No Reason for FCC to Hold Incentive Auction in 2014, NAB’s Kaplan Says

"A large majority” of the nation’s broadcasters will sit out the TV incentive spectrum auction, NAB Executive Vice President Rick Kaplan predicted Tuesday during a webinar sponsored by the Digital Policy Institute. Kaplan, a former FCC Wireless Bureau chief, also questioned why the FCC continues to push for a 2014 auction. Preston Padden, head of the Expanding Opportunities for Broadcasters Coalition, said the auction should be a success as long as the FCC gets the rules right.

"A majority of broadcasters, a large majority, are going to stay in the business and the FCC wants them to as does Congress, because we fulfill a role that nobody else does,” Kaplan said. “We're reliable when wireless networks go out.” Emergency alerts issued by carriers through the Commercial Mobile Alert System tell people “go check your local media in a time of emergency,” he said. Most broadcasters “just want to held harmless,” Kaplan said. “There should be no cost” to broadcasters from the transition. “It’s a voluntary auction. They didn’t want to be involved and that means their service area should be almost essentially the same as before.” Viewers should be able to receive the same stations they receive now after the auction, he said.

The FCC needs to take the time to get the 600 MHz band plan and other rules right, Kaplan said. “The number one thing is for the FCC to take its time to make sure that the technical decisions that it’s making are the correct ones,” he said. “We've seen what happens when you roll out something too quickly. You can have problems with it. Spectrum policy is no different.” Kaplan said interference issues between the 700 MHz A-block and Channel 51 licensees were recognized before that auction took place: “Those were known quantities, but not really talked about and explored deeply by the FCC so then you ended up with an interoperability problem that took the better part of several years to even start to chip away at.”

Kaplan questioned why the FCC needs to hold an auction in 2014, the agency’s often-stated target timeline. “There really is no rush, there just isn’t,” he said. “Any rush is self imposed. Something can be a priority but not a rush.” Kaplan also warned that litigation could slow the auction.

"If you look at the hockey stick growth in the demand for wireless broadband and the dearth of other places to look for spectrum I can’t imagine the FCC going for anything less than the 120 MHz that was identified in the National Broadband Plan as the goal to remove from broadcasting,” Padden said.

Padden said broadcasters could see high prices for their spectrum in many markets. “You could well get more than the price the wireless carriers are offering in your market because the chief of the Media Bureau has announced the FCC is only going to be buying spectrum in 25 or 30 markets and in the other 180 markets they will get the spectrum they need essentially for free and they can use all of that revenue to cross-subsidize the purchases they need to make in the biggest markets,” he said. Some broadcasters could see a “tenfold increase” in the value of their spectrum, he said.

"It is important that the auction timetable not really slip unduly,” said Randolph May, president of the Free State Foundation, who was also on the webinar. “It’s also important that you get it right and you can’t throw something together just in the name of speed.”

The discussion veered into the question of whether the FCC should impose restrictions of bidding by Verizon Wireless and AT&T in the incentive auction. Auctions “shouldn’t be encumbered or conditioned with extraneous conditions,” May said. “Experience has shown … that when the FCC starts to mess around with the auctions in a way that attempts to deviate from that principle of an unencumbered auction the results are not always pretty.” May cited the 1996 PCS auction, where auction rules favored small businesses with limited resources. NextWave, which eventually filed for bankruptcy and defaulted on its payments for the spectrum, was a leading bidder in the auction. “The conditions that time had to do with the FCC essentially becoming a banker for the first time and that resulted in the NextWave fiasco and that tied up spectrum for about 10 years,” May said.

Padden agreed the FCC “does not currently have in its possession the spectrum that it’s proposing to auction to wireless carriers. If they impose bidding restrictions on AT&T and Verizon it could well reduce the pool revenue coming into this proceeding so that the commission does not have enough money to meet the price expectations of willing broadcast sellers with the result that the auction would fail and no carrier would get any new spectrum.”

Sprint and T-Mobile would be the primary beneficiaries of caps, May said. “The market in my view really is effectively competitive now,” he said. Sprint and T-Mobile “aren’t mom and pop operations,” he said. “They're owned by some of the largest companies in the world really, global corporations that are highly capitalized. … They have the resources to bid in an open, unencumbered auction."