Most US TV stations will have to alter their usage of broadcast spectrum, resulting in channel changes, shared tech, and, in some cases, buyouts

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2017.04.13, Thursday

Stations Set to Reap $10 Billion as FCC Closes Auction of Broadcast Airwaves

[Source: Variety]

The FCC has closed a first-of-its-kind auction of broadcast airwaves that will see a shakeup in channel lineups in many markets, as stations are reaping a total of $10.05 billion to give up their spectrum.

A total of 175 stations stations broadcasters won bids and will give up their spectrum, the FCC said in a statement on Thursday. The agency said that 30 stations will receive money for moving to a lower channel, and 133 others will give up their licenses, with many intending to remain on the air under channel sharing agreements with other stations. Twelve stations did not indicate that they planned to channel share — raising the prospect that they would go dark.

The purpose of the auction — years in the making, and playing out for more than 12 months — was to free up spectrum for wireless use. That meant disrupting the lineup of broadcast stations on the UHF band to make way for prized spectrum valued by mobile and wireless firms.

As part of the process of clearing the spectrum, 957 stations that did not put their spectrum up for bid will still get new channel assignments, with the first group of stations scheduled to move on Nov. 30, 2018.

The FCC said that they will collect $19.8 billion in gross revenues from sale of the 70 MHz of spectrum, its second-highest return from a spectrum auction. Of that, $7.3 billion will go to federal deficit reduction.

The largest station payout was $304 million to WWTO-TV in Chicago that is owned by Trinity Christian Center. The largest award for a non-commercial station was to New Jersey Public Broadcasting, owner of WNJN-TV, with $194 million. Both were listed as going off the air, but it was unclear if that means that they would seek channel sharing arrangements.

In Los Angeles, PBS SoCal’s KOCE-TV has decided to give up its spectrum and, in return, will collect $49 million. It has reached an agreement to share its spectrum with KSCI-TV, another Los Angeles station, which will collect $89 million under the new arrangement.

Andrew Russell, the president and CEO of PBS SoCal, said that viewers will not notice a change when the transition is made.

“Our priority as the primary PBS station for greater Los Angeles is to ensure that we can deliver PBS programs to the 18 million people across the six counties in our region well into the future,” he said in a statement, adding that the additional revenue will allow the station to invest in programming, content production and broadband services, as well as in restructuring debt.

Stations will now have a 39-month transition period to move or relinquish their airwaves.

The full list of winning auction bidders is here.

The FCC said that that there were a total of 50 winning bidders for the 70 MHz of spectrum, led by T-Mobile, which spent $8 billion.

Craig Moffett, an analyst at MoffettNathanson, said that one surprise was that Dish Network bought more spectrum than expected — $6.2 billion, via wireless.

He also said that Comcast spent far less than expected buying up spectrum, shelling out $1.7 billion through CC Wireless Investment.

Verizon spent nothing, he noted, and AT&T spent $910 million.

In fact, before the auction started, there were predictions that this auction would prove a bonanza, even up to $80 billion in proceeds, as wireless firms would scramble to buy up airwaves given the increasing demand generated by mobile use.

But demand overall was less than expected, even though the FCC set up the auction to ensure that it would recoup its costs.

“The broadcasters showed up and, except for T-Mo, the carriers did not,” said Preston Padden, who had been advising companies interested in participating in the auction. “Gary Epstein deserves an award for 5 years of public service.” Epstein led the FCC’s auction task force.

The auction was at first greeted with some trepidation by broadcasters, who expressed concerns about disrupting the channel line up after having gone through a transition to digital television in the last decade.

But station groups saw the potential for big returns for participation, made all the better by the possibility that they also had the chance to give up their spectrum yet still stay on the air if they moved to a lower channel in the VHF band or if they reached agreements with other stations to share their airwaves. Then-FCC Chairman Tom Wheeler pitched the spectrum sale as a “once in a lifetime opportunity.”

In many cases, viewers, particularly those who have cable or satellite, will not notice the difference.

Comcast said that it will receive $481.6 million from the auction. It said that gave up spectrum in three markets where it owns two stations. In New York, it will give up the spectrum of WNBC-TV, and then share the channel with WNJU-TV; in Philadelphia, WWSI-TV will share with WCAU-TV; and in Chicago, WSNS-TV will share with WMAQ-TV.

Ajit Pai, the current FCC Chairman, said in a statement that “while we celebrate reaching the official close of the auction, there is still much work ahead of us.  It’s now imperative that we move forward with equal zeal to ensure a successful post-auction transition, including a smooth and efficient repacking process.”

Viewers who rely on over-the-air TV may have to “rescan” their sets once stations begin their move.

Gordon Smith, president and CEO of the National Association of Broadcasters, said that “now the FCC and the broadcast industry face the unprecedented task of moving almost a thousand TV stations — far more than originally anticipated — to new channels in very tight time frames.”

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