FCC Auction Would Benefit All TV Stations
Decades ago, clever communications lawyers proposed, and the FCC adopted, the Carroll Doctrine. Under this doctrine the FCC denied licenses for a new station if the existing broadcasters in the market alleged insufficient advertising revenues to support both existing stations and the new entrant. Pretty cool — the FCC protecting incumbent stations from new competition. Alas, in 1988 the FCC repealed the doctrine, deciding that more competition is always in the public interest.
Since then, competition in the video marketplace has exploded with competition coming not only from more broadcasting, but also from cable, satellite and online. Consumers are well served, but in a business where economies of scale matter, the fact that we have too many competitors makes it hard for anyone to earn a fair return.
The common sense answer is for some stations to exit and, indeed, some have considered doing so, if they can find a way to get fair value for their most important asset, namely their spectrum. Now, because of the compelling need for additional wireless broadband capacity, the FCC, in the incentive auction proceeding, is prepared to help ease these stations out the door.
If the strong stations in a market agreed over lunch to pay weaker stations to go off the air, they might all go to jail for a conspiracy to limit competition. But, in the incentive auction proceeding, the FCC is offering to provide the inducement for stations to exit — no need for the other stations to pony up. All broadcasters should be cheering for those stations willing to consider making a financial exit from the market.
It is manifestly in the best interests of all broadcasters to have the government offering to pay some stations to go off the air, leaving the ones that remain with more viewers, more advertising and access to more programming and network affiliations. And, with the possible exception of auction timing, the arguments being advanced by the stations willing to exit are good for all broadcasters. Here are a few examples from the comments filed at the FCC by such stations, the Expanding Opportunities For Broadcasters Coalition:
- The FCC should make high initial offers to all stations. This simply creates potential opportunities for all stations, even if you choose to not accept, it is better to get a high offer than a low offer.
- The FCC should provide more city of license coverage flexibility in choosing sharing partners. Again, this simply provides more potential opportunities for all stations. (If it is fine for a station to go completely off the air, there should be no problem with a mere change in city of license coverage.)
- The FCC should prioritize discussions with Canada and Mexico to resolve border issues. This serves the best interest of all broadcasters, those remaining in the market and those considering an exit.
- The FCC should try not to score stations. This will be a voluntary auction. The FCC will not get any station’s spectrum unless the FCC meets that station’s price. Scoring is a waste of the government’s time.
- The FCC should not place restrictions on which wireless carriers may bid. It is in the best interest of all stations to have the largest possible wireless revenue available to buy out stations (and to fund FirstNet [First Responder Network Authority] and reduce the deficit).
- The FCC should stick to the goal of clearing 120 MHz. The more spectrum that is cleared, the more stations that go off the air.
Clearly there are aspects of this auction that don’t feel good to some broadcasters. But, it made sense in the old days to pay your communications lawyer a fortune to try to limit entry in your market. And with today’s far more competitive marketplace, it makes even more sense for all broadcasters to support the incentive auction and those stations willing to consider a financial exit.
It’s the economic equivalent of culling the herd.
Stations planning to stay on the air (and Gordon Smith's revitalized NAB) appropriately are focused like a laser on repacking issues. That is as it should be. At the same time, those stations should be cheering for those broadcasters willing to consider the FCC’s offer of a buyout.
Preston Padden, a former lobbyist for Fox and Disney, is head of the Expanding Opportunities for Broadcasters Coalition, a group of anonymous TV station owners interested in selling spectrum through the FCC's planned incentive auction. He can be reached at firstname.lastname@example.org.