Repacking Cost Could Be Much Higher Than FCC Estimate; Transition's Real Test Will Be Late 2018
Broadcasters believe the estimated cost of the repacking is closer to $3 billion than the $1.86 billion figure last announced by the FCC, and that it won't be clear how well the repacking plan is functioning until late in 2018, when the process begins moving from one phase to the next, broadcasters and industry officials told us. The transition between phases of the repacking will demonstrate whether tower crews, manufacturers and broadcasters will be able to adhere to the FCC's repacking timeline. If broadcasters start missing their phase deadlines as the repacking goes on, it could have a cascading delay effect, said Gray Television Deputy General Counsel Robert Folliard. The first transition between repacking phases will be “a very telling day,” said PBS Assistant General Counsel Talia Rosen.
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The repacking is widely expected to cost around $2.5 billion, Rosen and other broadcast industry officials have said, and NAB CTO Sam Matheny pegged it at $3 billion while addressing a Senate Commerce panel last week (see 1801250061). Matheny's figure includes radio stations affected by the repacking. After broadcasters' initial reimbursement estimates, the FCC released an estimated cost of $2.1 billion, and based their initial allocation from the $1.75 billion reimbursement fund on an estimated cost of $1.86 billion (see 1710160060), stemming from FCC reimbursement fund administrator EY's first go-round of weighing reimbursement requests. But since then, many broadcaster reimbursement requests that had at first been rejected have now been approved, and broadcasters believe the gap between the estimated cost of the repacking and the reimbursement fund has grown, Gray' Folliard said. Though Rosen conceded the repacking cost estimate is “a living, breathing” figure and likely to continue shifting, she said the agency should release an updated estimate of the shortfall. At a $2.5 billion repacking cost, that number would be $750 million, while NAB's estimate would put the shortfall, and the possible additional funding needed from Congress to hold broadcasters harmless, at more than $1 billion.
The FCC will note the “then-current total verified estimates” of the repacking's cost when it dishes up an additional allocation from the repacking fund, said an Incentive Auction Task Force (IATF) spokesman. The timing of a second allocation isn't clear, but the IATF said it will likely occur “well in advance” of the phase one testing period, which is in September. The IATF said the timing and amounts of additional allocation will be based on the draw-down of the initial allocation, but broadcasters said they think the agency should do it soon. The lack of certainty about the availability of funds makes it very difficult to secure financing for stations, Rosen said. That's a particular problem for public TV stations, which often don't have as much money on hand and often are controlled by institutions with public budgeting processes, Rosen said.
The larger the shortfall, the more difficult it will be to get lawmakers to make up the gap, said numerous broadcast attorneys. “We absolutely should get it,” Folliard said of the additional funds. If broadcasters have to pay for portions of their own repacking, it would be tantamount to receiving “60 cents on the dollar” for their spectrum, he said. Most broadcasters believe the repacking will be paid for, but some are concerned they may have to absorb a small percentage of the costs, said Dielectric Antenna Sales Executive Christine Zuba.
Despite funding concerns, the repacking is proceeding smoothly, broadcasters said. Most repacking work hasn't begun, but broadcasters are able to place orders and plan, Folliard said. Some TV stations are waiting for the FCC to approve changes to their assignments for signal maximization or unexpected interference, which can delay equipment orders, she said. Broadcasters shouldn't wait until their particular phase is approaching to place orders, Zuba said.
Repacking resources won't really be tested until transitions between phases start, said broadcasters and attorneys and industry officials. “It's all going to depend on the crews,” Zuba said. If all the broadcasters in phase one make their deadline, and broadcasters in phase two are able to start their own tower work as planned, it will be a good sign for the repacking, industry officials said. Phase one will be the first such transition, but it's likely to get tougher between phases three and seven, Zuba said. If there are delays from weather or other causes, they could pile up into subsequent phases Folliard said. A tower crew that hasn't completed work on a broadcaster in a previous phase won't be able to start a job for a broadcaster in a later phase on time, Folliard said. If such delays start to pile up, it could bolster broadcaster arguments that the FCC should relax repacking deadlines, attorneys said.