Spectrum auction could be windfall for TV stations _lowres

 

Area television stations could cash in on some big bucks.

The Federal Communications Commission is set to hold an auction for broadcast TV frequencies beginning March 29, a move that could be a windfall for the owners of local stations.

How much of an impact the auction will have on the south Louisiana TV landscape is unknown. Most station owners aren’t willing to discuss if they plan to participate, citing an ongoing quiet period being held in advance of the sale.

Experts who are familiar with the auction said the biggest impact will be in large markets on the East and West Coast and around the Great Lakes.

Mark Fratrik, a senior vice president and chief economist with BIA/Kelsey, a Virginia research firm that studies local media and technology companies, said the auction is unique. The FCC’s goal with the sale is to free up space on the spectrum for smartphones and other wireless devices. The hope is that broadcast station owners will take payouts to go off air, consolidate two signals under one license or shift to a smaller VHF channel.

“This sort of spectrum auction has never been done before in the world,” Fratrik said. “It’s an incredibly complex process. What will affect one market will affect adjacent markets as stations move. There will be a daisy chain effect.”

Stations are being offered eye-popping sums to surrender their broadcast signals. WCBS in New York is being offered $900 million to give up its signal. The FCC set the opening price for New Orleans CBS affiliate WWL to move off air at nearly $200 million. WVLA, the Baton Rouge NBC affiliate, has an opening price of $230 million. WGMB, the Baton Rouge Fox affiliate, is priced at nearly $219 million. KATC, the Lafayette ABC station, has an opening price of $181.5 million. Smaller amounts are being offered if the stations move to a VHF channel.

Harry Jessell, editor and co-publisher of TVNewsCheck, a website that follows the broadcast television business, said the FCC prices are based on the strength of a stations’ signal and the size of its coverage area. “That’s the price to clear as much spectrum as they think they’ll need in the market,” he said.

However, the opening prices are misleading. Analysis from J.P. Morgan notes that the initial bid offers for stations to surrender their signal total $341 billion — and the auction is estimated to generate between $25 billion to $35 billion.

The thinking is that broadcast companies with multiple stations in the same TV market or adjacent markets would be the most likely to sell, since they could combine multiple signals under one license and pocket millions of dollars. There are several companies that fit that bill in south Louisiana.

Nexstar Broadcasting, which owns three south Louisiana broadcast stations: WGMB, WBRL, the Baton Rouge CW station, and KADN, the Lafayette Fox affiliate, would not say if it would participate in the auction.

Tribune Broadcasting has said it would participate in the auction but would not identify which stations it would be willing to consolidate or move. In New Orleans, the company owns WGNO, the ABC affiliate, and WNOL, a CW station.

While some public broadcasting stations across the country have said they will participate in the auction, none of the six Louisiana Public Broadcasting stations plan on participating.

“We’re not giving up any of our stations,” said Beth Courtney, president and chief executive officer for LPB. “We’re barely covering all of Louisiana.”

Small stations, such as independent broadcasters and religious programmers, could also be candidates to shift their signal. “As a broadcast business, it may make more sense for them to sell out for a one-time payday,” Jessell said.

Jessell said the first phase of the process will be a “reverse auction,” in which the FCC makes an offer to a station for it to give up spectrum or shift to VHF. The value of the FCC offers will drop in each round.

“The price will keep dropping until they clear as much spectrum as the FCC thinks they need in a given market,” Jessell said. In other words, if the FCC wants to shed one station in a market, the price will keep dropping until just one station accepts an offer. No one has a clear idea of how many stations the agency wants to remove in a given market.

Jessell said in smaller markets such as Baton Rouge, there may not be a need to remove stations.

The next step will be an April auction where companies bid on the spectrum that has been freed up. That’s expected to draw significant interest from communications firms such as AT&T, T-Mobile and Verizon. J.P. Morgan said some cable operators may be interested in the auction as their Internet customers are relying more on smartphones and tablets to watch streaming video. Google and Amazon also are mentioned as potential bidders, possibly wanting dedicated spectrum for wireless devices.

There could be multiple rounds of auctions — both for broadcast stations and buyers — until the spectrum broadcast stations are willing to give up and what telecoms are looking to buy is balanced out.

Follow Timothy Boone on Twitter, @TCB_TheAdvocate.