Ion Seeking Repacking Reimbursement Changes; Broadcasters Want More Upfront
Ion's seeking changes to FCC repacking reimbursement processes comes as the payment plan is a problem for many, broadcast industry officials and their attorneys told us. Ion’s petition in docket 12-268 asks the FCC to change its plans for reimbursing station owners (see 1707310068) to give them access to 100 percent of estimated reimbursement funds upfront, plus changes to what modifications are considered upgrades for stations, and restrictions on how an operator can adjust its signal.
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Lawyers said many broadcasters will be strained in funding their repacking without the full reimbursement provided upfront, and by virtue of owning a vast number of stations in large markets, Ion will be disproportionately affected by repacking costs. Since there’s a shortfall between the reimbursement fund and the repacking cost, some owners are resigned to getting less money upfront, said Holland and Knight's Charles Naftalin. Ion didn't comment.
The agency's plan for distributing reimbursement “will impose a significant financial burden on broadcasters,” Ion said. Since the commission will give commercial stations up to 80 percent of their estimated costs upfront, “many if not most broadcasters” will need to “debt-finance purchases” to pay for their repacking efforts, Ion said, and the reimbursement amounts won’t cover financing charges. Ion wants the FCC to hold a further proceeding to alter the reimbursement payment process and adjust its stances on what constitutes an upgrade. It urged the FCC to lengthen the timeline for the repacking, change rules limiting adjustments to station contours, and provide special considerations for stations repacked into the congested channel 14.
Costs of repacking look to be in the tens of millions of dollars apiece for some stations, a broadcast industry official said. Coming up with the cash to cover even a portion of such a hit will be tough for many licensees, the official said. Some equipment manufacturers are requiring payment upfront, which is expected to put a steeper demand on the initial allocations, an attorney said. Ion also says it faced price gouging in congested markets: “Because the parties controlling the repack resources know that broadcasters have strictly limited time and no effective choice, the cost of these inputs is rising.”
The reimbursement payments are broken into an upfront portion and a reserve to enable the FCC to better cover actual costs, Incentive Auction Task Chair Jean Kiddoo said in an interview last week. Initial allocations are based on estimates, and broadcasters will better know their actual costs as the repacking progresses, she said. By reserving some of the funds, the agency makes it less likely it will overpay some owners and need to pull money back, she said. The FCC didn’t comment on Ion’s petition.
Though many broadcasters likely would support getting their entire reimbursement upfront, attorneys said it’s not clear how many would back Ion’s petition. The company's repacking costs likely are more substantial than most others because of its size and markets, an attorney said. Forty-nine of Ion’s 60 stations were assigned new channels in the repacking, Ion said. “That is ... creating a technical challenge more daunting than that faced by any broadcaster of comparable size.” Many owners are also looking to relief from a congressional increase of the repacking allotment (see 1707260061). Such a bill could include some of the tweaks to the repacking process broadcasters are seeking, an industry official said. Some broadcast officials said they're so far pleased with the agency’s responsiveness in the repacking.
Ion’s requests come late in the repacking and reimbursement processes, lawyers said. Ion framed its filing as comments on recon petitions filed in 2016 by network affiliates and earlier this year by NAB, plus a new petition for recon. Much of the reimbursement structure was decided in 2014, attorneys noted.