Certainty on Incentive Auction Timetable on Its Way, Epstein Says
Industry will soon get a timetable laying out in more detail FCC plans for the TV incentive auction, Gary Epstein, chair of the FCC’s Incentive Auction Task Force, told us Monday night, at an FCBA seminar on the auction. The FCC is reviewing the timeline and plans to make it public “reasonably soon,” Epstein said. FCC Chairman Tom Wheeler is pushing for an auction next year, following the AWS-3 auction, slated to start Nov. 13.
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Most of the top FCC officials working on the auction spoke at the session. FCC officials listed eight additional steps that must be completed before the auction. They include auction comment and auction procedures public notices, an inter-service interference public notice, designated entity, unlicensed and wireless microphone proceedings and a proceeding on low-power TV and translators.
Epstein told us most, but possibly not all, of these steps must be completed before the auction. “Some maybe can lag a little bit, like wireless microphones, but our schedule is to get them all done before the auction,” he said. In another development of note, Howard Symons, task force vice chairman, said the FCC soon will release the pricing data sought by broadcasters eager to get a better idea of how much they stand to gain if they sell their spectrum in the auction.
"Nothing matters as much as how much money the commission is going to offer the broadcasters so they need to get that guidance out soon,” said Preston Padden, executive director of the Expanding Opportunities For Broadcasters Coalition, who also spoke Monday. An auction timeline is also critical “because broadcasters have existing businesses with building leases and tower leases and programming contracts,” he said. Padden said he expects a time frame from the commission within the next month.
Broadcasters also need clarity on a concept put forward by the FCC -- “dynamic reserve pricing,” Padden said. It would allow the commission to throw out high initial prices for spectrum, but the concept remains a “black box” that has yet to be fully explained, he said. “We are sympathetic to the goal; we understand what they're trying to do,” he said.
NAB Executive Vice President Rick Kaplan was asked if he thinks a mid-2015 auction is realistic. “I think it’s going to be earlier than the chairman says,” Kaplan said, to loud laughter from the FCBA members. “I don’t want anyone to accuse NAB of delay.”
Wall Street and investors need to know “the rules of the game” before they can decide whether investment in the auction is a good idea, said Jennifer Fritzsche, analyst at Wells Fargo Securities. “We're taught to believe that spectrum is like money, you can never have enough of it,” she said. “That’s the message very much from the carriers.” Asked about the likelihood of a mid-2015 auction, Fritzsche said the consensus seems to be that timetable is “optimistic” given all that remains to be done.
To Wall Street the AWS-3 auction seems safer and less complicated than the incentive auction, Fritzsche said. AT&T officials “seem more optimistic than I've heard them be in a long time” about the incentive auction, and Verizon officials seem to share that optimism, she said. She reminded the audience of regulatory lawyers that “at the end of the day” investors will look at the effect on cash flow and the balance sheet for each of the carriers. Investors will be watching how cash flow will be affected by “the billions of dollars that are clearly going to be spent here,” she said.
Sprint CEO Dan Hesse has made clear the carrier needs the low-band spectrum that will be offered, Fritzsche said. But she sees a risk that if regulators reject a Sprint/T-Mobile deal, Masayoshi Son, CEO of SoftBank, which owns a majority stake in Sprint, will choose to sit out the auction. “I think that’s a slippery slope” because Sprint needs low-band spectrum “especially now” to compete with AT&T and Verizon, she said.
AT&T and Verizon stand to benefit if Sprint and T-Mobile sit out the incentive auction, Kaplan said. T-Mobile is likely to be a big player in the AWS-3 auction, but may not take part if it’s tied up in a merger with Sprint, he said. “It’s very complicated” and could create “a real ticking time bomb … that affects all of the auctions,” Kaplan said. “We're very hopeful that the FCC will conduct the auction in the middle of 2015, no matter what Sprint and T-Mobile do,” Padden said.
Small carriers are optimistic about the auction, said Tara Shostek, regulatory counsel at the Rural Wireless Association. Small carriers are used to getting “crumbs” and this time hope they will get a full “slice” of the pie in the incentive auction, she said. The incentive auction will offer spectrum in 416 Partial Economic Area licenses, Shostek noted. That license size is “bigger than what a lot of the rural carriers wanted” but small enough that many will participate in the auction, she said.
CTIA hopes for an auction in the mid-2015 time frame, said Scott Bergmann, vice president-regulatory affairs. “That’s certainly an important thing.” Bergmann said it is difficult to estimate how much spectrum will be up for sale in the auction, but if designed properly, “the market will decide.”