The coalition of TV stations that is considering exiting the TV business to sell their spectrum in the government's upcoming auction could be having second thoughts, especially if selling out doesn't pay up.
About 40 TV stations, part of the Expanding Opportunities for Broadcasters Coalition run by former network TV executive Preston Padden, are worried that the Federal Communications Commission is manipulating the auction in ways that would result in a low sales price.
"We've had some very disturbing meetings and FCC-related conferences with the FCC's auction consultants that were very troubling," said Padden, who filed comments Sunday with the FCC. "Some of the members are discouraged."
The FCC's upcoming auction of spectrum, planned for 2014, is often described as extremely complex. Without enough TV stations lured by an attractive price, the auction could quickly turn into a bust. The FCC wouldn't meet its goals to transition more spectrum to wireless services, let alone build out the public safety network or deliver some much-needed cash to the U.S. Treasury.
In the filing, Padden criticized the FCC for considering proposals to restrict what companies can bid on spectrum and set prices on TV stations based on the value of the TV stations, not on the value of the TV station's spectrum. If companies with deep pockets, such as AT&T and Verizon Wireless, are discouraged from bidding, TV stations might rethink participating in the auction.
"The unhindered participation of Verizon Wireless and AT&T is necessary for the forward auction to generate sufficient revenues to compensate willing broadcasters and, therefore, to transfer the most efficient amount of spectrum for wireless broadband use. Restricting Verizon Wireless and/or AT&T from participating in the auction will lower the expected value to broadcasters of participating in the auction, causing fewer broadcasters to offer their spectrum in the first instance," Padden wrote.
Also troubling to prospective TV station sellers are proposals that would use a scoring system to value the TV stations including metrics such as a station's ratings or its broadcast "class," which could end up putting a lesser value on a low-power TV station, or a station lacking affiliation to one of the big four TV networks.
"The wireless carriers will be buying spectrum, not broadcasting businesses," Padden wrote. "It would be arbitrary, capricious and a clear violation of the Spectrum Act for the FCC to attempt to 'manage' the prices paid to broadcasters based on any metric other than the station's impact on spectrum clearing…6 MHz of spectrum is 6 MHz of spectrum," Padden wrote.
FCC officials were not available for comment but usually do not respond during comment periods.