In previous advisories dated Aug. 6, 2015 and Aug. 13, 2015, we provided an overview of the FCC’s incentive auction due to begin next year. The FCC has now released a lengthy Public Notice describing the application procedures for both the reverse auction (in which the FCC will be buying back TV channels to clear spectrum) and the forward auction (in which mobile broadband providers will be bidding on that spectrum). This advisory concerns application procedures for the reverse auction.
Most importantly, we now know the FCC will accept applications for the reverse auction beginning Dec. 1, 2015 at noon Eastern time, until Dec. 18, 2015 at 6 pm Eastern time. Broadcasters (full power and Class A TV stations) interested in participating are encouraged to apply early to avoid technical issues that could be caused by a crush of last minute applications. There will be no filing fee for this application.
In the application, which will be designated FCC Form 177, broadcasters will have to choose which options they might potentially select during the auction, i.e. going off air (which includes entering into a channel sharing agreement or “CSA”), moving to a low VHF channel or moving to a high VHF channel. Since this application does not bind stations to a particular choice, but includes the range of selections from which the station may ultimately choose, broadcasters should consider selecting all possible choices in Form 177. The process for explaining how options are chosen and changed is explained blow and in the earlier Aug. 13, 2015 advisory.
Form 177 will also require stations to provide ownership information for each station and to choose up to three persons who will be qualified to place and accept bids (the “bidder”) for that station. Since all bids will be made by the FCC in the reverse auction, the authorized “bidder” for each station will only be required to accept the current FCC bid (for the station’s chosen option) and remain in the auction, or reject the FCC bids for all options, in which case the station will exit the auction. The FCC has publicly announced the expected opening bids for each station, although all subsequent bidding (including which stations are participating in the auction) will be kept confidential. When the reverse and forward auctions are completed, the FCC will issue a public notice providing the results of both auctions. Winning bids for stations participating in the reverse auction are expected to be considerably lower—perhaps even 10% or less of the opening bid—than the enticing opening bids announced by the FCC, which are designed to encourage station participation in the auction.
Stations that have been “red-lighted” for nonpayment of FCC regulatory fees (and otherwise prohibited from filing FCC applications) may still file Form 177 and participate in the auction, conditioned upon acknowledgement of the debt owed and an agreement to pay any such debts out of the auction proceeds. Similarly, any station subject to a non-final revocation order or with an expired or cancelled license may also participate in the auction, so long as such action has not become final and unappealable by Dec. 18, 2015 (the Form 177 filing deadline).
Stations that have entered into CSAs prior to the Form 177 filing deadline must submit unredacted copies of those CSAs to the FCC and can then discuss FCC bids with their CSA partners during the auction. All other stations can indicate in Form 177 whether or not they intend to enter into a post-auction CSA, but cannot discuss bids during the auction with any station that is not under common ownership.
By March 29, 2016 at 6 pm Eastern time, all TV stations that have agreed to participate in the auction and have successfully completed Form 177 must choose which option (off-air/low VHF/high VHF) they will select for the first round of bidding. Once a station chooses to do anything other than go off air (which includes channel sharing), it cannot go back to choosing off air as an option in a subsequent round. See Aug. 13, 2015 advisory for details.
The actual auction will not begin until at least a month after the March 29 commitment deadline. Three to four weeks after the commitment deadline, the FCC will determine an “initial clearing target” based on the selections made. It is possible that some stations will be told at that time that they are no longer needed and cannot participate in the auction. Then there will be a mock auction before the actual auction begins.
During the auction, the FCC may offer bids to different stations on different dates since bids will depend on the need for a particular channel, which will in turn depend on what other stations in the market choose to do. All bidding will be confidential between the FCC and the station. The FCC is free to advise stations at any point that their channel is no longer needed, in which case the bid for that channel will be zero. Stations may also have their bids “frozen” in one round, only to receive a lower bid from the FCC in a subsequent round. Stations that drop out of the auction or that do not participate in the auction may be “repacked”on a different channel within their current band (UHF or VHF).
