Auction Dynamic Pricing Plan Opposed by Broadcasters, Wireless Industry

A pricing plan proposed in the upcoming draft FCC incentive auction comment public notice is seen by many as discouraging broadcasters from participating in the auction and increasing the likelihood of interference between repacked broadcast stations and wireless uses, wireless and broadcast industry officials told us. The PN on circulation and slated for Thursday’s FCC meeting proposes basing initial offers to broadcasters in part on the population they serve, and also proposes using a dynamic reserve pricing system, said Expanding Opportunities for Broadcasters Coalition Executive Director Preston Padden and other industry officials. Under that DRP system, some broadcasters in the auction could face a choice of either being repacked into the wireless band or having already-locked-in bids for their stations unexpectedly reduced. Called the “antithesis of simplicity” by Padden in a recent ex parte filing, the DRP proposal is opposed by wireless, unlicensed and broadcast industry stakeholders because of its complexity and since it would increase interference and variability in the spectrum band plan, said a wireless industry official.

The FCC wants to use DRP to preserve pricing flexibility, said a wireless industry official. It would be used as a “safety valve” to prevent difficult-to-repack stations in highly congested areas, adjacent to a lot of valuable spectrum, from receiving much higher prices than surrounding stations, the wireless official said. Under DRP, some of the outlier stations in that situation would be given the choice of receiving less money in the auction than they initially expected, or else being repacked into the wireless band in spectrum that would be somewhat impaired, FCC officials have said. The amount of acceptable impairment is one of the concepts up for comment in the PN, they have said. The FCC Incentive Auction Task Force declined to comment.

Since it results in “variable, illusive prices,” DRP will create distrust among broadcasters weighing whether to participate in the auction, Padden said. Broadcasters “will see DRP for what it is: a ham-handed way to attempt to limit payments to broadcasters,” Padden said in a PowerPoint presentation on the matter. The more complicated the FCC makes pricing, the less likely broadcasters are to participate, a wireless official told us: “It is essential to have a clear and transparent auction.” Though NAB hasn’t weighed in on the PN, Executive Vice President Rick Kaplan said that if the proposal would lead to more broadcasters sharing spectrum with wireless users, the association likely will oppose that aspect. That concern is shared by the wireless and unlicensed spectrum interests, said a wireless official.

The PN's use of the DRP suggests auction planners must have strong concerns about the need for pricing flexibility to successfully conduct the auction, the official said. DRP and auction pricing aren't yet top concerns for his clients, said Fletcher Heald broadcast attorney Frank Jazzo. With the auction date having been pushed back, pricing is not an immediate problem, he said. Though Padden has been meeting with FCC commissioners and addressing conferences on the matter, several broadcast attorneys said they didn’t feel familiar enough with the issue to weigh in on whether it’s a problem for the auction. If only “a handful” of industry professionals understand the pricing plan, it's unlikely station owners new to the incentive auction rules will be able to do so, the wireless official said. “It will be difficult for most, if not all broadcasters to understand, inspiring distrust of the FCC’s management of the auction, Padden said in an ex parte filing.