Feature Article

December 20, 2012

Experts Assess Upcoming Television Broadcast Incentive Auction

It’s coming – the FCC is ready to offer the television broadcast incentive auction, but will television broadcasters get involved? And if they do, how should they calibrate their bids to achieve the results they need?

Cross Fire Media, along with TMC, hosted a webinar on Wednesday, December 19 that invited experts in the field to discuss the requirements included in the Spectrum Act, as well as any unresolved legal issues.

Attendees were invited to gain an overview of the process involved in the incentive auction, the implications of key elements involved in the auction, valuations to consider when planning to bid and policy implications related to the auction process. All television broadcast industry executives, television broadcaster investors, professionals related to the industry and equipment manufacturers and suppliers were invited to attend.

One participant, Marty Stern, a Partner with K&L Gates, noted during the webinar that one question broadcasters need to ask themselves is, ‘what about us?’ in terms of having the ability to flexibly use and deploy their assets or turning them over and getting out the market. There are many elements to consider before that decision can be made to the best of their benefit, elements that were discussed in depth during this event.

At this juncture, channel sharing is on the table as a viable means to stay in the industry and reap the benefits of shared costs. Rebecca Hanson, Senior Advisor, Broadcast Spectrum with the FCC, shared that the agency will not regulate what kind of distribution must take place within a channel sharing arrangement.

The full channel benefits are available and those partnering can dictate the distribution of the spectrum and how it will be used according to their individual strategies and programming needs.

Must Carry rights will remain with stations when purchasing spectrum, ensuring these channel holders are able to maintain financial sustainability. The FCC aims to provide the best oversight and allocations within the auction, but still maintains its boundaries where it believes channel owners should determine overall use. Ultimately moving from UHF to VHF grants television broadcasters an opportunity to share in the auction proceeds, but will have to sacrifice some of their over-the-air audience.

J. Armand Musey, an economist and lawyer with the Summit Ridge Group, LLC, introduced the economic issues related to the television broadcast spectrum auction. A key point made Thomas W. Hazlett, Professor, George Mason University – there are just 49 channels in the digital broadband spectrum to address terrestrial broadcast television. The American public has increasingly shifted away from the ‘free’ over-the-air television; in fact, 91 percent of viewers are relying on multichannel subscription services.

With the increase in mobile, a new generation is now turning to broadband for the distribution of their viewing choices.

According to Professor Hazlett, “there is no debate amongst economics and independent policy experts that the value of the radio spectrum set aside for television is a far more valuable alternative for television uses.” The challenge facing the FCC is to select the best method for distribution of spectrum and policy to enhance the market, create more value for all players and allow for the development of technologies that meet the demands of consumer trends.

One of the biggest challenges in the upcoming auctions is speculating pricing so that those involved in the process can develop appropriate bids to be competitive. According to Coleman D. Bazelon, Principal with The Brattle Group, determining those prices ahead of time is a complicated endeavor. The supply curve and the demand curve tend to be racing to the right and the intersection of the two is difficult to determine at any one point in term.

Still others believe that the movement in technology has been stymied by the activities of the U.S. government and the FCC in an effort to ease the burden on the American people. The main goal is to create the opportunities in the industry that allow for profitable markets regardless of the end channel, yet the path to get there is often riddled with peaks and valleys. 

To get an insider’s view into the bigger picture and learn what these experts have to contribute to the topic, check out the video event in full.




Edited by Braden Becker


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