B’cast auction in budget deal

WASHINGTON — In a major setback for broadcasters, the balanced budget agreement reached Friday by the White House and congressional Republicans counts on the auction of airwaves broadcasters are now using to raise $5.4 billion.

In order for that sale to take place, broadcasters and consumers will have to complete the transition to digital TV by 2006. That’s when the government plans to reclaim the channels broadcasters are currently using and hand them over to the successful bidders.

Although Republicans had initially resisted the White House’s plan for a forced march towards digital TV, the determination to balance the federal checkbook took precedence. The deal still needs to move through Congress for final approval, and congressional Democrats have raised red flags about issues not directly related to broadcasters such as cuts to social programs and estate tax breaks.

Early payment plan

Under the balanced budget plan, the government will not actually wait until 2006 to sell the channel. Instead, the Federal Communications Commission put the airwaves on the auction block in 2002 — four years before they will even be available to the highest bidders. That way the revenue can be collected in time to meet the Republican goal of balancing the budget by 2002.

In its original proposal, the White House estimated the sale of broadcasters’ current channels would be worth $14.8 billion. But the Congressional Budget Office countered with $5.4 billion — the number which was figured into the budget last week. CBO downgraded the estimate in part because of the uncertainty surrounding an auction for property that cannot be collected for four years.

In a letter sent to every member of the Senate and House budget committees, NBC VP Robert Okun noted: “Few if any investors would be willing to tie up billions of dollars in a futures auction for an asset they won’t own for four more years.”

Also, the White House wanted broadcasters to make up any shortfall if the auction failed to generate its revenue estimate of $14.8 billion. But that proposal never had legs on Capitol Hill, where it was labeled a tax — something neither Republicans or Democrats want to be associated with.

Privately, broadcast lobbyists said that it is inevitable that Congress will change its mind about the deadline sometime in the next few years. As Okun pointed out in his letter: “If 50% of consumers have not bought the digital equipment by 2006, is the Congress really prepared to cut off analog TV signals in 2006, rendering tens of millions of analog TV sets useless overnight?”

According to several estimates the cost of making the transition from analog TV sets to digitally compatible equipment will cost consumers at least $100 billion.

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