Why your local TV station may disappear forever

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June 21, 2016 by Paul Dughi

On air sign

If you’re not in the local TV station business, you probably have no idea that your favorite local TV station may be disappearing soon or that your TV set may not work at all in the near future. Those are two consequences of initiatives that are underway right now.

Spectrum Auction Underway

Right now, the Federal Communications Commission (FCC) is holding a Spectrum Auction aimed at reclaiming some of the spectrum currently being used by over-the-air television stations. For the past month, stations have had the opportunity to agree to relinquish that spectrum in exchange for a one-time cash payment which, in some cases, could dwarf the value of the station itself.

Judge hammer icon

A 2009 Auction of 700 megahertz spectrum raised $19 billion dollars

Under one option, if a station owner accepts the payment, they will have a fixed amount of time to shut the station down and stop broadcasting. Under another, stations can move to a less desirable frequency, or even share the frequency with another broadcaster, and get a lower payment.

MThe spectrum is being sold off to the highest bidder for use in other sectors, such as the cellular phone industry to handle the ever increasing amounts of cell data being used by consumers. Companies such as AT&T, T-Nobile, Verizon, and US Cellular are expected to bid to buy the spectrum, which could raise as much as $37 billion dollars. 104 companies (at last count) had registered to bid.

Most Desirable Spectrum

The 600 megahertz TV band is some of the most desirable spectrum for this purpose. Congress authorized the FCC to hold an auction to see how much it could get and re-purpose, feeding the need, and also putting some money in the government’s pockets.

For some station owners, it could be very enticing. The opening big prices for one station in New York City could be as high as $900 million dollar — values dependon a number of engineering factors such as interference with other frequencies. A station in Los Angeles, according to the FCC, could see opening bids of $628 million. In Chicago, the biggest opening bid could top $632 million.

Not Every Station, Not Every City

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Not every station and not every city is needed. For example, Las Vegas is the 40th largest television market, but will not participate in the auction because there is no need for additional spectrumthere. Alpena, Michigan is one of the smallest TV markets in the country (#208 out of #210), but one station there is looking at an opening bid of $61 million dollars.

If you want to see the opening bid prices yourself, the FCC has posted them on their website. Check them out here.

Two Parts to the Auction

Reverse Auction

The part that started in June and will end shortly is the “reverse auction.” In the first stage, the FCC offers up price points to the TV stations willing to participate. It started with the opening bids for each TV market around the country. Stations could opt in or opt out. The opening bids were typically set at very high levels to attract the most amount of potential sellers. These amounts were offered to multiple sellers, then reduced in each round until the FCC could get the amount of spectrum it needs at the lowest price. The “selling price” is reached when only enough potential sellers stay in the auction to allow the FCC to get enough spectrum necessary.

Forward Auction

Once they’ve got the amount of spectrum they need, the “forward auction” begins. In this case, the FCC puts the spectrum up for auction. It needs to get enough cash to cover the costs of buying the spectrum from the TV stations that participate, pay for the auction, and $1.75 billion dollars that it will cost to move stations to another frequency. If the forward auction doesn’t raise enough money, the FCC will set a lower target for how much spectrum they can get and start the whole thing over.

It’s Super-Secret

What stations have actually bid or the strategy they are using is super-secret. Stations are currently in the “quiet period” where participants are prohibited from discussing what they are doing even within their own organizations.

Timetable

The reverse auction is drawing to a conclusion now. The FCC estimates it could end by the end of June.

At that time, the forward auction would start and could take into the fall. If all goes well, things could wrap up this fall. If the clearing targets fall short, or the bids aren’t big enough, the whole thing starts over… and that could mean well into 2017 before its conclusion.

But it may be quite a while before your local TV station is affected.

Once the Auction is Over

If you think it’s already complex, just wait. While some stations may opt to go off the air, others may opt to take a smaller payment and move to another less-desirable frequency (or even share a single frequency with another broadcaster). On top of that, the FCC plans to maximize spectrum by “repacking” the remaining TV stations into tighter parameters to free up as much as possible. Under some scenarios, that might mean the majority of TV stations in the U.S. would have to move to new channel assignments. That means new transmitters, antennas, and — in some case — new TV towers.

Now if you’re thinking that’s going to take some time, you’re right. The FCC put a 39-month cap on the moves. Some industry folks think that’s an impossible deadline to hit — especially in light of the fact there are an extremely limited number of manufacturers of this specialized type of equipment (and only so many techs that work on broadcast towers). A study by the National Association of Broadcasters estimated the repack alone could take 11 years.

A T-Mobile study says 39 months is adequate.

Just Down the Road

road.jpegIf you’re waiting for the proverbial other shoe to drop, that may happen, too.

Remember when TV went HD? You needed a cable box or  a convertor box to get the new signals. While the government subsidized the convertor boxes last time, it won’t help this time.

Right now, stations broadcast in what is called ATSC (ATSC is really just the initials of the group Advanced Television Systems Committee, formed to suggest standards for the industry).

The next generation of ATSC is coming, which will allow for more efficient use of the spectrum and allow for things like significantly higher resolution video (think 4k or Ultra HD).

The bad news is that it will not be backwards compatible.

That means every TV station currently in existence would be obsolete unless somebody develops some kind of adapter device. Here’s a good explanation of ATSC 3.0 if you’re interested.

ATSC was developed more than 20 years ago, when it came into existence to provide standards for HD. They set up standards for 1080i and 720p broadcasts. With 4k and higher resolutions now in existence, the current standards can’t handle it. That’s why you’ve never seen an over-the-air broadcast of 4k even though you can buy a 4k video camera or editing software.

The transmission for ATSC will be IP-based (similar to how video is sent over the internet) instead of the current stream (MPEG). It will allow the transmission of high quality signals using much less spectrum, which frees it up for other uses. And it will allow for efficient mobile broadcasting, meaning you could watch that football game on your cell phone without exceeding your data plan.

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