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

  • Andy Signore Screen Junkies

    'Honest Trailers' Creator Andy Signore Settles Defy Media Suit

    Andy Signore, the creator of Screen Junkies’ “Honest Trailers,” has settled a lawsuit against Defy Media challenging his firing for alleged sexual misconduct. Signore was one of the first figures to lose his job in the aftermath of the Harvey Weinstein harassment revelations in October 2017. Defy Media, which then owned Screen Junkies, terminated him [...]

  • Singer-rapper Psy performs during the 70th

    YG Agency Boss Quits as K-Pop Scandals Expand

    Yang Hyun-suk last week resigned from his remaining positions at YG Entertainment. The talent agency he co-founded is deeply mired in a series of inter-linked scandals that stretch from drugs to prostitution. Problems started with the band Bigbang and its star Seungri, but now also encompass other YG artists. Hwang Bo-kyung was appointed as the [...]

  • NEW YORK, NY – JUNE, 24:

    LGBTQ Stars Honored at Variety’s Power of Pride Celebration

    New York City felt the full Power of Pride on Monday, as Variety celebrated its inaugural issue devoted to the annual recognition of LGBTQ people worldwide. At an intimate gathering at Mr. Purple, the rooftop bar at Hotel Indigo Lower East Side in Manhattan, Variety’s cover stars and luminaries gathered for cocktails and the unveiling [...]

  • Motown Seeks to Block 'O-Town' Trademark

    Motown Seeks to Block 'O-Town' Trademark

    UPDATED: The boy band O-Town briefly rose to fame in 2000, with a star turn on MTV’s reality series “Making the Band.” But the reformed group has just one obstacle to its efforts to trademark its name: Motown Recordings. The label’s parent company, Universal Music Group, is trying to block the band from registering “O-Town” [...]

  • Alyssa Milano

    Alyssa Milano Settles $10 Million Suit With Former Accountant

    Actress Alyssa Milano has settled a legal battle with her former accountant as the case was on the verge of going to trial. Milano and her husband, agent David Bugliari, filed suit in 2017, alleging that accountant Kenneth Hellie had forged her signature on checks, failed to pay overdue bills and taxes and allowed costs [...]

  • J Balvin ‘Amicably’ Parts Ways With

    J Balvin ‘Amicably’ Parts Ways With Longtime Manager Rebeca Leon

    J Balvin and his longtime manager Rebeca León have “amicably” parted ways, reps for the singer and León confirmed to Variety. The news was first reported by Billboard. León — who also oversees the careers of fast-rising Spanish singer Rosalia as well as Colombian superstar Juanes, with whom she founded Lionfish Entertainment — began managing Balvin early in his career [...]

More From Our Brands

Access exclusive content