[Blogmeister’s Note: This is another in a series of posts describing the FCC’s Incentive Auction Notice of Proposed Rulemaking. You can find all installments in this series by clicking here. Contributors to this series include Dan Kirkpatrick, Rob Schill, Don Evans and Harry Cole.]

Once the final participants in the repacking of the TV band have been identified through the "reverse" auction process, the shuffling of stations necessary to accomplish the repacking will raise a number of practical considerations and conundrums. 

Once the auctions have been completed, the Commission and the TV industry will have to grapple with the practical implementation of repacking: who gets what channels, how will stations moving from one channel to another effectuate that transition, what (if any) reimbursement of transition costs will be available, and to whom. This phase of the process will affect all TV broadcasters, whether or not they opted to participate in the “reverse” auction.

 Initially, the post-transition channels to which full power and Class A station will be assigned will be determined by the FCC, without input from licensees. The Commission will use a software program to figure out the optimal way to squeeze the TV industry into the portion of the current TV band that will remain, post-auction, available for TV operations.   Although stations are not to be involuntarily moved from UHF to VHF, almost any other move will be fair game as long as it’s consistent with the auction results.  Licensees unhappy with whatever “new” channel they are assigned to will have very limited recourse: the Spectrum Act denies stations the right to protest modifications of their licenses (i.e, channel changes)imposed by the Commission to accomplish the repacking.

Re-licensing ProceduresOnce the Commission announces its repacked TV band, a number of procedural steps will have to be taken: as we all learned from the transition to DTV several years ago, it’s one thing for the FCC to specify where stations are supposed to operate on the spectrum; it’s an entirely different thing to get those stations up and running on the appointed channels.

As envisioned in the Incentive Auction Notice of Proposed Rulemaking (NPRM), stations requiring modification of their existing authorizations in order to conform to their post-auction channel assignments would be required to file a Form 301 or 340 construction permit application.  This would not apply to licensees who will simply be sharing a channel with a station that is not otherwise modified. The NPRM requests comment on how much time should be allowed for the filing of such applications. (Hint: the NPRM recognizes that more than 30 days would likely be appropriate, since any changes may not be ones the licensee has previously had any reason to anticipate, much less prepare for.) Whatever deadline is established, the NPRM requests comment on whether any extension procedures should be adopted and whether an early deadline should be established that would entitle applicants to expedited processing. 

Stations that will be participating in a channel sharing arrangement without any technical changes would have to file a Form 302 license application; if the station whose facilities are to shared is itself going to have those facilities modified in the repacking, the NPRM proposes that both the sharer and sharee licensees would need to file license applications for the shared station’s original channel. That will cover their sharing arrangement until the new channel facility is constructed. 

How long would licensees have to effectuate the changes in their facilities? The Commission is looking for input on the range of issues underlying that important question. Should there be a uniform, one-size-fits-all, nationwide deadline, or a series of deadlines determined geographically or based on the subsequent use (i.e. continued broadcast use or wireless) of the channel being vacated. The Commission indicates that it does not believe that a full three years should be required to implement changes, suggesting instead a possible 18-month timeframe. The NPRM asks whether any deadlines should be tied to its procedures for reimbursement of relocation expenses (discussed below), and whether advance payments from the Relocation Fund should be allowed. 

With respect to stations that will be terminating operations entirely – as to whom the issue of additional construction is obviously irrelevant – the Commission asks whether earlier deadlines should be imposed. Finally, the NPRM requests comment on whether it would be appropriate to adopt tolling criteria, and/or allow flexibility for temporary operations, as was done during the DTV transition. 

As noted above, licensees will not be able to protest channel modifications. But the NPRM does propose some limited relief for stations unhappy with their reassigned channels. The FCC suggests that such stations could request alternative channel assignments, but only after all initial construction permit applications implementing the repacking have been processed. Such alternative assignments would have to be technically feasible. Additionally, stations that successfully bid to relinquish a UHF channel in favor of a VHF would not be allowed to request a return to UHF. 

Reimbursement of Costs. The Spectrum Act establishes a $1.75 billion “TV Broadcaster Relocation Fund” from which the Commission must reimburse television stations’ “reasonable” relocation costs. Consistent with the chicken-and-egg complexity of the Incentive Auction process (including, particularly, implementation of the repacking process), cash for that fund is to come from the proceeds of the “forward” auction. The Act provides that such costs cannot be paid until after the end of the forward auction, and must be paid within three years. Since some reimbursements may need to be made before those proceeds roll in, the Act authorizes the FCC to borrow up to $1 billion from the Treasury to get things started. 

As the Commission reads the Spectrum Act, reimbursement from the Relocation Fund would be available only to those stations that are involuntarily reassigned to a new channel. According to the FCC, that universe does not include licensees who opt to participate in the “reverse” auction. The FCC figures that successful “reverse” auction participants should pay for any relocation expenses out of the payout they get from the auction. With respect to “sharer” stations that participate in a channel sharing arrangement but do not submit winning bids in the reverse auction, the FCC would permit reimbursement of relocation costs in the event of a new channel assignment for the shared facility.

The NPRM proposes rules that would allow relocated broadcasters to elect reimbursement of their actual costs or estimated costs. Broadcasters electing estimated costs would be able to collect payment before implementing its channel change. The Commission requests comment on how to calculate estimated costs, and what station characteristics should be considered in any such determination. Stations electing to be paid their actual costs would, under the Commission’s proposal, be required to submit documentation showing the amounts claimed, and that such amounts were reasonable.

Since the Act limits reimbursement to “reasonable” costs only, the Commission must come up with some way to establish “reasonableness”. With that in mind, the NPRM requests comment on whether reimbursement should be provided for equipment that must be replaced, but where the newer equipment also represents an upgrade from the station’s existing equipment. In light of the Spectrum Act’s prohibition on reimbursing lost revenues, the Commission proposes no reimbursements for lost advertising while a station is off-air, but requests comment on whether reimbursements could be made for refunds to advertisers, the costs of make-goods, or other expenses. 

Other reimbursement questions on the table: What happens if total requested reimbursements exceed the statutory $1.75 billion cap? Is there anything the Commission can do to reduce the costs of relocation? As to that last question, could the FCC maybe obtain discounts by purchasing equipment in bulk, or somehow encourage stations to exchange and repurpose equipment, or possibly agree to waive certain rules in lieu or monetary reimbursement? If such waivers were offered, the NPRM asks what rules could be waived and what types of flexible use of spectrum could be allowed. 

The Act also provides for reimbursement of costs incurred by multichannel video programming distributors (MVPDs) as a result of the repacking. While such costs are not likely to be terribly extensive, the NPRM requests comment on what types of costs may arise, whether reimbursements should be based on estimated or actual costs, and how to determine what costs are reasonable. 

Finally, the Commission requests comment generally on how to prevent waste, fraud, and abuse in the reimbursement program. 

Consumer Education. Harkening back to the DTV transition and concern that arose then about the need to increase public awareness of the changes involved there, the Commission asks whether a similar consumer education effort is warranted now. Since the repacking is, from a consumer standpoint, likely to be much less complicated than the DTV transition, the Commission asks whether less complicated consumer notification requirements might be appropriate. Also, because viewers will primarily need simply to rescan their receivers, the NPRM requests comment on whether it would really be necessary to establish viewer call center(s), require stations to broadcast on-air notifications, and require reporting to the FCC on any such efforts. The NPRM also requests comment on what type of notification stations should be required to provide to cable operators, and whether a simple letter notification of the station’s new channel and transition date would be sufficient. 

Post-Auction Licensing/Operating Rules. The Commission recognizes that the repacking process will raise some ongoing post-auction regulatory issues. It’s looking for input on a number of specific issues along those lines, as well as on any issues that may not have been considered. 

Recognizing that the removal of one or more stations from a market could affect remaining stations’ compliance with the multiple ownership rules, the NPRM proposes grandfathering any existing station combinations. (Other ownership issues are to be addressed separately in the Commission’s quadrennial review of its ownership rules.) The Commission also recognizes that removing some stations from operation, particularly where those stations are likely to be ones that served niche markets, will have a negative impact on diversity. The NPRM requests comment on how to address this loss of diversity, including possible ways to encourage multicasting or alternative delivery of niche programming that may disappear as a result of stations relinquishing their licenses.

The concept of channel-sharing arrangements (CSAs) raises another set of rule-compliance issues. While recognizing the Commission’s traditional reluctance to involve itself in private contractual relationships, the NPRM requests comment on whether CSAs should be required to address certain matters, such as: access to station facilities; operation, maintenance, repair, and modification of those facilities; and transfer or assignment of either or both licensee’s rights in the station. Comment is also requested on how to address future terminations of a shared license, particularly where one of the two sharing licensees were to have its license terminated, either voluntarily or involuntarily. 

The Commission notes a number of particular difficulties that may arise with respect to CSAs involving a Class A station and a full power station. While such CSAs would be permitted, any such shared license would be subject to the technical rules applicable to the station that did not relinquish its channel. The Commission notes, however, that such a sharing would not grant the Class A station any enhanced MVPD carriage rights, nor would it diminish the full power station’s carriage rights, except to the extent that the full power might no longer delivery a good quality signal to an MVPD headend. 

For stations involved in channel sharing, the NPRM requests comment on how compliance with technical rules should be enforced. The Commission proposes generally to require each licensee individually to comply with all technical rules, but requests comment on whether certain responsibilities, such as preparation of station logs, compliance with the RF exposure rules, and EAS compliance, should be shared responsibilities. 

Finally, the Commission proposes rules to address treatment of noncommercial educational licensees. While such licensees may, following repacking, end up on an “unreserved”, or commercial, channel, the NPRM proposes that such licensees would still have to satisfy all of the existing noncommercial educational licensing requirements. Such licenses could be assigned only to another entity satifying those requirements, and if terminated, such a license could be reassigned only to a noncommercial licensee. The NPRM also proposes allowing noncommercial and commercial licensees to enter into CSAs, although each licensee would remain subject to the applicable noncommercial or commercial licensing rules.

Again, comments are currently due to be filed by December 21, 2012 and reply comments by February 19, 2013.

[UPDATE: As we have separately reported, on November 29 the Commission extended the comment and reply comment deadlines to January 25, 2013 and March 12, 2013, respectively.]