With Repacking Estimated to Cost $365 Million More Than in Fund, Some Eyes on Congress

The preliminary estimated expense of the post-incentive auction repacking of $2.12 billion (see 1707140054), $365 million more than the $1.75 billion reimbursement fund intended to cover those costs, drew some concerns even as the shortfall was less than some feared. That Incentive Auction Task Force number could change as broadcaster requirements and standards for what's reimbursable become clearer and a few submissions that hadn't been included from a small number of broadcasters and MVPDs are totaled. Having a deficit to cite is expected to bolster broadcaster lobbying efforts to have Congress increase the reimbursement fund amount, said Pillsbury broadcast attorney Scott Flick. Such legislation may come soon.

Legislation to address a funding shortfall could be filed in the Senate before the start of that chamber's August recess, with a bill dropping as soon as this week, industry lobbyists told us. Sen. Jerry Moran, R-Kan., is believed to be a leader in drafting the bill, they said. Moran led work on the draft Viewer Protection Act circulated in December (see 1612090054). Moran's office didn't comment. House Communications Subcommittee ranking member Frank Pallone, D-N.J., said he plans to file his own version of the bill this week.

FCC Chairman Ajit Pai also could seek a heftier reimbursement fund on broadcasters’ behalf, attorneys said. The agency didn’t comment on how Pai would proceed, but Commissioner Mike O’Rielly said he would support broadcasters in seeking more funds. “If it turns out that legitimate expenses exceed the statutory limit, which is not unreasonable to assume at this time, I have always said that I would be the first to make the case to Congress for additional funds,” O’Rielly said. “No broadcaster or MVPD, nor their viewers or listeners, should be harmed by the repack process."

The estimated cost of the repacking is based on the total of estimates submitted by broadcasters last week, before the FCC goes over the submissions and selects those it deems reimbursable. A broadcast attorney said has clients whose submissions included requests the FCC is unlikely to approve, and the process is likely to reduce the amount of the shortfall significantly.

Other broadcasters may need to adjust requests upward as the repacking progresses, NAB said. Since the filings Wednesday were estimates, they could change in practice, broadcasters said. Friday's number also includes some broadcasters with difficult repacking reassignments that likely will have their repack channels ultimately adjusted, an IATF spokesman said. In such situations, an alternate channel assignment could reduce the costs.

Even with the actual difference between costs and the reimbursement fund unclear, the numbers are close enough that broadcast attorneys see it as a positive for stations and the FCC. Asking Congress for $200 million or $300 million isn’t as heavy a lift as asking for half a billion, one attorney said. Going to Congress with requests that have a price tag attached is always difficult, Flick said. Since both broadcasters and wireless carriers want the repacking to proceed smoothly, it’s not immediately clear where opposition to a request for more repacking funds would come from, though it would mean less income for the Treasury from the incentive auction, an attorney said. The incentive auction generated $7 billion for the Treasury.

With a hard number to cite, NAB will have more ammunition in its push to have the reimbursement fund increased, industry lawyers said. The lobbying push is likely to gain more momentum when the IATF assigns each broadcaster its allocation of the reimbursement fund, since the difference between cost and reimbursement fund will have then crystallized, an attorney said. “NAB will work closely with Congress to address this issue, and to additionally ensure that no TV viewer or radio listener loses access,” said NAB CEO Gordon Smith. “Congress's passage of the voluntary broadcast TV incentive auction legislation was premised on a promise that no TV station would be punished for not participating in the auction.”

Increasing the amount of funds for the repacking might not be the only adjustment broadcasters need, Flick said. NAB seeks extension of the 39-month repacking deadline, but the legislative language on the reimbursement fund included a limit on how long the FCC has to reimburse broadcasters. If the repacking is lengthened and more money is added to the fund, legislators likely also would need to adjust that deadline, Flick said. Further pressure will be put on the repacking deadline later on in the process, when it becomes clearer that broadcasters aren’t going to meet it, a broadcast industry official said.

Early stages of the repacking are keeping broadcast engineers busy, said Bob du Treil, president of du Treil, Lundin. Since repacking construction permit applications and cost estimates were both due on the same day, engineers were spread thin in the industry, broadcast attorneys said. “Virtually all of the stations that needed to file a CP application did so by the deadline,” an IATF spokesman said: “Some -- less than a dozen -- experienced technical issues” but won’t be considered late-filed. Twenty-five petitions for waiver of the deadline from stations seeking to file in the priority window were granted, the IATF said.