Tiny TV Stations May Win Big in AirWave Auction

Monday, Mar 28, 2016

As TV broadcasters go, KSCI Channel 18 in Long Beach, Calif., is a little fish in a big pond.

The independent station, which airs local shows in Chinese, Korean and Tagalog as well as other Asian-language programs, was in bankruptcy in 2012 when Texas-based NRJ TV bought it and two small stations for a reported $45 million.

But in the federal government’s upcoming auction of TV airwaves, KSCI’s slice of the nation’s second-largest market could be a precious catch — worth as much as $585 million to telecommunications companies, according to opening bids released by the Federal Communications Commission last fall.

On Tuesday, the FCC will take its latest step toward using multimillion-dollar payoffs to lure broadcasters into giving up their airwaves, which in many cases would force them off the air.

The spectrum then would be auctioned to telecommunications companies to be used to deliver mobile broadband and Wi-Fi services for America’s fast-growing wireless appetite.

The biggest winners in the first-of-its-kind auction could be a handful of the nation’s newest — and most anonymous — station owners.

Companies such as NRJ TV, OTA Broadcasting and LocusPoint Networks have kept a low profile the last few years while snatching up dozens of small TV stations in Los Angeles, San Diego, San Francisco, New York, Chicago and other markets.

The buyers, which include one involving computer magnate Michael Dell, are widely seen as speculators in on the 21st century frontier of wireless spectrum.

They have purchased sometimes-struggling TV stations on the cheap and are expected to try to sell the rights to their airwaves in the FCC auction that begins Tuesday.

Seven companies have purchased a total of 68 TV stations over the last five years for a combined $445 million as of October, about two months before broadcasters had to apply to participate in the auction, said Robin Flynn, research director at media analyst SNL Kagan. The airwaves of those stations could be worth as much as $17.4 billion, she said.

But the unique nature of the one-time-only auction is almost certain to reduce that figure significantly.

Station owners can receive smaller paydays for agreeing to move to a less-desirable frequency instead of giving up their airwave rights completely. KSCI, for example, could receive up to $439 million to move its channel location.

Stations also could remain on the air by selling their spectrum and making a deal with another broadcaster to use some of theirs.

Still, some station owners could end up with no money at all from the auction if they hold out for too much.

“Speculators are coming in for a big profit,” said Harold Feld, senior vice president at digital rights group Public Knowledge. “It may not be the big payoff that a lot of people were hoping for, but from a speculator’s perspective, there’s not a hell of a lot of risk either. And who knows, it might pay off.”

Congress authorized the broadcast incentive auction in 2012 to free up more airwaves for mobile services for smartphones and other devices. Over-the-air viewership has declined sharply in recent decades with the advent of cable, satellite and the Internet — although there’s been an uptick lately from so-called cord-cutters.

As more people access the Internet wirelessly, demand for airwaves has increased. An FCC spectrum auction that ended in early 2015 brought in a record $44.9 billion.

Broadcast airwaves are the highest quality, able to carry signals deep into buildings and over long distances. The Congressional Budget Office has estimated the auction could raise as much as $40 billion for the federal government after payments are made to broadcasters.


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