Ownership Discount for VHF Stations Could Encourage Participation in the Incentive Auction
An ownership discount for VHF TV stations could encourage participation in the incentive auction, said a broadcast attorney and a broadcast engineer in interviews Thursday. Such a discount is among the items the commission would seek comment on in a draft NPRM on eliminating the existing UHF discount for calculating the 39 percent national ownership cap (CD Aug. 14 p1). Since UHF stations became more desirable for broadcasting than VHF stations following the DTV transition, and freeing up UHF spectrum is one of the incentive auction’s goals, a VHF discount might be intended to encourage more stations to participate in the auction, said Fletcher Heald broadcast attorney Frank Jazzo. An ownership discount for VHF stations “could make it a lot more desirable for stations to move to VHF,” said Bob du Treil, president of engineering firm du Treil Lundin.
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"VHF is at a disadvantage in a digital world,” said du Treil. DTV transmissions over VHF are vulnerable to interference from power lines and common household devices, a problem that UHF doesn’t have, he said. Before the DTV transition, the UHF discount was merited because UHF transmitters and receivers were more expensive than VHF ones, and making a UHF signal travel as far as a VHF signal was costly, du Treil said. With DTV, UHF signals have become superior, he said, especially to low-band VHF stations in channels 2 to 6. Full-power broadcasters have found a “significant loss of coverage” for low-band VHF stations as compared with UHF stations or even higher band VHF, said Jazzo.
Du Treil also said VHF has some advantages, meaning its problems may not merit a new discount. Even post-DTV transition, giving a UHF signal the range of a VHF signal is still expensive, du Treil said. VHF interference is much more pronounced in dense urban areas, so VHF stations in rural areas don’t face as many problems, he said. UHF is a “beachfront property” that will be “squeezed” by the incentive auction, so a VHF discount as an extra incentive to clear it would make sense, said Jazzo. Eliminating the UHF discount -- the NPRM’s main concern -- also would encourage auction participation, said Stifel Nicolaus analysts in a Thursday email to investors. “If broadcast aggregators have less headroom to buy more TV stations, it stands to reason that some additional broadcasters seeking to exit might be interested in selling their spectrum in the auction for wireless repurposing."
Analysts disagreed over what the NPRM’s effect will be. “The UHF discount’s days are numbered,” said Stifel. “Our sense is even most broadcasters recognize this.” However, Wells Fargo’s Marci Ryvicker was less sure that the NPRM would lead to action. “This NPRM is JUST a set of proposals that has gotten way too much air time from the media,” she emailed investors Thursday. Rule changes from the NPRM could also be delayed to allow FCC Chairman nominee Tom Wheeler to weigh in, or by any lawsuit, Ryvicker said. “Broadcasters could take this action to court, causing a significant delay.” While a UHF discount would probably be eliminated, Stifel is less sure about the VHF version, analysts there wrote. “We would be surprised if that ultimately is adopted.”