expedite the conclusion of a now seemingly interminable auction.  Unfortunately, the FCC held fast to its incremental approach.  As a result, the FCC attempted to clear 108 MHz in Stage 3, leading to a reverse auction that lasted 30 days and resulted in a $40.3B target for the forward auction.  That was roughly double the amount of money bid in the forward auction in Stages 1 and 2.  Also, with the Stage 2 forward auction concluding after only one round of bids, it seemed unlikely the skies would suddenly open up and start raining big-dollar forward bidders in Stage 3.

That has now proven true, as the Stage 3 forward auction commenced at 10am this morning and officially ended at 12:01pm.  Like Stage 2, it lasted only a single round of bidding.  Technically, it concluded even faster than Stage 2, which took 2 hours and 14 minutes before being declared over, a whole 13 minutes longer than today’s auction.  Having taken six years to reach this point, the fact that we are measuring entire auction stages in minutes is disappointing to say the least.

The good news?  The FCC is apparently feeling at least some urgency to move the auction along to a conclusion, announcing today that it anticipates launching the Stage 4 reverse auction on Tuesday, December 13.  Unfortunately, with the Stage 1, 2, and 3 reverse auctions taking 28 days, 30 days, and 30 days respectively, even a fast-moving Stage 4 can’t conclude the auction in 2016.

While the forward auction bid totals have dropped in every stage of the auction as the amount of spectrum being sold has dropped ($23.1B in Stage 1, $21.5B in Stage 2, and now $19.7B in Stage 3), the totals have been fairly consistent.  To declare the auction concluded, the FCC will at a minimum need forward auction payments to cover the reverse auction total, the $1.75B for repacking, and the several hundred million in auction expenses incurred.

As a result, the spectrum clearing target will likely need to drop until the total bids in the reverse auction are less than $17B.  That would allow the FCC to cover the reverse auction payments for spectrum plus the roughly $2B in repacking costs and auction-related expenses if the forward auction still brings in $19B or so.  However, since the total forward bids have dropped a bit in each stage, it’s reasonable to assume that trend will continue, meaning total reverse auction bids will need to drop significantly below $17B for the auction to finally conclude.  That’s quite a way from today’s $40+B target and, barring some surprises, makes it likely the auction will see a Stage 5 and perhaps a Stage 6, taking us far into 2017.

When the National Broadband Plan was announced by the FCC in 2010 as a way of repurposing spectrum while reducing the federal deficit, broadcasters were, for the most part, decidedly uninterested in the reverse auction.  Only after the FCC presented sky-high valuations for broadcast spectrum in the Greenhill Report did shareholders insist broadcast companies take a closer look.  It now looks like that initial disinterest was fully justified, with most broadcasters having spent more on their auction participation and forgoing deal opportunities during the “quiet period” than they can ever hope to derive from the auction itself.

So broadcasters’ first instinct regarding the Spectrum Auction may well have been the right one.  And that part about the excess auction proceeds reducing the federal budget deficit?  Turns out that’s not happening either.