Auction Comment PN on Circulation Proposes Scoring Broadcasters Based on Population
A draft of proposed rules for the incentive auction circulated among commissioner offices Thursday proposes setting opening bid prices for the reverse auction based on TV stations' population served and the amount of interference they cause, FCC officials told us on background. The draft item, called the auction comment Public Notice, will eventually go before the full commission for a vote before being offered up for public comment, as expected (see 1410160056).
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Along with prices for both the reverse and forward auctions, the draft auction comment PN contains details and seeks comment about the benchmark amounts for determining the auction's final stages, the definition of what constitutes an impaired market for wireless spectrum, and details of how the auction rules will apply to “beachfront” spectrum reserved in the auction. After the auction comment PN goes through the rule-making process, the next step is an “auction procedures” item that will be released next year to allow enough time for the FCC to accept auction applications in September and then hold the auction in 2016, the FCC officials said.
A pricing methodology that accounts for population served in calculating opening bids is different from that used in the Green Hill information packages sent out to broadcasters in the summer, which presented estimated final prices for stations calculated based on a station's interference level. At the release of the Greenhill “books,” Incentive Auction Task Force officials characterized the Green Hill pricing system as “similar” to what was being contemplated for the auction. Broadcasters have told us their auction prices shouldn't depend on any factor but interference.
Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden, who has long stressed that other pricing systems will discourage broadcaster participation, wouldn't comment on the draft auction comment PN. But he has told Communications Daily in the past that scoring stations based on population is not “appropriate” (see 1405160059). Asked why the PN had not used only interference, the officials said the methodology was designed to create opening bids high enough to encourage robust participation but not so high that the auction takes too long to close. As a reverse auction, it will close when prices reach a point at which no one wants to sell their spectrum. However, they also said the draft auction comment PN's inclusion of population is expected to lead to higher final prices for broadcasters. NAB wouldn't comment.
Prices for opening bidders in the forward auction will be determined by bidding units assigned to each license, also based on population, the FCC officials told us. Those prices will be weighted based on the value of spectrum in each license's market -- markets where spectrum has fetched higher prices are weighted more heavily, similar to the system used in the AWS-3 auction, the FCC officials told us.
The draft auction comment PN contains specific proposed numbers for auction processes like the final stage, but the FCC officials declined to release those figures before the commissioners have had a chance to weigh in on them. The methodology for determining the final stage will be based on a certain amount of spectrum being cleared and the average price per MHz pop reaching a specific level, the FCC officials said. The comment PN doesn't set a number for a nationwide clearing target because the commission doesn’t know how much spectrum will be cleared in the auction, but it seeks comment on a formula for calculating it and determining how much variation there is market to market, the FCC officials said
The draft comment PN also seeks comment on how to determine impaired areas -- places where carriers wouldn’t be able to use wireless spectrum because of TV stations operating in wireless spectrum, the FCC officials said. The draft item proposes two categories of license, depending on how much of a population is subject to interference from broadcast stations, the officials said.
To keep within the $1.75 billion fund for relocating stations bumped by the auction, the draft PN also proposes a set of considerations for use in reassigning stations to new channels, the officials said. They include maximizing the number of stations that don't have to move, minimizing aggregate interference and avoiding particularly costly reassignments, the FCC officials said. Stations will get a provisional channel reassignment at the end of each reverse auction stage, but their final channel would be determined using those considerations, the officials said.