Incentive Auction Will Complicate Quadrennial Review

The FCC's upcoming quadrennial review of its broadcast ownership rules will be greatly complicated by the ongoing incentive auction and is unlikely to be resolved under the current commission, broadcast attorneys told us. FCC Chairman Tom Wheeler repeatedly has said and the FCC told a federal appeals court that a draft quadrennial review order will be on circulation by June 30, but that date almost certainly will fall in the midst of the incentive auction, broadcast and public interest attorneys told us. That means at the time of circulation, neither the FCC nor the broadcast industry itself will know what broadcast stations in what markets will be staying in business, or how diverse the remaining owners will be, the attorneys told us. “The auction is a black hole,” Fletcher Heald broadcast attorney Frank Montero said. “It's going to be extremely difficult to come out with reasoned policy,” he said.

“Taking action at this time, particularly when the broadcast television industry is undergoing a radical transformation via the incentive auction[,] would be imprudent, particularly since the Commission has no analysis about the impact of the auction on ownership diversity at this time,” said the Leadership Conference on Civil and Human Rights in an ex parte filing earlier this month.

Since the incentive auction is likely to change the number and distribution of U.S. broadcasters, information collected before the auction is complete would likely be “irrelevant” for use as a basis to change ownership rules, said public interest lawyer Cheryl Leanza, who represents the United Church of Christ. The FCC has already released a study of Hispanic-owned stations (see 1604290019) that's seen as being a precursor to the quadrennial review order, and some attorneys expect the FCC eventually to release the results of data collected through its broadcast ownership Form 323. But the information in those reports won't reflect the post incentive auction landscape, Leanza said. “I don't know how they could justify the record with the auction,” she said. The FCC didn't comment.

Though the final results of the incentive auction can't be known, many minority-owned station owners are expected to sell their spectrum and leave the industry, several attorneys told us. It's not clear how the FCC could account for such changes in an order drafted before the auction is complete, Georgetown Law Institute for Public Representation Senior Counselor Andrew Schwartzman said. Though broadcasters don't have to immediately leave their sold spectrum after the close of the auction, the number of broadcast voices in each market could change rapidly, Pillsbury Winthrop Broadcast Attorney Scott Flick told us. Stations that have sold their spectrum will want to cease operating as soon as possible, he said. “Once you have sold your spectrum to the Feds, you don't want to spend another dime on your station,” he said.

Under any auction scenario, the FCC already has the justification to change the cross-ownership rules, one broadcast attorney who favors deregulation of broadcast ownership told us. The rules are “unnecessary” and the number of stations left after the auction wouldn't change that, the attorney said. "The commission shouldn’t make any changes to the rules until they know how many stations will stop broadcasting and the makeup of those stations,” Schwartzman said. Though Schwartzman said the combination of the auction timing and Wheeler's promised June 30 quadrennial circulation date created a problem, he said the blame lay at several feet. “In fairness, Chairman Wheeler inherited a mess because of the studied inaction of his predecessors,” Schwartzman said.