Auction BlockIt has been a busy week with regard to the FCC’s forthcoming incentive auction of broadcast television spectrum.  First, Los Angeles television stations KLCS and KJLA, together with CTIA, announced a channel sharing pilot that will test the feasibility and technical limits of channel sharing arrangements between arms-length parties.  Then, the Commission released a public notice about how to calculate interference between television and wireless operations.  Finally, the FCC’s Incentive Auction Task Force provided an auction status report at the Open Commission Meeting.  As a result, we’ve garnered some important information about the direction of the incentive auction.

After the break, we discuss six lessons that we learned this week:

1.  The FCC Is Very Concerned About Whether Enough Broadcasters Will Participate In The Reverse Auction.

If one thing stood out from this week’s FCC Open Meeting, it was concern about the need to convince broadcasters to participate in the auction.  But where there was agreement as to the need for outreach to broadcasters, there was less unanimity as to how.  FCC Incentive Auction Task Force Chairman Gary Epstein emphasized that the agency “must engage specific stations and broadcaster constituencies in targeted markets.”  But Commissioner Michael O’Rielly took issue with the suggestion that the task force should wait until the adoption of a Report and Order to start that targeted, one-to-one outreach.  And Commissioner Ajit Pai, warning that without sufficient broadcaster participation the auction will fail, called on the FCC to “show [broadcasters] the money” – that is, provide information in the near-term about how much broadcasters can expect to receive in the incentive auction.  Commissioner Pai also discouraged the agency from taking actions to force broadcasters into the auction, saying that now is not the time to change the rules for television joint sales agreements and shared services agreements.

The significance of broadcaster participation is best understood when considering the National Broadband Plan’s goal of reallocating 120 MHz of spectrum from broadcast to wireless use.  The FCC may need participation from up to 20 television stations in some markets (20 stations x 6 MHz each = 120 MHz).  Although other markets may have some “unused” spectrum available for re-allocation already (thus decreasing the number of television stations that would have to participate in order to reach 120 MHz), the congested markets where the FCC needs to reclaim the most television spectrum are, of course, the markets where the demand for mobile spectrum is the greatest.

2.  Channel Sharing Offers The Potential To Alleviate Broadcaster Participation Concerns – But At A Cost.

While the Commission appears to recognize that a lack of broadcaster participation may be a problem, it also views channel sharing as a promising solution.  Epstein and several of the Commissioners commended KLCS, KJLA, and CTIA for the channel sharing pilot project that they announced earlier this week.  FCC Chairman Tom Wheeler was particularly emphatic in his support, calling channel sharing a great opportunity for broadcasters to enjoy the benefits of the auction without having to leave the broadcasting business and stating that he is “keenly awaiting” the results of the pilot project.

While a successful pilot project could make channel sharing a more feasible option for some broadcasters, it almost certainly is not for everyone.  As we have explained, developing a channel sharing arrangement between arms-length parties can be extremely complicated and require great foresight.  Further, as the National Association of Broadcasters (NAB) has pointed out, stations that agree to relinquish some of their spectrum capacity could miss out on the opportunity to deliver new and innovative services that require a full 6 MHz television channel.

3.  The Incentive Auction Report and Order Will Be Comprehensive – Unless It Is Not. 

Consistent with the earlier timeline presented by FCC Chairman Wheeler, the Incentive Auction Task Force committed to have a Report and Order ready for the Commission’s consideration this spring.  The Report and Order will address all components of the spectrum auction, including the 600 MHz band plan, the design of the forward and reverse auctions, the sequencing of the forward and reverse auctions, and post-transition issues (including repacking).  At the same time, Epstein explained that some of the auction processes and procedures are dependent on what the Commission decides in the Report and Order, and therefore will be resolved during the period between the adoption of the item and the actual auction.

4.  The Commission Wants Maximum Flexibility To Address Inter-Service Interference.

One of the key engineering challenges in the Incentive Auction is how broadcast and wireless services can co-exist, perhaps even on the same channel (in different geographic areas).  Several commenters have been active on this issue, filing pleadings detailing the geographic separation needed to prevent interference between the services.  This week’s Public Notice from the Office of Engineering and Technology (OET) appears to reject a uniform approach to inter-service interference, expressing concern “that prescribing a pre-defined separation distance as proposed by some commenters may be spectrally inefficient and overly conservative.”  Instead, OET has proposed “alternative methodology that could enable the Commission to accommodate market variation in a more spectrally efficient manner than that proposed by various commenters.”  While a customizable approach is preferable from the standpoint of increased flexibility for the FCC, it provides for only a very small margin for error because of the difficulty inherent in remedying interference caused by permitting co-channel operations too close together.  And, if we learned anything from the DTV transition, it is that engineering estimates cannot always predict real world propagation and interference.

5.  Auction Registration Could Be Just A Year Away.

If everything goes according to plan, the Incentive Auction Task Force hopes to begin accepting applications for participation in both the forward and reverse auctions in “early 2015.”  On the other hand, Epstein emphasized that the auction will start only when “the system is ready, user friendly, and thoroughly tested.”  Many things will need to go right for the Commission to adhere to its revised schedule and, given that the FCC will not even finalize the auction systems—much less begin user testing—until after the Report and Order is adopted, the current timeline seems rather aggressive.

6.  The FCC’s Repacking Plans Remain A Mystery.

A glaring omission from the Incentive Auction Task Force status report was any real discussion about the post-auction repacking of broadcast stations.  The FCC still must address both substantive and procedural issues relating to the repacking, including what stations are entitled to protection, what interference threshold to apply, how the Commission will model the repacking, when broadcasters will be able to test the proposed model, and what ability broadcasters will have to provide feedback on the results of the repacking.

For many broadcasters, everything else about the auction is white noise – this is the single most important aspect of the Commission’s planning.  Given the current lack of visibility into the FCC’s repacking plans, these broadcasters rightly are concerned about whether repacking will receive the attention that it deserves, or whether it simply will be an afterthought amidst the Commission’s grander auction plans.

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