Most US TV stations are in the process of altering their broadcast spectrum licenses, resulting in channel changes, shared tech, and, in some cases, buyouts

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2017.06.23, Friday

Repack Reimbursement Process Starts Now

[Source: TVNewsCheck]

July 14 — the middle of summer and a traditional time for media executives to take some well-earned vacation. This year it’s also an important post-incentive auction filing deadline for broadcast stations and MVPDs assigned to new channels as a result of the FCC’s spectrum auction and channel repack. Affected groups must prepare and submit two FCC documents by that date.

Some extra time will be allotted to stations that filed a request for a waiver for the Initial Construction Permit Filing Deadline (which was due by June 12). Stations whose waiver requests have been granted by the FCC will have 30 days after the grant of their construction permit to file the FCC Reimbursement Form (FCC Form 2100, Schedule 399), which must detail all of the repack expenses qualifying for reimbursement. Either way, a number of media management and engineering professionals will be spending their traditional summer vacation times navigating construction plans and budgets instead of costal waterways or beach reading.

There is some method in the madness. The FCC is working against an aggressive 39-month timeline to migrate all frequencies being sold or repacked. Also expect pressure from forward auction winners; T-Mobile has already been enticing stations to speed up the repack process.

Additionally, despite the siren call of the beach and the human urge to procrastinate, there are several very good reasons to submit the required data to the FCC as early as possible. As broadcast attorney David Oxenford points out, this information will allow the FCC to determine whether its ambitious repacking deadlines can be met. It will also indicate whether the $1.75 billion budgeted for the repack is enough to cover everyone’s expenses.

Even before the deadlines were finalized, Paul A. Cicelski, an attorney with Lerman Senter, prepared an article about the reimbursement process for MFM’s The Financial Manager magazine. A digital copy of the May-June issue of TFM, which includes his piece, is available on the MFM website for a limited time.

The following questions, summarized from Cicelski’s article, may help prepare those tasked with completing the FCC paperwork:

What expenses are eligible for reimbursement? — Only replacement equipment comparable to what the station is currently using is eligible for reimbursement. To help stations determine what expenses are likely to be covered, the FCC has already released a “Catalog of Potential Expenses and Estimated Costs.”

As Cicelski points out, the catalog, despite being reasonably comprehensive, is not intended to be a complete list of every possible reimbursable expense. He says that the FCC will be evaluating the “reasonableness” of all submitted estimated expenses on a case-by-case basis. The cost catalogue will be used as a “blueprint.”

Expense categories covered in the catalog, which is embedded in the FCC’s Reimbursement Form, include transmitters, antennas, transmission lines, tower equipment and rigging, and outside professional costs. They also include miscellaneous expenses such as building permits, equipment disposal and delivery costs, handling and storage charges and channel-change notifications.

Stations are also required to provide the FCC with an inventory of their current equipment (whether or not it is operational) and all the costs they expect to incur. It’s important to note that cost estimates provided in the FCC’s catalog can be replaced by actual itemized price quotes from vendors.

Are upgrades to ATSC 3.0 eligible? — Broadcasters may use the repack process as an opportunity to upgrade their station’s facilities, and that is OK. However, as Cicelski points out, “they will be required to pay the out-of-pocket difference between the amount the station could have paid for new equipment comparable to the setup a station used pre-repack, and the amount actually paid for any subsequent voluntary equipment upgrades.”

With respect to ATSC 3.0, the FCC said requests for 3.0-compatible equipment would be evaluated for reasonableness on a case-by-case basis. However, it does not anticipate providing reimbursement for new, optional features in equipment unless the station documents that the feature is already present in the equipment being replaced. In a nutshell, unless a station is currently using 3.0 gear, Cicelski predicts that such enhancements will be considered non-reimbursable upgrades.

What are considered ineligible expenses? — The Spectrum Act allows only repacked stations to receive reimbursement payments. However, as Cicelski explains, there may be cases in which a repacked broadcaster has a contractual obligation to pay expenses for interference to non-repacked third-party tower occupants, in which case those expenses can be reimbursed. In addition, Cicelski anticipates situations in which the FCC determines that such a reimbursement “is reasonable as part of a station’s repack.”

Regardless of the circumstances, stations will not be reimbursed for lost revenues, which the FCC defines as dollars lost as a “direct or ancillary result” of the repack. Examples include lost advertising revenues or lost airtime, “even if a station has to go off-air to put its new channel into operation.”

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