An analysis of broadcast spectrum incentive auction revenues released this week may be overly optimistic in its estimates, according to BIA/Kelsey.
The white paper, submitted to the FCC this week by the Consumer Electronics Association and CTIA—The Wireless Association, attempts to put dollar values on the cost and revenues generated by spectrum auctions of 120 MHz of “underutilized” broadcast television spectrum. The proposal is part of FCC Chairman Julius Genachowski’s National Broadband Plan, which the two associations have endorsed.
Using what they term “conservative assumptions,” the two associations—which did the report in-house– estimated that the licenses auctioned in the broadcast TV band should be valued at $0.978 per MHz-POP (the amount of bandwidth, in MHz, times the population area covered), and that estimated net auction revenues would be approximately $33 billion, although they note that revenue could be higher if valuations are consistent with recent auctions for similar spectrum rights.
It also estimates that “only a very small percentage” of the U.S. broadcast stations would have to participate in the auction to achieve the goals of the NBP, and that in the vast majority of broadcast markets, no broadcast stations would need to participate in such an auction. The estimated enterprise value of the broadcast licensees that voluntarily surrender their channels is $1.2 billion-$2.3 billion, assuming that the participating stations opt to surrender their licenses rather than accept lower-cost options such as channel sharing or cellularization. The report estimates that the cost of relocating or “repacking” TV channels 31-52 to the new core channels at TV channels 7-30 at $565 million, based on data from the National Telecommunications and Information Administration.
“The spectrum crisis is real and must be addressed to ensure that our innovation-driven economy can recover and thrive,” said Gary Shapiro, president and CEO of CEA. “Additional spectrum for licensed and unlicensed wireless broadband is crucial to our national competitiveness. A voluntary incentive auction will create jobs, enhance innovation, provide the government resources to reduce the national debt, and even give broadcasters a windfall of billions of dollars for spectrum they don’t own.”
“I think the report is a very optimistic view,” said Mark Fratik, vice president with BIA Kelsey, which analyzes the financial status of the broadcast industry. “I think they over-estimate the revenues and they underestimate, somewhat, the costs of relocating all these stations and the disruption it would cause.”
The report also completely discounts the role of low power TV stations, Fratrik noted. “They basically just say that LP is going to go away,” he said. “They don’t talk about any costs involved in relocating LPs.” Fratrik adds that the report doesn’t take into account what percentage of the auction revenues local broadcasters would get, but acknowledged that “that’s a question that Congress has to decide.”
For its part, NAB said that the report just represents one view and doesn’t take into account the impact that relinquishing such spectrum would have on small markets.
"It's hard to take seriously an analysis of broadcast spectrum values done by parties with a vested interest in forcing scores of broadcasters out of business,” the NAB said in a statement. “It's noteworthy that CTIA and CEA cavalierly suggest eliminating 'smaller stations in larger markets,' which translates into fewer niche broadcast stations that serve important immigrant communities and religious audiences. NAB does not oppose spectrum auctions that are truly voluntary, and we look forward to an informed dialogue in coming months on the enduring value of free and local television for all Americans."
CATEGORIES
More about regulatory and standards
