Post-CES, Further Incentive Auction Delays Seen as Possible, Not Certain
The FCC may not necessarily delay the TV incentive auction until after 2016, industry and FCC officials said, despite general support among commissioners for a pause in the auction. But one big takeaway from CES last week was that major carriers, including AT&T and Verizon, and some broadcasters are considering the merits of a delay for different reasons, industry observers said.
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Carrier officials told us they expected further delays in the incentive auction, even before the four commissioners appeared on a CES panel Wednesday. Commissioners Mignon Clyburn, Ajit Pai and Jessica Rosenworcel all appeared to endorse a pause in the auction, while Commissioner Mike O’Rielly stressed the importance of getting the rules for the auction right (see 1501080032).
But the comments were nuanced. Clyburn meant that instead of going straight to court, the agency should work things out because it's a spectrum-constrained world, an FCC official said Monday. The pause referred to the rush to litigation, not the auction. O’Rielly was unhappy about his position being characterized by at least one news outlet as supporting an auction in 2016 in opposition to other commissioners, an industry lawyer said.
In a Thursday appearance on Bloomberg West TV, Rosenworcel said the incentive auction is still slated to take place in 2016. Rosenworcel said her time at CES demonstrated to her the importance of spectrum. “Given that the bidding right now stands at $45 billion it has become really apparent that getting more spectrum into the marketplace is important to power all of those devices and that carriers are willing to spend quite a bit of money to make sure they have the spectrum they need,” she said. Rosenworcel predicted bidding in the incentive auction will be “really big too.” She said, given the high numbers in the AWS-3 auction, many broadcasters will "take another look" at the incentive auction.
One carrier executive said it may be attractive to Chairman Tom Wheeler for the AWS-3 auction, which has far exceeded expectations, to go down as his legacy rather than risking a second auction that may be less successful. “The chairman decides when to schedule the auction,” said Preston Padden, executive director of the Expanding Opportunities for Broadcasters Coalition. In his speech at CES, Wheeler said an auction would take place in “early 2016,” Padden noted.
“The Chairman remains focused on successfully implementing the incentive auction in early 2016, and we are on track,” an FCC spokesperson said in an e-mailed comment Monday. “The incentive auction will make additional spectrum available to address the skyrocketing surge in mobile data consumption, promote economic growth, and enhance competition in the wireless marketplace.”
“Wheeler sets the agenda, so I would not assume that he has given up on trying to deliver an Incentive auction before the end of Obama’s term,” said BTIG analyst Walter Piecyk. “However the concerns of his fellow commissioners about available capital are valid and T-Mobile and Sprint will be certain to push even harder for a higher allocation of reserve spectrum in the meantime.”
“It looks like Chairman Wheeler is in a minority of one when it comes to having a 2016 auction,” said an industry lawyer who represents wireless industry clients. “Pai, Clyburn and Rosenworcel all flat out called for a delay. Some said a delay was needed due to the success of the AWS-3 auction and the financial realities of recharging bidders' bank accounts after those huge checks are written. Pai echoed all that plus his opposition to unnecessarily complex rules. Then, O'Rielly called for having an auction, but only with simpler rules -- which amounts to calling for an implicit delay because simpler rules don't currently exist in draft form and will take months to write.”
After the success of the AWS-3 auction, some broadcast networks and other large broadcasters are now interested in participating in the incentive auction, executives at two large broadcasters told us. That means some of NAB's members no longer look favorably at that group's lawsuit against the auction and perceived attempts to delay, one executive said. Another broadcast executive told us some NAB members are concerned that the group's opposition to the incentive auction and other FCC policies could have repercussions for broadcasters. Broadcasters planning to remain on-air mainly support the NAB suit because it deals with the preservation of their signals, said a communications attorney. “Savvy” broadcasters planning to continue broadcasting after putting spectrum in the auction have incentives to support both NAB's arguments and an on-time incentive auction, the attorney said. If carriers are seeking to delay the auction, it might make sense for broadcasters looking to sell to want it pushed back as well, said a communications attorney. Since carriers are the ones buying the spectrum, it makes sense that broadcasters that want to sell would want to wait until their customers have money to spend, the attorney said.
“None of our efforts to date are designed to come at the expense of stations who choose to channel share or exit the business," an NAB spokesman told us via email. "NAB continues to believe that a successful auction is achievable, and we look forward to working with the FCC to make that happen.”
In meetings last week with Wheeler and other FCC officials, Padden said the success of the AWS-3 auction should not mean a delay in the incentive auction. The FCC “should not use the AWS-3 auction as a basis to delay the Incentive Auction,” said a filing from Expanding Opportunities in docket 14-252. “Wireless carriers have both the incentive and the ability to secure an abundance of capital to bid for the far superior spectrum that will be available in the Incentive Auction.” Coalition representatives also met with Incentive Auction Task Force Chairman Gary Epstein and Vice Chairman Howard Symons.