Comments sought on new Reimbursement Form and related instructions to be used by TV/MVPD’s for post-Incentive Auction claims
The Media Bureau has given the television industry a sobering glimpse of what life will be like immediately after the close of the Incentive Auction. All full-power and Class A licensees would be smart to take a look now so that they’ll be ready when the time comes. And make no mistake: the FCC is confident that the time will come.
When the Incentive Auction rolls around, stations opting to participate will either give up their channels or agree to shift channels in return for a share of the proceeds from the auction. Stations electing not to participate in the auction will be squeezed (“repacked” is the term the Commission uses) into the lower end of the spectrum now allocated to TV. As a result, an unknown number of TV stations will be forced to change channels. Implementation of such changes will necessarily force the affected stations to spend money.
Not to worry (too much), however: the TV Broadcaster Relocation Fund (Fund) will come to the (partial) rescue.
The Fund, established by Congress in the Spectrum Act, consists of a total of $1.75 billion set aside to reimburse eligible TV broadcasters (and cable and satellite providers) for the reasonable costs imposed as a result of the channel changes. The Reimbursement Form will be the mechanism for seeking reimbursement; the instructions accompanying the form outline the reimbursement process. Comments on the draft instructions are also sought by the Bureau.
While the Bureau refers to the Reimbursement Form as a single document, in fact the Form as envisioned by the Bureau consists of multiple separate components to be filed at different stages of the reimbursement process. Those stages are: the initial sign-up for a Department of Treasury (DoT) account through which funds will be made available; the initial estimate of funds expected to be necessary for the station’s modifications; submission of actual cost documentation (as expenses are incurred during the modification process); and the final allocation/accounting.
The first two stages will occur very shortly after the Incentive Auction wraps up. Once the auction is done, the Commission will issue a public notice (the Channel Reassignment PN) detailing the assignment of TV (full power and Class A) stations to new channels. Within three months of the issuance of the Channel Reassignment PN, licensees eligible for reimbursement will have to establish their DoT accounts and submit their initial estimates.
Before delving into the details of the Reimbursement Form, let’s review who will be eligible to participate in the process.
For television stations, eligibility is limited to full-power and Class A television stations that are involuntarily assigned to new channels during the repacking process. That process, of course, envisions the possibility that some stations may choose to “share” channels, with one station abandoning its frequency and moving over to share another station’s transmission facilities (and over-the-air RF frequency). In such situations, only the host, or “sharer”, station is entitled to reimbursement if it is required to change channels.
MVPD’s may also claim reimbursement for expenses reasonably incurred in order to continue to carry stations which are relocated either voluntarily or involuntarily, within the same spectrum band or between bands, or which decide to share a channel with another station.
For those eligible for reimbursement, the first step will be to establish an account with DoT’s Automated Standard Application for Payments (ASAP) system. That’s the account into which reimbursed funds will be placed for disbursement to eligible claimants. This is probably the simplest component of the reimbursement process, requiring only the submission of name, address, contact person, DUNS number, and FRN information. (A DUNS number – short for Data Universal Numbering System – is a unique nine-digit identifier assigned by Dun and Bradstreet.) Eligible entities can and should get on this chore immediately after the release of the Channel Reassignment PN because having an ASAP account is an essential to the reimbursement process. (Heads up: Submission of the portion of the Reimbursement Form relative to the ASAP account will not, in and of itself, be enough. Additional information concerning how to complete the establishment of an ASAP account will be e-mailed to the contact person; ASAP enrollment must be completed within 45 days after receipt of that e-mail.)
In the second phase of the process, the Reimbursement Form will be used to provide estimates of relocation costs before construction of the modified facilities begins. The deadline for these estimates will be three months after release of the Channel Reassignment PN.
Reimbursement claimants will not be free to include each and every imaginable cost that they project, nor will they be free to name their own price for each item. Rather, they will be limited to the predetermined cost estimates included in the Media Bureau’s Catalog of Potential Expenses and Estimated Costs (Catalog), at least as a starting point. (You can find more information about the Catalog here.) Some variations may be permitted: If a claimant believes that the Catalog does not fully account for its individual circumstances, it must submit an explanation and appropriate documentation to justify a variance; ditto if the claimant believes either that the Catalog-specified cost of an item is too low, or that some additional item not listed in the Catalog will be required.
In preparing the estimated costs to be filed, broadcasters must provide a description of the steps that will have to be taken to implement the transition, including any plan for interim operations. The specific equipment that will be used during and after transition will have to be identified, including antenna(s), transmitter(s), transmission line(s), and tower(s). Information as to any new equipment to be purchased must also be provided. Details as to the leased or owned status of certain equipment additionally will be requested. The initial estimate will also require substantial detail about the types of equipment modifications that will need to be made and any issues that might arise (e.g., HVAC).
On a somewhat troubling note, the Commission may second-guess some of the claimant’s estimates. For example, there will be no reimbursement for equipment that is not in working order – but there is some room for disagreement about exactly what state equipment must be in to be considered in “working order.” Another potential source of FCC second-guessing: Stations proposing to buy a new transmitter will have to justify their decision to buy new rather than modify an existing transmitter.
While the initial estimate is expected to be detailed and comprehensive, it will not be written in stone. The FCC recognizes that plans may change along the way. If there is a significant modification of plans after the initial cost estimate form is submitted, a revised form will have to be prepared and filed to reflect in particular any changes that might increase the amount of reimbursement due.
The Commission will review all initial estimates and, following that review, provide initial allocations of funds amounting to up to 80% (90% for noncommercial stations) of the submitted estimate. Claimants will then be expected to proceed with implementation of their modification plans. As expenses are incurred along the way, claimants will be able to draw down funds from their ASAP accounts by submitting updated Reimbursement Forms along with invoices, receipts, or other documentation to substantiate their claimed expenses.
When the licensee submits this documentation, it will have to match each item to a cost category on its estimated cost form. As a result, multiple cost documents may end up being submitted under a single expense category and, alternatively, a single cost document might have to be filed multiple times under different expense categories.
If a broadcaster or MVPD finds itself running short of funds from its initial allocation, it will be expected to continue submitting documentation of expenses, which will be considered at the final allocation stage. Not surprisingly, if the actual cost is greater than the estimated cost, an explanation must be given for the difference.
The Reimbursement Period will end three years after the completion of the forward auction of the repurposed spectrum, a time-frame that coincides with the expiration date for construction permits for modified facilities. Prior to that time, the Media Bureau will establish a filing deadline by which documentation of all expenses incurred or paid to date, plus any remaining estimated expenses if construction is not complete, must be filed. That submission will also be made on the Reimbursement Form. At that point, entities will have to certify that the expenses shown on the actual cost form reflect the amounts actually paid to vendors, net of any discounts, rebates, or funds, for reimbursable expenses. At that point, if the initially allocated funds have run short along the way, broadcasters and MVPD’s will be able to request additional funds. Finally, anybody not yet finished with construction when the Reimbursement Period ends will have to submit a final accounting of all actual expenses once construction is complete.
Clearly, the process of completing the form as planned will be neither short nor easy.
While the reimbursement process outlined by the Commission may look very logical, looks can be deceiving. The short three-month frame between (a) the Channel Reassignment PN and (b) the date on which cost estimates are due does not leave much, if any, room for hiccups along the way. And let’s be honest here: the potential for hiccups clearly exists.
For example, if a television station isn’t exactly happy with its new channel assignment and believes that there’s an alternate solution which would allow it to stay put while requiring another station to move, we can expect that unhappy station to seek reconsideration or review of the Channel Reassignment PN. That alone would inject a measure of uncertainty in the process, since it’s unlikely in the extreme that such a petition would be resolved before the close of the three-month period for estimates. But if reconsideration were ultimately to be granted and that first station allowed to remain on its current channel, that station would not be entitled to any reimbursement. That being the case, would the first station nonetheless be required to go to the trouble and expense of filing cost estimates for a move it hopes never to make? And how about the second station: uncertain as to whether it would be required to make either any move or a different move, would it have to submit cost estimates for both possible scenarios?
While it might be possible to sort out the objections of one broadcaster in three months’ time, what happens if there are many requests for reconsideration or review of the repacking decisions, including some which object to the fundamental way in which the repacking was conducted? Will it nonetheless be necessary to march full speed ahead even in the face of substantial uncertainty? How should possible costs of seeking even a minor reconsideration or review be factored into expenses?
The prospect of such hiccups cannot be ignored. But for now there is no need to speculate about such things. Instead, potential claimants’ time would be better spent taking a close look at the proposed Reimbursement Form, the particular information that will be required at each submission stage, and the level of detail expected. If you have any suggestions or criticisms relative to the Form (e.g., additional information that should be included, or included information that should be omitted), please consider filing comments.
Comments are due to be filed by October 27, 2014. (Oddly, despite the fact that the spectrum auction is still some number of months away, no opportunity for reply comments is apparently contemplated.) They may be filed electronically through the FCC’s online filing system; refer to Proceeding Number 12-268.