Getting the Auction Back On Track

NAB today filed suit against the Federal Communications Commission (FCC) in federal court to challenge certain elements of the Commission’s May 2014 incentive auction order, which was published in the Federal Register last Friday. The order, approved by a sharply divided Commission, establishes the “framework” for the FCC’s first-ever voluntary broadcast television spectrum incentive auction. That framework improperly diminishes key broadcaster protections embodied in the Middle Class Tax Relief and Job Creation Act of 2012 (“Spectrum Act”), and undermines the overall efficacy of the auction. Unfortunately, the Commission’s action has left NAB with no choice but to seek legal redress.

Before explaining the substance of some of our objections, let me be clear about what our petition is not about: delay. NAB has never advocated for – in words or deeds – any undue delay in the auction. Where we’ve identified concerns with the auction or repacking design, we’ve suggested multiple reasonable and expeditious solutions. Consistent with that approach, we have filed our petition at the outset of the 60-day filing window and we will be seeking expedited review. Our aim is to resolve our core challenges as quickly as possible, so the FCC can immediately return to its auction preparations. We believe the court can help us swiftly address our discrete issues.

The Spectrum Act was hailed largely because it achieves an important balance. On the one hand, it seeks to fuel the commercial wireless industry’s insatiable desire for spectrum. On the other hand, as with the recent DTV transition, the Act aims to protect broadcasters and their viewers in an otherwise unsettling repacking process.

Broadcasters ultimately supported the auction legislation not because it gave them a chance to get out of the business – even a “successful” auction will only see no more than 15 percent of the 2,200 eligible broadcasters go off the air – but because Congress ensured, with the FCC’s backing, that broadcasters who choose not to enter the fray will not be harmed in the process. While there are many aspects of the legislation that make this point clear, perhaps the simplest and most direct expression of this balance for broadcasters is that participation in the auction is voluntary.

There are three critical ways in which Congress did its best to ensure that auction participation remains voluntary and protect broadcasters and their viewers during and following the auction. Unfortunately, the FCC’s order is not faithful to these elements, and thus, fails to meet Congress’ mandate.

First, Congress instructed the FCC to take “all reasonable efforts” to preserve broadcasters’ coverage areas and to allow them to continue to serve the same people they serve today. Unfortunately, the FCC reads this passage as if they must only take “reasonable” efforts to protect broadcasters and their viewers. The FCC believes that Congress left a substantial gulf between “reasonable” and all other kinds of efforts, and therefore Congress developed a fairly low bar for Commission compliance.

A plain reading of Congress’ direction to the FCC, however, requires it to do all it can to protect broadcasters and the viewers who rely on them. Congress inserted the word “reasonable” simply to give the FCC some measure of flexibility in the unusual case where perfectly replicating a particular broadcaster’s coverage area and population served would jeopardize the success of the entire auction. If that circumstance were to arise, Congress provided the FCC with the flexibility to allow the auction to proceed, even if a small reduction in service area occurred for a particular broadcaster in a particular market. That is the fair equilibrium that Congress desired.

Second, in an effort to ensure that broadcasters do not have to pay for their forced moves during repacking, Congress established a fund for the FCC to reimburse non-participating broadcasters that the FCC requires to relocate. The reimbursement concept was a key part of the FCC’s pitch to Congress in the run-up to the passage of the Spectrum Act. As former FCC Chairman Julius Genachowski said to broadcasters in a speech at the 2011 NAB Show, in the auction “it’s essential that broadcasters be treated fairly. That means, for example, that broadcasters should be fully compensated for any costs of any channel changes.”

The FCC incentive auction order, however, does little to ensure that the Commission won’t repack beyond its financial means and that broadcasters won’t get stuck with the bill. Indeed, conservative projections suggest that broadcasters will be out of pocket at least $500 million dollars by the conclusion of the auction and repack. And for what purpose; which broadcasters gain? None. Local broadcasters should not be forced to go out of pocket to help multi-national wireless giants.

Third, Congress took the unusual step of instructing the FCC on exactly how to compute the broadcasters’ coverage areas and populations served. It specifically stated that the FCC must use the same approach it uses today to evaluate any new station application, called OET-69. The FCC, however, sees Congress’ direction as inconvenient, and thus has made changes to this time-honored methodology (and for purposes of this auction only). The result is that, what Congress assumed to be a constant in the auction process – the methodology for calculating broadcaster coverage areas and population served – now is reducing the coverage areas and populations served for the majority of broadcasters. That methodological change was not part of the deal, and the FCC has improperly and imprudently moved the goalposts from the goal line on which we all agreed. In fact, the OET-69 provision was inserted into the Spectrum Act precisely to avoid this kind of mid-stream resizing.

The net effect of all of these changes (and others) is that broadcasters are effectively left with an auction that benefits everyone else while harming only them. NAB’s lawsuit is not designed to derail the auction, or even slow it down. We are looking for a mid-course correction that better reflects Congress’ intent and that protects broadcasters and the millions of vulnerable over-the-air TV viewers. We believe strongly that the FCC itself can achieve a better balance. If not, with this litigation we can right the ship that puts more spectrum out in the marketplace while ensuring a vibrant and robust broadcasting service for the American people.