In his third speech to broadcasters at NAB since he’s been in office, FCC Chairman Julius Genachowski again pushed incentive auctions, especially to those broadcasters not receiving retransmission consent fees or creating local content.
“Many stations don’t have local news and content-creation operations that they can leverage over multiple broadband platforms; and on a percentage basis that’s also particularly true in the larger markets,” Genachowski said. “The economics are the economics. The good news is that the new voluntary incentive auctions law presents an unprecedented opportunity for broadcasters like these and others to improve their financial position.”
The incentive auctions were proposed by the FCC and authorized by Congress in response to the looming broadband spectrum crunch, which the chairman said is continuing to mount.
“Since the last NAB show, the number of active mobile phones in this country passed the number of people,” he said. “The percentage of cell phone owners with smartphones passed the 50 percent barrier, up from about 25 percent a year ago. The growth of the tablet market continues to exceed even the most optimistic forecasts. In 2010, it was a big deal when Apple sold one million iPads in 28 days. The new iPad passed that milestone in less than 28 hours.”
Genachowski said the FCC is now focused on implementation of the auction.
“A few facts about the law that broadcasters should be aware of: First, it codifies the voluntary nature of contributing spectrum. Second, it authorizes the Commission to offer three unprecedented opportunities to share in auction proceeds: contributing all 6 MHz; channel sharing; and moving from UHF to VHF. Third, it preserves must-carry rights for channel sharing stations. Fourth, it directs the FCC to make all reasonable efforts to preserve broadcaster coverage. And fifth, it creates a $1.75 billion—that’s billion with a B—repacking fund to pay moving costs of broadcasters who don’t participate as well as other incumbents.”
He said the initial response from many broadcasters has been positive. “Since passage of the law, our phones have been ringing at the FCC, with broadcasters and their representatives expressing genuine interest in participating and asking thoughtful questions.”
For those broadcasters interested in the auction, Genachowski said there is a unique opportunity that presents some very interesting—and potentially compelling—business options that did not exist before. “Consider the option to channel share or move to VHF. You’ll be able to participate in an active marketplace providing sizable cash infusion for returning some or all spectrum.
“Some broadcasters may want participate and still stay on the air. A VHF move or channel sharing could be just the ticket. In the case of a move to VHF, a broadcaster would stay on the air, retain must carry rights on cable and satellite, and generate cash from the move.
As for channel sharing, it provides an opportunity to retain UHF transmissions, but to trade in a portion of channel capacity in exchange for a cash infusion—again, while continuing to reach audiences over-the-air, via cable and satellite.”
Genachowski said the FCC recognizes that good information is essential to good dealmaking. “Over the course of this process, we are committed to getting you the information you need to make sound business decisions and to help you recognize the full value of the opportunity.”
And, he asked, to maximize the opportunity for broadcasters, “we need information from you. That is why we have already begun reaching out to get your ideas on how to develop auctions with the right incentives to encourage broad participation.”
He promised to run a process that is open, inclusive, fact-based, and guided by economics and engineering. He said a task force has already been formed and it will feed a robust public process. Later this month, he promised the FCC would take up a channel sharing order at its monthly meeting. The goal is a Notice of Proposed Rulemaking by this fall.