WASHINGTON, February 6, 2017 – Today, we are taking an important step to facilitate a rapid and orderly repack of television broadcast stations following the close of the incentive auction. Specifically, the Wireless Telecommunications Bureau is waiving the rules prohibiting communication between parties of any incentive auction applicant’s reverse auction bids or bidding strategies. Broadcasters have asked for this waiver in order to make it easier for television stations to engage in planning and coordination for the post-auction transition. I look forward to working with broadcasters and wireless carriers going forward on further steps to ensure a smooth post-auction transition.
The time for the tower industry to begin operational ramp up is fast approaching. This significant business opportunity is linked to the FCC Spectrum Incentive Auction, which is now in its final stage.
The spectrum auction is a process designed to transfer spectrum from the broadcast industry, where it is currently underutilized and therefore not required, to the wireless carriers experiencing an expanding need for spectrum related to the growing demand for services.
What this means for the tower industry is a four-year spike in demand for its services – site management, consulting, engineering, research and development, tower and antenna manufacturing and, of course, tower erection by trained and qualified crews – to name a few. So, the question becomes: when does a tower company begin to make operational changes to accommodate the anticipated onslaught of demand?
The FCC has set a 39-month window for the transition of spectrum from broadcasters to purchasers of that spectrum – wireless carriers. That 39-month clock begins to tick at the Commission’s release of what is called the Auction Closing and Channel Reassignment Public Notice, which will specify the effective date of the post-auction repacking. Importantly, it will also announce the post-auction channel assignment and technical parameters of every station eligible for protection in the repacking process that will remain on the air after the incentive auction.
Repacking involves the reorganization of television stations in the broadcast television bands so that stations that remain on the air after the incentive auction occupy a smaller portion of the UHF band thereby freeing up a portion of that band for wireless services uses. This process, clearly, will require the services which are provided by the tower industry.
In anticipation of the repack, the FCC is currently considering a post-incentive auction transition scheduling plan as outlined in the FCC Media Bureau’s Public Notice. Under the provision of this plan, one issue presented is whether the repack will proceed on a regional basis. Many interested parties filing ex parte filings in this proceeding (T-Mobile, AT&T and the National Association of Broadcasters) have supported conducting the transition on a regional basis. These parties have pointed to the availability of tower crews and RF and structural engineers, in addition to antenna manufacturing capacity, as key issues of consideration in developing a transition plan. The regional approach, it is argued, will be the most efficient use of available resources.
Reports vary concerning how many qualified companies exist which can professionally and safely perform the work to be done at the completion of the auction. The FCC solicited what is referred to as the Widelity Report (named after the company which prepared it). The report was published in December 2013. In compiling this report, Widelity performed detailed research examining several repack-related issues, including tower crew availability and broadcast field, RF and structural engineering resources, to provide the information upon which the FCC could base its decisions. Completed in October of 2015, the Digital Tech Consulting report (“DTC Report”), funded by the National Association of Broadcasters, posited that there were a very limited number of companies and engineering consultants that had the expertise and/or properly trained crews sufficient to meet the significant demand created by the repack. Published in February 2016, the On Time, On Budget report, funded by T-Mobile, took issue with the DTC report, stating that the resources available to meet the demand were extensive. Ultimately, determining the number of those companies which will be competing for spectrum-related projects will become important as this estimate will, in part, determine the price point at which services are offered.
Tower service companies, which stand “at the ready” to move when the RFPs are requested by broadcasters and wireless carriers, will have the advantage of achieving the winning the bid. Staying apprised of the twists and turns of the FCC regulatory proceedings as they relate to the spectrum auction is pivotal for successful bidding. To support this effort to remain informed, contact Marlexar Research which offers research of legal and industry-related issues and content development services for the tower industry. Stay in the loop, stay informed, seize the opportunity.
Marina Lee J.D. is a communications law legal analyst with Marlexar Research, Raleigh-Durham, North Carolina. She provides law-related content development services to the media and communications industries. She can be reached at firstname.lastname@example.org.
The forward auction portion of the Incentive Auction got started on Tuesday with more than $10.1 billion bid for the 600 MHz spectrum after three rounds of bidding. The forward auction has a long way to go to raise enough money to cover the total cost of clearing the spectrum set by the reverse auction at $88.4B.
After each round, the FCC will determine if the bids reflect competitive prices and if they will cover the auction costs and the costs to move the broadcasters off the spectrum.
The forward auction must raise enough money to cover broadcaster clearing costs, $207 million to cover the FCC’s costs for conducting the auction, and $1.75 billion for the TV Broadcaster Repacking Fund. In all, $88.4 billion must be bid.
If those target numbers are met, the forward auction will go into its final phase where the spectrum reserve is triggered and bidding rounds continue until winners are declared. But, if the final stage rule is not met during the forward auction of a stage, which is very possible, the Incentive Auction will reset with a lower spectrum target for clearing. Another reverse auction will be held followed by another forward auction.
More than 60 entities are taking part in the Forward Auction, including the Big 4 carriers and several regional, including Pine Belt Cellular, Sagebrush Cellular and Union Telephone Company.
Rural Carriers Ask for a Bidding Break
Almost half of the participants have received the rural service provider bidding credit. The Rural Wireless Association (RWA) and NTCA – The Rural Broadband Association (NTCA) have requested the FCC suspend the bidding from Sept. 7-9 and Sept. 26-28, when both groups will be holding meetings. Alternately, the associations requested that the bidding at least be limited to one round per day during those time periods.
“The associations’ members have limited personnel resources to dedicate to auction participation. In many cases, the leaders that attend industry events to conduct their companies’ business are the same individuals named as their companies’ authorized bidders in Auction 1002,” the NTCA and RWA said in their request.
July 1, 2016 — As the reverse auction came to a close this week, it revealed it will take at least $86.4B to get the broadcasters to voluntarily give up access to 126 megahertz (100 megahertz totally cleared) of their 600 MHz spectrum. Jennifer Fritzsche, Wells Fargo senior analyst, noted that the high number is almost two times the amount that was paid at AWS-3 auction, which sold 65 megahertz of spectrum at 2 GHz for $44.9 billion.
“While the ‘shock value’ of this number is indeed high – we remind investors this number does NOT necessarily reflect what bidders in the forward auction (T, VZ and TMUS) will bid to get this spectrum,” wrote Fritzsche.
The reverse auction is the first step of the Commission’s the broadcast incentive auction. The second step is a forward auction, which will determine how much companies are willing to pay for the same frequencies. If the bidding fails to reach these types of numbers set in the reverse auction, additional stages will be run with lower spectrum targets in the reverse auction and less spectrum available in the forward auction.
“We continue to remain very skeptical that the wireless companies have the balance sheets to spend this amount. We believe it is highly likely that the FCC will likely have to step to a lower clearing target, which would be 114 megahertz (86 megahertz truly cleared) at the next stage,” Fritzsche wrote. “An important point to not forget: the auction does allow for multiple reverse rounds if lower clearing targets are indeed needed.”
Previously, Wells Fargo Securities has estimated the forward auction will eventually raise $30-35 billion to clear 60 megahertz of spectrum, which works out to $1.75/MHz/POP).
Connecting the reverse and the forward auctions is the repacking process, which involves reorganizing and assigning channels to the remaining broadcast TV stations in contiguous blocks of cleared spectrum, according to the FCC. This process may cost upwards of $1.75 billion.
“The auction system will establish a band of wireless spectrum that is generally uniform in size across all markets,” according to the FCC.
March 15, 2016 — In the incentive spectrum auction slated for later this year, broadcasters will give up some or all of their spectrum in the 600 MHz band for a share of the proceeds when it is auctioned off. The post-auction transition of the broadcasters off those frequencies, known as the TV repack, is inviting many questions.
Tower crews are the linchpin to the success of TV repack. But are there enough of them to complete the job on time? The industry continues to debate how long it will take broadcasters to move to new spectrum or off the air entirely. And the number of available, well-trained tower crews is a key factor in making that happen.
Steve Berry, CEO, Competitive Carriers Association, told an audience at February’s annual conference of the National Association of Tower Erectors, NATE UNITE 2016, that a tight deadline was needed by the carriers in order to begin recouping money paid for the spectrum as quickly as possible. The FCC has set the deadline at 39 months.
“Having a deadline, like the 39 months, as set by the statute, benefits both sides involved in the incentive auction. Increasing the certainty when carriers can put spectrum to use — increases its value, ultimately leading to a bigger ‘incentive’ that can be paid to the broadcasters,” Berry said.
Berry said he understood NATE’s concerns about the safety of climbers, which will be under increased pressure to meet deadlines during the transition. “To be clear, the FCC has established reasonable alternatives for unique circumstances to address safety concerns,” he said. “I for one appreciate NATE’s concerns and would never suggest an unsafe transition activity.”
The National Association of Broadcasters funded a Digital Tech Consulting study, which projects the transition would take more than the 39 months and would cost between $1.98 billion and $2.94 billion, much more than the $1.75 billion authorized by Congress. The NAB challenged the FCC’s incentive auction in the District of Columbia Circuit Court and lost.
“The two most significant bottlenecks in the process will be the small number of qualified crews for implementing tower modifications and installing antennas and transmission lines, and an anticipated shortage of antennas,” according to DTC.
The study asserted that while 30 tower crews were active during the digital TV transition, only 13 qualified crews are active today with tower companies forecasting 16 crews in the near future to do repack work.
“These companies tell us that they are working now to identify as many qualified crews as possible, but have had little success in identifying additional possible crews due to the dearth of qualified foremen and trained workers,” DTC wrote.
With 16 qualified crews, 130 antenna installations can be changed out per year, DTC estimates. If it takes four months to get the repack started, that leaves 33 months during which no more than 360 antennas would be changed out. As a result, if the repack affects between 800 and 1,200 deployments, the study said that tower and antenna installations would take between 6.5 and 9.5 years to complete.
Berry respectfully disagreed with NAB/DTC, noting that spectrum auction expert Peter Cramton had been retained by CCA to develop a methodology that would measure tunable antennas, stations that can be repacked on the same channel, stations with in-range broadband antennas and stations with antennas less 350 feet.
“Looking at these factors, and other engineering submissions —it is realistic there will be up to 41 crews available to complete the work on tall antennas within the transition timeframe,” Berry said.
T-Mobile Study Evaluates Time, Resources Needed for TV Repack
Berry also pointed to T-Mobile’s study filed with the FCC on February 17, which evaluated the time and resources required to transition television broadcast operations from their current frequencies to a new band plan.
Broadcast engineering firms — Broadcast Tower Technologies and Hammett & Edison – were engaged by T-Mobile to look at the post-auction broadcast relocation process.
“Based on an exhaustive review of television broadcast license facilities and in-depth, nationwide analysis of available resources for the major stages of repacking — the study concludes that America’s broadcast industry can transition to a more spectrum-efficient band plan within the 39-month timeframe set by the FCC and within the $1.75 billion budget established by Congress,” according to T-Mobile.
In particular, the study asserted that the deadline will be met because not all stations will need new antennas and not all towers will require modifications, an adequate supply of broadband antennas exists, and adequate numbers of towers structural engineers and RF engineers are available.
Tower Companies Eye Repack Warily
Bob Paige, senior vice president, mergers and acquisitions at Vertical Bridge, wasn’t buying into the studies, saying that he believes NAB grossly underestimated the amount of manpower available. At the same time, he told an audience at NATE UNITE 2016 that he believes there will be a bottleneck created by all of the TV repack tower activity.
“Don’t confuse lobbying with the facts, but everything can’t get through the funnel at the same time,” Paige said. “At Vertical Bridge, we are the largest private owner of tall towers in the United States and we are spending a lot of resources internally making sure we have a number of tall tower crews dedicated to our needs, because we believe there is going to be a resource shortage when it comes to tall tower crews.”
American Tower Asks FCC for TV Repack Reimbursement Clarity
Representatives of American Tower met with the FCC staff twice last Fall, regarding the logistical challenges of the broadcast repack following the incentive auction, according to an Ex Parte filing.
American Tower has 153 towers with at least one full-power/Class A TV transmitter, 73 towers multiple full power/Class A TV, 65 complex sites (candelabra, mountaintop, broadband antenna) and 328 full-power and Class A tower leases.
American Tower said that while it has begun the planning process for the TV repack, more could be done if TV stations subject to repacking knew they would be reimbursed for expenses incurred prior to the 39-month repack period, known as “pre-implementation eligible expenses.”
“For example, we can perform pre-repack work such as tower mapping and structural analysis starting now if TV stations had clarity that expenses will not be rejected simply because the work was actually performed prior to the start of the 39-month buildout,” American Tower wrote in an Ex Parte filing.