Class A’s Concerned about Spectrum Auction
Uncertainty about the details of the upcoming spectrum incentive auction and a perception of unfair treatment by the FCC has Class A owners worried about the future of their stations, said several owners and other industry officials in interviews. “How can you know if you should sell your business if you don’t know the value, or even how the auction will work?” asked Vincent Castelli, general manager of a Prism Broadcasting Network Class A in Atlanta. The executives we spoke with elaborated on questions they have for the commission, some of which were posed at a Media Bureau event at the NAB Show (CD April 10 p9).
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Ron Bruno originally planned to participate in the auction, before a lack of information from the FCC on the value of spectrum in the auction and questions about its timing discouraged him, said the owner of several Pittsburgh Class A’s. “There’s so much uncertainty. I have to proceed as if there isn’t an auction,” the president of Bruno Goodworth Network said: “I don’t think anyone is planning” to participate in the spectrum auction. Class A owners also say they continue to worry about public-file related notices from the bureau, a list of which is at http://www.warren-news.com/showcause.htm.
Bruno said the primary concern among Class A’s is how the FCC will value each station’s spectrum. Comments from FCC Incentive Auction Task Force Chief Gary Epstein at the NAB show (CD April 10 p1) seemed to many station owners to indicate that stations’ coverage area or monetary value might be factored into how their spectrum is priced. Class A owners said they worry this will greatly reduce the price they receive for their spectrum. “Any type of scoring that doesn’t create a level playing field ... is going to make me say, ‘guess what, I'm not in the auction,'” said Bruno. Castelli also said uncertainty about spectrum price is being enhanced by companies that are apparently speculating on the spectrum market, buying up multiple stations as the auction gets closer.
KAXT San Francisco owner Warren Trumbly is selling his station to OTA Broadcasting for just more than $10 million because of the uncertainty about the spectrum auction, he said. The Spectrum Act and the process leading up to that 2012 law made it clear that there would be extremely limited space on the dial for low-power TV and Class A stations, he said. “I don’t have any confidence about the repacking,” said Trumbly. “I have investors, I don’t want to gamble.” Trumbly said he made the decision to sell after Congress passed the law, but the lack of information provided by the FCC at NAB’s show cemented his decision. “The people participating in the auction are taking a bigger risk than I am,” said Trumbly. “This is a death warrant for Class A stations and low powers."
Bruno said uncertainty about the auction is forcing Class A’s to make what could be unwise business decisions. Since they don’t know if they'll participate or even when the auction is, entering into long-term leases for broadcast towers or office space, or even into contracts to broadcast content, has become risky for broadcasters, he said. “You could be paying to run something for a year when you might not even have a station,” Bruno said. “It affects everything about your business.”
Recent FCC behavior toward Class A’s is also feeding station owner insecurity, said some owners. The agency recently instituted a retroactive freeze on new applications for Class A and full-power status (CD April 8 p5), and attorney Michael Couzens, who represents several Class A owners, said the FCC has been using public file regulations to force Class As into giving up their spectrum. Since February 2012 when the act passed, 38 Class A stations have received bureau orders to show cause why they shouldn’t be downgraded to regular low-power status, and 18 of them have lost Class A status. Our research also shows that 12 Class A’s got notices of apparent liability for violations of public-file rules totaling $133,000.
Couzens said numerous stations have received letters that threaten large fines for violations of public-file regulations. The letters say the fines will be waived if the station demotes itself to a LPTV, which would then free up their spectrum to be auctioned without the licensee being paid, he said. LPTVs aren’t protected under the act like Class A’s, which also are low power but have obligations and protections of full-power stations. “It’s obvious to me that the purpose of these letters is to free up spectrum for the incentive auction,” said Couzens. “It’s an improper use of an enforcement mechanism to downgrade facilities that Congress has said were in the public interest.” A bureau spokeswoman declined to comment.
Squeezing out the Class A and LPTV stations will work against the FCC’s diversity goals, since many of the channels that serve minorities and non-English speakers -- and by extension, employ them -- fall into those two categories, some industry officials say. Trumbly’s station had multiple channels in Vietnamese and Taiwanese, and he said the repacking of TV channels related to the auction will cost minorities jobs. The repacking will also affect the diversity of opinions on the airwaves, said General Manager Mike Gravino of the Civic Affairs Network of various low- and full-power stations that aims to create a nationwide over-the-air rival to C-SPAN. The repacking will also affect the diversity of opinions on the airwaves, “leaving no room for civic concern” on the broadcasters that remain, he said. Trumbly said that with the “perfect storm” of the spectrum auction and the recent setbacks for broadcasters in the Aereo case (CD April 17 p5), he believes the whole broadcast industry is on the way out. “Why would you want to broadcast over the air now?” Trumbly asked.