What is an Incentive Auction FCC

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					      Federal Communications Commission

Incentive Auctions and
 Broadcast Spectrum

 CBG State and Local Government Webinar
            Rebecca Hanson
        Senior Advisor, Spectrum
           Media Bureau, FCC
              May 2, 2012
What is an “Incentive Auction”?

Concept developed as part of the National Broadband Plan of 2010

Use of wireless broadband is increasing exponentially through smart phones and tablets
     –      Viewers of over-the-air television have been steadily shifting to cable/satellite
     –      Now averaging around 10% nationally

Needed a market-based mechanism to redirect spectrum to where it is needed most

     –      An auction of spectrum

     –      Contributed voluntarily by broadcasters

     –      Configured into large, contiguous blocks by the FCC to create more value for
                 –   More value for wireless companies, contributing broadcasters, and consumers

     –      Auctioned by the FCC

     –      Proceeds shared between contributing broadcasters and the Treasury

Incentive auctions could be applied to a variety of spectrum bands, but first auction will focus
       on the television bands.

                                                                        Incentive Auctions Implementation
Middle Class Tax Relief and Job Creation Act of 2012

Signed by the President on February 22

Includes incentive auction authority (ability to share auction

Consistent with the vision we laid out in our previous webinars:

   –    Spectrum contributions will be voluntary

   –    Three options for contributing are included
       • All 6 MHz
       • Channel Share
       • Move from UHF to VHF

                                                  Incentive Auctions Implementation
Three Options for Broadcaster Participation

Contribute a 6 MHz channel
    –    Set reserve price
    –    Relinquish 6MHz license and take station off the air
    –    Could use proceeds to strengthen other stations in a multi-station group
    –    Could invest proceeds in new content distribution or other businesses

    –    Set reserve price for sharing of 6 MHz channel
    –    Channel share with like-minded station in your market
    –    Retain direct license from FCC, including must-carry rights
    –    Maintain core business on primary stream

Move to VHF
    –    Set reserve price
    –    New 6MHz VHF channel assignment, retain multicast opportunities
    –    Retain must-carry rights

Both channel-sharing and moving to VHF would allow broadcasters to receive a
      portion of auction proceeds and stay on the air.

                                                                       Incentive Auctions Implementation
Important Broadcaster Protections in the Act

For participating broadcasters:

   Confidentiality of contributions

   Preservation of must carry rights for channel sharing stations

For broadcasters not participating:

   No involuntary moves from UHF to VHF

   Reasonable efforts to preserve coverage area and population served

   $1.75 billion to reimburse repacking costs

                                                         Incentive Auctions Implementation
How will proceeds be shared?

Broadcaster contributions referred to as “reverse auction” in statute.

•       A volunteering broadcaster would identify what spectrum they want
        to contribute and a reserve price.

•       A reserve price would be the minimum price at which a broadcaster
        is willing to contribute its spectrum.

•       Station value might be a starting point in formulating reserve price.
    –         Station value is an accepted sales metric used today.
          •      For what price would you sell your station in an acquisition?
          •      For what price would you channel share (give up capacity)?
          •      For what price would you move from UHF to VHF (give up coverage)?

•       Other considerations for setting a reserve price

                                                                  Incentive Auctions Implementation
Some Considerations for Public Television Stations

High concentration of public television stations in some markets

States are cutting public television budgets

Channel sharing is an opportunity to rationalize the sector, trim duplicative
     stations, increase efficiencies in programming
         •    Moving to VHF may also be appropriate choice for some stations

Working to develop viable ways for public broadcasters to receive auction
     proceeds and fulfill coverage mission

Consider long-lead actions that may facilitate participation by state-owned or
     controlled stations

         •    Any restrictions in a station’s state law?
         •    Any restrictions in a state-owned station’s organizing charter?
         •    Any other relevant restrictions?

Conducting due diligence now could increase your options later
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Next Steps

FCC in process of organizing the work streams, timelines,
   coordination with Canada and Mexico, and drafting a
   variety of new notices and rulemakings

   –   Issued first R&O on channel sharing on April 27
   –   Workshop on channel sharing announced for May 22
   –   Workshop on reimbursement for repacking costs being

New wave of interest from broadcasters

   –   Lots of questions about channel sharing, how to formulate a
       contribution and reserve price
   –   We are encouraged by this show of interest as signs for a
       successful auction

                                                 Incentive Auctions Implementation

             Incentive Auctions Implementation

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