Regular readers of this space should be completely aware that the use of incentive auctions in the television space is not going to have any noticeable impact on deficit reduction. That’s even IF it brings in the maximum amount being touted in some corners. An article in National Journal is out exploding the auction windfall myth.
NJ writes that auctions of spectrum have a history of being seen as a cash cow, but in this case, there are major questions as to how much it would really bring in.
A Senate bill calling for voluntary incentive auctions mentioned income of $24.5B, and an administration proposal cited $23.7B. Both totals are based on very shaky foundations, however.
The auctions are supposed to be voluntary, and nobody knows how many television broadcasters would opt for a piece of the auction pie and either agree to share a channel or get out of the business entirely. (We at RBR/TVBR are certainly aware on no poll or survey that even hints at a potential participation level.)
Second, the numbers do not account for the share of auction proceeds going to the participants, nor do they account for money paid to broadcasters who remain in business but are forced to switch channels in a spectrum repacking that would be necessary to pursue the strategy.
The Congressional Budget Office estimated something along the lines of a $6.5B net figure that would apply to deficit reduction.
What makes the whole exercise meaningless, in terms of deficit reduction, is that it doesn’t matter which number is correct – either one is “chump change,” as NAB’s Dennis Wharton put it, compared to a deficit measured in the trillions of dollars.
Adding spectrum usage fees and auctioning off spectrum that is supposed to be reserved for unlicensed devices is also mentioned in the article, and in both cases, Wharton’s “chump change” description remains valid.
RBR-TVBR observation: We’ll say it again – there are extremely important issues involved in the current spectrum debate. But deficit reduction is not one of them. It is simply foolish to tie this in any way to the work being attempted by the Supercommittee.