Auction Order Leaves Repacking Questions Unanswered, Say Broadcast Attorneys

The specifics on incentive auction repacking and reimbursement in the FCC auction order released Monday (CD June 4 p4) leave a lot of uncertainty for broadcasters, said broadcast attorneys in interviews. Though the order details how broadcasters will be paid up front and how their costs caused by the repacking will be assessed, the specifics of the process remain unclear, which makes it hard for broadcasters to plan, the attorneys said. NAB said in a news release Monday that holding nonparticipating stations harmless in the auction is one of its aims, and an organization representing low-power TV has already said it will pursue legal action against the order over repacking costs. Not compensating stations for repacking costs puts a “huge financial burden” on stations, said Fletcher Heald broadcast attorney Peter Tannenwald, who has many LPTV clients.

The FCC is still developing the process for broadcasters and multichannel video programming distributors affected by the repacking to be reimbursed, and it will be publicized well in advance of the auction, said an agency official. The order said broadcasters and MVPDs will submit eligible repacking costs up front, and the FCC will issue funds for “up to 80 percent” of the eligible costs. Noncommercial broadcasters will get up to 90 percent, “due to their unique funding constraints,” the order said.

How expense eligibility will be determined is not final. The order said broadcasters and MVPDs will have the option of accepting predetermined amounts for specific expenses, values of which will be listed in the catalog of eligible expenses when the FCC issues a final version. Alternatively, they can ask for reimbursement for expenses not covered in the catalog, or show why a given expense is more than the amount listed in the catalog, though they'll have to provide justification, and survive a Media Bureau review of the submission. “We will require entities that provide such individualized cost estimates to submit supporting evidence and to certify that the estimate is made in good faith,” the order said.

The amount of money available to pay broadcasters up front depends on the initial repacking expenses claimed by broadcasters, and how much money the FCC can borrow from the treasury, the order said. Because of language in the Spectrum Act, the amount available for initial allocations from the Reimbursement Fund may be limited at first to $1 billion, the order said. The rest of the money might be available to allocate until proceeds from the forward auction become available, the order said (http://bit.ly/1oX6QVm). “If necessary, the initial allocations of funds to broadcasters and MVPDs will be made in tranches as funds become legally available."

That up-front money is a good thing for broadcasters, and could even allow them to secure financing for any repacking costs that aren’t eligible for reimbursement, said Fletcher Heald broadcast attorney Frank Jazzo. But the lack of specific numbers, or even hard percentages for the up-front allocation, still leaves a lot of uncertainty for broadcasters, he said. “The devil is in the details.” The precise process for broadcasters to receive their reimbursement is also still undefined, said Sinclair Senior Vice President-Strategy and Policy Rebecca Hanson. It’s not clear if broadcasters will have to go through some sort of approval process at Treasury to access their funds, she said.

Concerns about unfunded repacking costs will drive LPTV interests to sue the commission, said LPTV Spectrum Rights Coalition Director Mike Gravino in a statement Monday. Since LPTV stations aren’t protected in the auction or eligible to receive repacking reimbursement funds, Gravino said the auction order is a violation of the Unfunded Mandates Reform Act. “The LPTV industry is forced to seek redress from the courts. And will do so as soon as possible,” Gravino said. The FCC is not bound by the UMRA, the order said. “How much can you change the rules on somebody?” said Tannenwald of the plight of LPTV operators affected by the auction, calling them “discouraged and surprised."

NAB concerns about the auction order were about the TVStudy software, in a Monday news release. The FCC should hold nonparticipating stations “harmless” in the auction, NAB said. The older OET-69 software, preferred by broadcasters over TVStudy, “cannot support the incentive auction” because it can’t handle the required interference calculations “in a timely fashion,” the order said. NAB had argued that, because the TVStudy software calculates a reduced coverage area for some broadcasters compared with the original OET-69 software, using it violates language in the Spectrum Act requiring the FCC to use all “reasonable” methods to preserve broadcaster coverage area. That interpretation of congressional intent is wrong, as a “qualification that requires of the Commission a certain level of effort rather than a particular outcome” is reasonable, said the order. “Eighty-eight percent of full power stations will experience an increase in population served, while only 12 percent show some decrease.”