×
You will be redirected back to your article in seconds

FCC’s Spectrum Auction Reaps Rewards for Stations, but Didn’t Live Up to Predictions

As broadcast station groups like Fox Television Stations and Tribune Media report hundreds of millions of dollars in expected proceeds from the FCC’s auction of spectrum, the windfall comes with a caveat: The sell-off of the airwaves hasn’t lived up to the hype.

Before the auction started last spring, some financial analysts had predicted that wireless firms would pay tens of billions of dollars for the prized UHF-band spectrum that stations were relinquishing. Some pegged the bonanza would reach as much as $80 billion.

With the auction in the final stages, wireless firms are expected to pay $18 billion — $10 billion of which will go to broadcasters for giving up their airwaves, $1.75 billion to station relocation costs, $207 million for administrative costs and the remaining $6 billion for deficit reduction. The figure could go higher as the auction enters its last phases.

So what happened?

“It is real simple: the broadcasters showed up, and and the wireless carriers did not,” said Preston Padden, who had led a group called the Expanding Opportunities for Broadcasters Coalition, made up of those companies interested in participating in the auction.

“I don’t honestly know,” he added. “The carriers had told the Congress in writing that they would build at least $45 billion.”

The purpose of the auction was to address a “spectrum crunch,” spelled out in a 2010 FCC report called the National Broadband Plan. It warned that the United States risked falling behind in competitiveness if it couldn’t address a coming shortage of frequencies. A solution: Try to entice broadcasters to give up their spectrum licenses with the option of putting it up to bid and sharing in the proceeds. The result would be to free up a big chunk of the airwaves for wireless use.

Two years later, Congress passed legislation calling for the FCC to conduct a first-of-its-kind “incentive auction.” With input from Nobel prize winning economists, the complex auction consisted of two parts — a “reverse” auction to determine what price the station can get for its spectrum, and a “forward” auction to determine what prices companies are willing to pay to obtain wireless licenses.

Simply put, supply had to match demand. It’s taken four rounds of bidding to reach that point, as broadcasters initial offers of selling a total of 126 MHz of spectrum eventually was dropped to 84 MHz of spectrum. That is still a significant chunk of airwaves, and the auction also met benchmarks, including those to make sure that the government covered costs.

“We’re very happy with the results,” said Charles Meisch, an FCC spokesman.

Some analysts have suggested that the initial expectations about the auction were too bullish, and perhaps based too much on the heightened expectations from a previous auction of government held airwaves that brought in $41 billion.

In a recent blog post, the research firm of MoffettNathanson cited a number of market factors, among them that wireless carriers are increasingly looking to small “cells,” rather than spectrum, to boost capacity in specific areas, like “a specific street corner, for example, or a pedestrian plaza.”

“It may also be the case that the sobriety in the current auction reflects the fact that the carriers’ balance sheets are stretched to the breaking point,” the research firm said. “Sprint has no money. AT&T is busy buying Time Warner. And Verizon has promised the ratings agencies and investors that it will de-lever.”

The firm noted that even though the auction fell short of predictions, “in truth it has done precisely what it was supposed to do.”

Padden credits the FCC staff for “working nights and weekends for four years” to pull off the auction.

“Look, $20 billion is not chopped liver, and for the broadcasters who got significant payments it is good,” Padden said of auction proceeds. “But there were lots of other broadcasters who relied on the statements of the [wireless] carriers and were very disappointed.”
Broadcasters now are looking to the next phase, as the FCC clears portions of the UHF band to make way for its new use by wireless carriers.
The FCC has begun informing stations of the end result of the auction. That will mean that some channels will go off the air, others will move to new spots on the lineup and others will share space with other entities.
It’s a prelude to a 39-month process called “repacking.”
Gordon Smith, president of the National Association of Broadcasters, said that they still have concerns that it will be sufficient time. “It is going to be highly disruptive, and our hope is that those on Capital Hill and at the FCC will be fully engaged and cooperative,” he said.
 The FCC is expected to disclose a complete list of the winning bidders sometime later this year, perhaps in several months.

More Biz

  • Discovery CEO David Zaslav Sees 2018

    Discovery CEO David Zaslav Sees 2018 Compensation Soar to $129.4 Million

    Discovery Inc. president-CEO David Zaslav is once again making headlines for an enormous compensation package. Zaslav’s 2018 compensation soared to $129.44 million in 2018, fueled by stock options and grants awarded as the longtime Discovery chief signed a new employment contract last July that takes him through 2023 at the cable programming group. Zaslav received [...]

  • Jonathan Lamy RIAA

    Jonathan Lamy Stepping Down From RIAA

    Jonathan Lamy, the Recording Industry Association of America’s longtime executive VP of communications and marketing, is stepping down from his post after 17 years, he announced today. As he put it in an email to Variety, “I started back in 2002, which means it’s been 17+ years, four different RIAA CEOs, three format changes and [...]

  • Fox Layoffs

    Disney-21st Fox Layoffs: TV Divisions Brace for Deep Cuts

    A second day of layoffs has begun on the Fox lot in the wake of Disney completing its acquisition of 21st Century Fox on Wednesday. Longtime 20th Century Fox Television Distribution president Mark Kaner is among the senior executives who were formally notified with severance details on Friday morning. 21st Century Fox’s international TV sales [...]

  • anthony pellicano

    Hollywood Fixer Anthony Pellicano Released From Federal Prison

    Anthony Pellicano, the Hollywood private eye whose wiretapping case riveted the industry a decade ago, was released from a federal prison on Friday, a prison spokeswoman confirmed. Pellicano was sentenced in 2008 to 15 years, following his conviction on 78 charges of wiretapping, racketeering, conspiracy and wire fraud. He had been in custody since 2003, [...]

  • This image taken from the Twitter

    HBO’s Reaction to Trump’s ‘Game of Thrones’ Campaign

    Everyone wants a piece of the “Game of Thrones” lemon cake. From Bud Light to Red Bull the world of Westeros is open to a lot of brand partnerships, unless you’re using that iconic typeface to push a political agenda. In November of 2018 President Donald Trump unveiled a “Thrones” inspired poster with the words [...]

  • Leaving Neverland HBO

    'Leaving Neverland' Lawsuit Proves to Be a Judicial Hot Potato

    The Michael Jackson estate sued HBO last month for airing the documentary “Leaving Neverland,” which accuses the late King of Pop of serial child sexual abuse. Since then, the case has had a difficult time finding a judge to handle it. Three federal judges have recused themselves in the last week, citing potential financial conflicts [...]

  • Members of the public mourn at

    Guy Oseary’s New Zealand Fundraiser Nears $150,000, Continues Raising Money

    In the wake of the horrific shootings at New Zealand mosques last week that killed some 49 people, Maverick chief Guy Oseary launched a GoFundMe campaign to “support those affected by this tragedy at this very difficult time,” and began it with an $18,000 donation. Boosted by donations from many celebrities — including Amy Schumer, [...]

More From Our Brands

Access exclusive content