NAB Finds More Problems with Duplex Gap


NAB / National Association of BroadcastersThe NAB just finished asking for more information on FCC auction simulations. The organization believes it’s uncovered more serious questions, particularly regarding the duplex gap.

It shared its concerns in an ex parte meeting.

NAB wondered about the lack of simulations run, and can’t believe there were only two.

“In this instance, releasing only two simulations per clearing target is akin to asking a person to accurately predict the National League pennant winner by watching only two games from the 162-game Major League Baseball schedule.”

Here is NAB’s summary of the rest of the meeting:

“To make matters worse, according to FCC staff, those are the only simulations they have performed. It is almost incomprehensible how, with the incentive auction just months away, FCC staff has not conducted more than a pair of simulations for each clearing target. If this is true, then how does the Commission have any confidence the auction will work? How can the agency possibly make sound policy choices without understanding the impact of its decisions?

“Second, the assumptions made in these handful of simulations are unclear, and to the extent they are understood, are way off base. For example, the simulations assume that no station with an enterprise value of more than $100 million will participate in the auction, a crippling assumption flatly inconsistent with the Commission’s laudable efforts at broadcaster outreach. In Los Angeles, one of the markets where the duplex gap is impaired in the 84 MHz clearing target simulation, the Commission has proposed a median opening bid price of approximately $560 million, and median anticipated compensation of $340 million.3 Given these values, it is unrealistic to assume that no station with an enterprise value of more than $100 million will choose to participate in the auction. Does the Commission actually assume in any other context that stations with enterprise values of $100 million or more will not participate in the auction?

“The staff also should analyze the effect of putting stations in the duplex gap against other interference proposals. For example, the leading stakeholder proposal recommends that the FCC allow unlimited impairments from international sources, but cap domestic impairments at three percent. Not only is the stakeholder proposal consistent with the Commission’s stated intent to have a near-nationwide band plan (unlike the current 20 percent limit), but it would be helpful to see the simulations measured against this alternative approach. The results may ultimately be no different, but providing enough information to make these assessments would be useful and ultimately help the auction succeed.

“Third, looking at last Friday’s five-page document, it is striking how few stations are causing such enormous problems. This appears to reveal a serious flaw in the current auction design. Stations that otherwise should have been purchased should not be forced into the wireless band. For example, if the auction yields $20-30 billion for the U.S. Treasury (after covering all auction costs), the FCC should have paid those handful of additional broadcasters left stranded some small percentage of that to eliminate variability. But apparently, the current design could leave a mere dozen stations on the table in the wireless band, harming licensed wireless operations, unlicensed operations and broadcast operations. That simply makes no sense.

“Ultimately, the information released late Friday night suggests deep problems with the auction or a significant lack of transparency, or both. If there is more information to provide, the FCC should do it, and do it expeditiously so as to avoid any delay. If what was released is the extent of the information available, stakeholders should be wary of what is to follow. It is critical that the FCC makes reasoned, well-informed decisions. That can only happen from testing its systems and soliciting public input. This is nowhere truer than where, as here, the Chairman is asking his colleagues eschew a prior commitment and place TV stations in the duplex gap.”