It’s crunch time – so everybody looking to participate in the Incentive Auction should pay close attention.

At long last, the Commission has announced the Initial Clearing Target that it plans to shoot for in the Incentive Auction, and it has set the dates for the commencement of the reverse auction. These are developments of the utmost importance to all would-be auction participants, all of whom should be sure to review the Commission’s public notice carefully. Here’s a summary of the highlights.

Clearing Target
Perhaps most importantly – because it could determine the ultimate success of the auction process – is the Clearing Target that the Commission’s auction process software has determined, based on the spectrum relinquishment commitments made by broadcasters. And the target is (drum roll, please): 126 MHz. This means that the Commission thinks that, given the broadcasters who have committed to selling their channels (or moving to a VHF channel), a full 21 channels can be cleared in each market of the country. The 126 MHz clearing target also indicates that the Commission believes there is sufficient interest on the forward auction side that bidders for wireless licenses will pay enough to support the broadcast clearing necessary for success of the Auction overall.

While the Clearing Target may be revised during the course of the auction as developments warrant, the initial target bodes well for the auction’s eventual success.

Final Confidential Status Letters
With the Clearing Target set, the Commission has determined which stations will be qualified to participate in the reverse auction and which won’t. The Commission is sending to each reverse auction applicant a Final Confidential Status Letter (Final CSL) advising it of its status. The letters are addressed to the contact representative identified in the applicant’s Form 177 and must be signed for, although not necessarily the contract rep him/herself. Because the Final CSL contains information essential to participation in further auction preparation – as well as the auction itself – the Commission has emphasized that

any applicant that has not received the Final Confidential Status Letter package by 12:00 noon Eastern Time (ET) on Wednesday, May 4, 2016, should contact the Auctions Hotline at (717) 338-2868.

You have been warned.

In addition to notifying qualified applicants of the happy news that they’ve made the cut, the Final CSL will also provide those qualified applicants with instructions for participating in the mock auction (see below) and placing bids in the actual auction, once it starts. The Final CSL will not, however, advise which of the applicant’s previously specified relinquishment options will be the preferred option. That determination – made by the FCC based on the auction software’s conclusions as to which relinquishment options could be accommodated – can be found only by logging into the bidding system once it becomes available for previews on May 23, 2016 at 10:00 a.m. ET (see below for more on that).

For applicants found not to be qualified to participate, the Final CSL will provide one of three explanations for the non-qualification: either the applicant made no initial commitment, or its initial commitment could not be accommodated, or the Commission determined that the station won’t be needed to meet the Clearing Target. The Final CSL will advise non-qualified applicants how to return their SecurID® fobs.

Important Caveat: In its public notice the Commission reminds all full-power and Class A TV licensees – including those not qualified for the reverse auction – that they remain subject to the prohibition against certain auction-related communications. That prohibition is currently in effect and will remain in effect until further notice from the FCC (which notice will not in any event occur until after the close of the forward auction). In particular, the Commission expressly notes that “communicating that a party ‘is not bidding’ in the auction could constitute an apparent violation that needs to be reported”. That could include disclosure by a non-qualified applicant of its non-qualified status, regardless of the reason for that status.

Commencement of Reverse Auction
Bidding in the reverse auction is set to start on May 31, 2016 and continue on the following schedule:

May 31, 2016 
Bidding Round           10:00 a.m. – 4:00 p.m. ET

June 1, 2016
Bidding Round           10:00 a.m. – 2:00 p.m. ET

June 2, 2016 and after
Bidding Round           10:00 a.m. – 12N ET
Bidding Round           3:00 p.m. – 5:00 p.m. ET

The timing and duration of rounds may be adjusted by the Commission during the auction based on the auction’s progress. Any changes will be announced through the online Auction System.

Pre-Auction Instructional Opportunities
Just because the auction won’t technically begin until May 31 doesn’t mean that there will be nothing to do in the meantime. Au contraire, recognizing the unprecedented nature of the Incentive Auction and the crucial importance of insuring that participants are comfortably familiar with the process, the Commission is making a number of educational opportunities available, including:

FCC Incentive Auction Reverse Auction Bidding System User Guide. An “FCC Incentive Auction Reverse Auction Bidding System User Guide” will be emailed to each authorized bidder on May 5, 2016. A PDF copy will also be posted on the Auction 1001 web page (you can find the link in the “Education” section). The Guide will “describe the features of the Auction System that will be used to bid in the clock phase of the reverse auction”.

Online Bidding Tutorial.  Also available in the Education section of the Auction 1001 web page as of May 18 2016, an online tutorial regarding bidding in the clock phase of the reverse auction.

Bidding Preview Period. The curtain will finally be pulled back on the Auction System on May 23, 2016 at 10:00 a.m. ET, which will mark the start of the “preview period”. (The preview period will close at 6:00 p.m. ET on May 24, 2016.) This preview will provide authorized bidders the opportunity to log in and:

  • check out which stations they can make bids on once the auction starts;
  • determine each station’s bidding status;
  • learn the initial relinquishment option assigned to the station; and,
  • where applicable, available bid options with associated vacancy ranges and next round clock price offers.

 Clock Phase Workshop. On May 24, 2016, from 10:00 a.m. ET to 1:00 p.m. ET, the Incentive Auction Task Force will present a public workshop on the reverse auction bidding system. (Details about the workshop and remote viewing will be released at a later date.) Don’t worry if you can’t attend: a recording of the workshop will be posted in Education section of the Auction 1001 web page.

Mock Auction and Mock Auction Preview Period. One mock auction for all qualified bidders will be held on May 25-26, 2016. The goal is to let bidders familiarize themselves with the clock phase bidding system by working through as many as five simulated rounds involving purely hypothetical situations similar to what bidders will encounter once the bidding starts for real. Commission staffers will be available to answer questions about the auction system and the conduct of the auction generally. The mock auction schedule is:

May 25, 2016
Mock Bidding Round 1          10:00 a.m. -12N ET
Mock Bidding Round 2          3:00 p.m. – 5:00 p.m. ET

May 26, 2016
Mock Bidding Round 3          10:00 a.m. – 11:00 a.m. ET
Mock Bidding Round 4          1:00 p.m. – 2:00 p.m. ET
Mock Bidding Round 5          4:00 p.m. – 5:00 p.m. ET

The Commission is obviously making elaborate efforts to allow all reverse auction participants to get comfortable with the bidding process before the auction kicks off. We strongly recommend that anyone planning on bidding in the auction take advantage of all these opportunities.

Other Important Information
In addition to the scheduling information above, the Commission’s public notice also sheds useful light on a number of questions that will eventually loom large.

Limit of Repacked UHF Band. Broadcasters who will be repacked, and the vendors and third parties implicated in the post-Auction repack, will be interested to learn that the new UHF band will extend only through Channel 29. That provides a starting point for assessing a station’s likelihood of repack and the capabilities of current equipment. For example, many stations have so-called broadband antennas capable of operating across several channels of the UHF band. Prior to today however, attempting to assess whether a station’s particular antenna would be reuseable in the post-auction landscape was a fool’s errand.

Forward Auction Band Plan. The FCC’s public notice includes not only the band plan framework but the allocation of paired spectrum blocks in every PEA. Of particular interest to wireless bidders is the announcement that 97% of all spectrum blocks to be auctioned will be Category 1 blocks, of which, 99% will be zero-percent impaired.

Mexican Border Considerations. Of interest to both broadcasters and wireless bidders is the impact of Mexican coordination and interference protections on the clearance of paired blocks in the southern border areas. Because the FCC will implement a nationwide band plan, broadcast stations in southern border cities – including LA, San Diego, Phoenix, and cities along Texas’s Rio Grande – will see the same band clearance in the reverse auction as in all other markets. However, the FCC will be limited in what it can reallocate for wireless because Mexico requires ongoing inter-service interference protections below Channel 37 – not Channel 30, as will be the case in the rest of the country. It’s not clear whether this is potentially good news for LPTVs in those areas, who in theory might be able to take advantage of the unallocated spectrum between Channels 29 and 37.

The long-awaited Incentive Auction is now upon us. While the fun won’t start for real until May 31, there is much to be done in the next few weeks to prepare. All would-be reverse auction participants should be sure to review carefully the FCC’s public notice and the Final CSL they receive (and if they don’t receive one, be sure to contact the FCC pronto). This is crunch time, and attention to detail is important.