Reverse Auction Seen Going Well
The reverse portion of the incentive auction is seen as going well for participating broadcasters, according to what information can be gleaned from them, attorneys and analysts laboring under the strictures of FCC anti-collusion rules. The Incentive Auction Task Force (IATF) won't comment on the status of the auction and no broadcaster is likely to know how things are going beyond its own auction assets. Anecdotal information we gathered from broadcast industry officials shows a common trend of stations freezing at higher prices than expected, and a tone of general satisfaction about how the auction is proceeding.
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An attendee at the recent SNL Kagan Broadcast Finance Summit told us representatives of companies believed to have a lot at stake in the auction seemed optimistic about their payoff. Wells Fargo analyst Marci Ryvicker received a similar impression, she emailed investors. “The auction could be a transformative event for broadcast -- more so than we initially thought,” Ryvicker said, saying broadcast management teams at the event were discussing large shareholder returns from the auction.
Despite general optimism, numerous broadcast industry officials said this reverse auction could only be a precursor to a more modest second stage if there isn't enough money spent in the forward auction. “Expectations remain pretty realistic that 126MHz will be hard to clear given the lack of a 'white knight' on the forward side,” Ryvicker said. If the forward auction doesn't generate enough money, the reverse auction will be held again, with a lower clearing target and less spectrum on offer.
FCC auction software is seen as functioning well, with one broadcast attorney even describing it as “elegant.” Though delays in processing auction results have led to some rounds being delayed, the system has mostly worked well, broadcast attorneys told us.
At its current speed of three rounds a day, the reverse auction is projected to end June 28. The forward auction isn't expected to start until late July, said Wiley Rein broadcast attorney Ari Meltzer in a blog post. Round 30 was the last round Friday, and the reverse auction will go until Round 52. The FCC released the formula by which the price of a UHF station decreases each round. Such stations still in the auction in Round 30 are being offered prices that are roughly 22 percent of their opening bid price, according to calculations by a broadcast lawyer. VHF station decrements are calculated differently, and their decrements depend on a station's individual circumstances. At Round 34, which should occur Tuesday, the decrement for UHF stations will change to one percent of each station's opening bid price.
The FCC Public Reporting System will display more data about the auction's progress during the forward phase and is expected to allow those outside the auction to get a better idea of how the auction is going, FCC and industry officials have told us.
After the auction will come the repacking, and a proposed repacking plan is expected to be issued for comment later this summer, an IATF spokesman told us. FCC officials have said for months a regional repacking plan was likely, and the IATF spokesman told us the model plan will likely focus on “daisy chains,” strings of stations that can't be repacked without affecting each other.