Incentive Auction Discussion

[Peter Parker]

I do not know that the auction will fail but i would expect the sides to be getting closer and hat is not the case so far. maybe by round 9.

 

[Trip]

We've gotten way off subject on LPTVs and network affiliates. Let's bring this back to the Incentive Auction which, incidentally, will reach the end of the reverse stage on Friday.

- Trip

 

[dhett]

Then why the memo to a presumed short-timer?

I've already answered that question.

While the auctions are costing unimaginable amounts of money, I'm not seeing a convergence between what the FCC is offering and what the wireless industry is willing to pay. To see success, they should be coming together rather than both decreasing.

Stage 1: Reverse auction ~$88.0B for 126 MHz or ~$698M per MHz. Forward auction ~$22.45B or ~$178M per MHz. Difference: $520M.
Stage 2: Reverse auction ~$56.5B for 114 MHz or ~$496M per MHz. Forward auction ~$21.5B or ~$189M per MHz. Difference: $307M.
Stage 3: Reverse auction ~$40.3B for 108 MHz or ~$373M per MHz. Forward auction ~$19.7B or ~182M per MHz. Difference: $191M.

Where I went to school, that's called convergence.

 

[Voyager6]

I've already answered that question.



Stage 1: Reverse auction ~$88.0B for 126 MHz or ~$698M per MHz. Forward auction ~$22.45B or ~$178M per MHz. Difference: $520M.
Stage 2: Reverse auction ~$56.5B for 114 MHz or ~$496M per MHz. Forward auction ~$21.5B or ~$189M per MHz. Difference: $307M.
Stage 3: Reverse auction ~$40.3B for 108 MHz or ~$373M per MHz. Forward auction ~$19.7B or ~182M per MHz. Difference: $191M.

Where I went to school, that's called convergence.

But wasn't there a divergence on Stage 3? In Stage 3, the Forward Auction price per MHz should have gone up not done.

 

[harshness]

Where I went to school, that's called convergence.

But if you follow the convergence, does it actually meet before the forward auction no longer covers the cost of the auctions? Both are decreasing and there's still a substantial difference.

 

[harshness]

In Stage 3, the Forward Auction price per MHz should have gone up not done.

The forward auction bidding theoretically should be less as there's less spectrum to bid on in each round. Sometimes there's a little less and other times there's a lot less so that has to be taken into account.

At some point, it is going to get skinny and then the industry will likely get excited about not having anywhere to go.

 

[Nascarken 91xg]

I can't what to see what happens with the low vhf end will we see 2-6 agen ?

 

[harshness]

I can't what to see what happens with the low vhf end will we see 2-6 agen ?

Perhaps, but it becomes less likely with each auction round. Depending on when the repack happens and where the ATSC 3.0 transition comes in, there may still be a short-term need for VHF-low (especially in tight markets).

 

[dhett]

But wasn't there a divergence on Stage 3? In Stage 3, the Forward Auction price per MHz should have gone up not done.

No, because the difference in each round had been cosistently less.

 

[dhett]

But if you follow the convergence, does it actually meet before the forward auction no longer covers the cost of the auctions? Both are decreasing and there's still a substantial difference.

Yes, it does meet before that point because the inventory of spectrum that needs to be bought is rapidly decreasing. In more and more markets, there is now enough spectrum to accommodate all full-power and class A stations currently in the UHF band. That is already the case in the Phoenix, Tucson and Yuma/El Centro markets here in Arizona.

I have a feeling that the Spectrum Auction succeeds in Stage 4, but if not, on to Stage 5, which is exactly how the Auction was designed to work.

People forget that before the Auction began, there was a lot of chatter about how channels 14-36 would be left for TV service, with the radio astronomy band at 608-614 MHz serving as a natural buffer between television and wireless service. Indeed, our agreement with Mexico allowed them to use up to 608 MHz (channel 36) for TV service. Why wouldn't we follow suit?

 

[Voyager6]

No, because the difference in each round had been consistently less.

Stage 1- $178M per MHz
Stage 2 - $189M per MHz
Stage 3 - $182M per MHz

Stage 3 should have been in the $190M to $195M range for the convergence theory to hold.

 

[Trip]

Stage 1- $178M per MHz
Stage 2 - $189M per MHz
Stage 3 - $182M per MHz

Stage 3 should have been in the $190M to $195M range for the convergence theory to hold.

You're looking at the wrong number. The forward price is more or less the same per MHz each stage. The reverse price, however, is falling significantly each stage. The numbers are converging because the differences are getting smaller each stage.

Stage 1: Difference: $520M.
Stage 2: Difference: $307M. (Two channels added to TV band.)
Stage 3: Difference: $191M. (One channel added to TV band.)

If you follow the pattern, it looks like the difference is decreasing by about $100M per channel added back to the TV band. Stage 4 has four channels added back to the TV band.

- Trip

 

[harshness]

People forget that before the Auction began, there was a lot of chatter about how channels 14-36 would be left for TV service, with the radio astronomy band at 608-614 MHz serving as a natural buffer between television and wireless service.

I'm not sure about the "lot of chatter", but I asserted that they should have started with 35 channels and gone from there. Could have saved a lot of time and money.

 

[dhett]

I'm not sure about the "lot of chatter", but I asserted that they should have started with 35 channels and gone from there. Could have saved a lot of time and money.

When did you assert that? Now? Because it sure wasn't at the start of this thread back in late April. Congratulations on the 20/20 hindsight.

The FCC was tasked with clearing as much TV band as possible, up to 126 MHz. That's what they did. No one knew what value wireless carriers would place on the spectrum at that time, and the FCC set opening prices high enough to entice enough broadcasters to participate in the auction so as to make the 126 MHz target feasible.

 

[harshness]

When did you assert that?

I'm thinking that ideally it would go to RF 36 (since RF 37 is off the table).

I may have also lamented the concept of straddling 37 in another thread.

 

[dhett]

I'm thinking that ideally it would go to RF 36 (since RF 37 is off the table).

I may have also lamented the concept of straddling 37 in another thread.

You realize that when you posted that, the auction had already gone into the second stage, so it was locked into the process already?

Nice 20/20 hindsight. You're a real stinkin' Nostradamus, you are.

OK, then let me ask you this - since in September (after the auction completed Stage One) you thought that ideally the TV band should go to RF 36, then why the devil are you whining about the auction being a failure when it's going to RF 36? Brilliant - absolutely brilliant.

 

[localclassictvfan]

Got a question.......WAFB 9 and WBXH-CD is in the same studio owned by the same people, Raycom Media. Hopefully I am making sense of this. WBXH is on WAFB 9.4 and say with this retrans going on, is it possible to shutdown WBXH altogether and keep the MNTV programming on 9.4 and move one of the Katz stations to WAFB like say escape to 9.3 and I guess Grit could go to WVLA 33.3 is that a SCENARIO on how some of this works....

 

[harshness]

You realize that when you posted that, the auction had already gone into the second stage, so it was locked into the process already?

Does it matter where the auction is or was? My point remains: They should never have started below channel 37 yet they spent considerable time and money dwelling down there. As it turned out, the second and third rounds were perhaps more disappointing than the first and the fourth round is estimated to be pretty far off target.

Is the process so "locked in" that the FCC can't adjust it? Sounds like a recipe for a sub-optimal outcome if you see where your assumptions and/or advice were poor but you forge ahead anyway.

 

[Trip]

[...] and the fourth round is estimated to be pretty far off target.

Where do you estimate it will end up?

Is the process so "locked in" that the FCC can't adjust it? Sounds like a recipe for a sub-optimal outcome if you see where your assumptions and/or advice were poor but you forge ahead anyway.

Yes. Writing the rules for this auction took multiple years and they are pretty much set in stone now. To undo them would take more months (at best) or years of rewriting rules. There is no appetite for it.

- Trip

 

[dhett]

Does it matter where the auction is or was?

Absolutely. Once the first round started, you're just a Monday morning quarterback.

My point remains: They should never have started below channel 37 yet they spent considerable time and money dwelling down there. As it turned out, the second and third rounds were perhaps more disappointing than the first and the fourth round is estimated to be pretty far off target.

Easy for you to say now, after seeing the results. Where were you before the process started? If i look at the ECFS*, am I going to see someone from Salem advising the FCC to start the Auction process at 84 MHz because it would be a waste of time and money trying to get the wireless industry to bid on any larger amounts? I'm pretty sure the answer will be no, because you didn't have a clue then, and you still don't. All you can do is sit back and criticise after the results come in.

* - ECFS is the FCC's Electronic Comments Filing System, which I'm sure you didn't know.

Is the process so "locked in" that the FCC can't adjust it? Sounds like a recipe for a sub-optimal outcome if you see where your assumptions and/or advice were poor but you forge ahead anyway.

Once you establish the rules and process, you don't change them. That would be a recipe for a lawsuit. The process has worked exactly as it was designed to work.