Perhaps indicating that the rapid conclusion of Stage 1 of the Incentive Auction was not a surprise to the FCC, the Commission moved with lightning speed to announce that Stage 2 of the auction will commence on September 13 with a spectrum clearing target of 114 MHz. In a Public Notice released less than 24 hours after Stage 1 concluded, the FCC effectively indicated that it was staying the course, and reducing the spectrum clearing target by only 12 MHz for the next stage. In light of the lackluster results of Stage 1 that we discussed yesterday, many wondered if the FCC would, or legally could, make a more significant adjustment in the spectrum clearing target to expedite the conclusion of the auction. It now looks like auction participants will indeed be in for a long slow march to the point where spectrum supply meets demand.
However, the quick release of today’s Public Notice at least minimizes the administrative delay in the process. In fact, the Public Notice also announced that “[b]idding in the clock phase of Stage 2 of the forward auction will begin on the next business day after the close of bidding in Stage 2 of the reverse auction.” That will eliminate the downtime between the reverse auction and forward auction that slowed Stage 1, and will require forward auction participants to be extremely alert for the end of the reverse auction, lest they miss their opportunity to bid in the forward auction.
Also indicating that the FCC was well-prepared for the move to Stage 2, the Public Notice announced that the FCC will make an online tutorial available for Stage 2 participants tomorrow, September 1. The tutorial will be found on the Auction 1001 website in the “Education” section, and the FCC is encouraging all broadcasters still eligible to participate in the reverse auction to review the tutorial. Stations that exited the auction in Stage 1, whether due to withdrawing from the bid process or because the station was not needed in the auction, will not be able to return for Stage 2. In addition, stations that did not exit in Stage 1, but which are not needed in Stage 2 due to the lower spectrum clearing target, will not be allowed to bid in Stage 2. However, regardless of whether they are eligible to participate in Stage 2, all full power and Class A TV stations remain subject to the rule against discussing bids or bidding strategies. Indeed, the Public Notice indicated that “communicating that a party ‘is not bidding’ in or has ‘exited’ the reverse auction could constitute an apparent violation that needs to be reported.”
Given that the auction process has begun to drag out, and may drag out further, the FCC also reminded participants to keep their auction applications (Form 177 for broadcasters, Form 175 for forward auction bidders) up to date, filing any necessary amendments to those applications within five days of a “significant occurrence”.
After being told for the last several years that mobile broadband was a more valuable use of their spectrum, broadcasters might be disappointed in the economic results of Stage 1, but were not truly surprised. They have been arguing for years that their point-to-multipoint business model is a far more efficient use of spectrum, and that if spectrum is worth less in their hands than in the hands of cell phone companies, it is only because broadcast spectrum is burdened by excessive regulation—regulation that the FCC ironically reaffirmed as essential to the public interest less than a week ago in its Quadrennial Ownership Review. While the auction may not turn out to be the economic windfall broadcasters had been promised, there may still be some value to it, if only to prove that broadcast spectrum is already being put to its “highest and best” use.