Broadcaster Court Challenge to Repacking Reimbursement and ‘TVStudy’ Likely, Attorneys Say

Broadcasters on the fence about participation in the incentive auction are unlikely to be encouraged to participate by Thursday’s auction order (CD May 16 p5), and aspects of the FCC’s repacking plans may lead to litigation before the auction, several broadcast attorneys told us. An NAB release immediately after the FCC vote criticized the commission’s handling of the $1.75 billion repacking reimbursement fund and commitment to the TVStudy auction software, and the attorneys said there’s widespread industry concern that the FCC deferred many of the auction decisions to later proceedings. That delay could force opponents to take the commission to court sooner rather than later, said Cooley broadcast attorney Jason Rademacher. It’s much easier for a court to prevent or change a repacking process that hasn’t happened yet rather than unwind one that’s already occurred, several attorneys pointed out. “By deciding just these major policy things they've put people in a strategic box,” Rademacher said.

By not treating the reimbursement fund as a budget for the repacking, the FCC has increased the likelihood that broadcasters who don’t participate in the auction may have to pay for the costs of their own repacking, said NAB, several broadcast attorneys and Commissioner Ajit Pai. Though FCC Chairman Tom Wheeler and FCC staffers have said the cost of the repacking effort is unlikely to exceed the $1.75 billion threshold, the information so far released doesn’t make it clear which broadcasters will or won’t be eligible to participate. That creates a lot of uncertainty, Rademacher pointed out. “Most broadcasters believe the auction doesn’t have anything to do with them,” he said.

If broadcasters want to challenge the FCC’s handling of the reimbursement fund, they will need to do so soon, several broadcast attorneys said. “You won’t get another shot at that,” said Rademacher. NAB said in a release it will “pursue every avenue to get the auction back on track,” and recently challenged the FCC in court on its ownership rules.

NAB told the FCC in comments filed early last week not to commit to TVStudy, using language hinting at the possibility of litigation (CD May 12 p4). “If the Commission adopts TVStudy as it currently stands, and in express contravention of unambiguous Congressional intent, the Commission will be acting in a manner that is arbitrary, capricious and contrary to law,” NAB said. Broadcasters face similar timing pressure for legal challenges of the FCC’s use of TVStudy, the updated version of software used to calculate interference between stations, Rademacher said. Since TVStudy produces different results from the older software using the same parameters -- altering many broadcaster coverage areas -- broadcasters could have a strong argument in court, several attorneys told us. But as with repacking, “the time to make that argument is before the auction,” Rademacher said.

The FCC may have released information on TVStudy and the repacking with the expectation it would draw lawsuits, some broadcast attorneys told us. The commission may have wanted to gauge “the lay of the litigation land” while there’s still time to resolve court challenges without delaying the auction, Rademacher said. The FCC’s deferral of many of the auction decisions to later proceedings may represent a danger to the auction this way, one broadcast attorney suggested -- policies released closer to the actual auction could draw court challenges more likely to delay it, the attorney said.

News that potential auction bidders AT&T and Verizon support the auction order and AT&T’s release of a potential $9 billion to $18 billion bid for broadcast spectrum could encourage broadcaster participation in the auction, said Guggenheim Partners analyst Paul Gallant. Actual dollar amounts on the table might lessen broadcaster willingness to threaten the auction with court challenges, one broadcast attorney told us. Gallant disagrees. Though the announcement (http://bit.ly/1jn5YXF)"takes some of the risk out of the auction, Gallant said, it’s unlikely to deter court challenges. “I wouldn’t expect the brighter financial outlook for the auction to deter NAB from filing lawsuits to protect their members,” he said.