Wells Fargo Securities analyst Marci Ryvicker pulled away from Wall Street to test the waters in Washington, DC on laws and regulations which might impact the stocks she covers. She reports that spectrum reclamation is a priority – but warns that it won’t come quickly.
“Recall that as part of the National Broadband Plan, President Obama is looking to reclaim 500MHz of spectrum, with 120MHz coming from the television broadcasters via ‘incentive auctions.’ From where we sit today, there is no official piece of legislation that allows the government to share the proceeds from an incentive auction with third parties. Clearly this will change given that the government plans to use the proceeds from these incentive auctions to build a public safety network on the D block spectrum,” Ryvicker said in a note to clients.
Her colleague, Jennifer Fritzsche, who covers telecom stocks for Wells Fargo, has suggested that incentive spectrum auctions could be rolled up in a final resolution of legislation to raise the national debt ceiling and set the federal budget. She speculates that action could come to fund the D block build-out for public safety for the symbolic 10th anniversary of the 9/11/01 attacks.
“We point out that legislation permitting an incentive auction is just the first step. The second step entails the FCC actually writing the auction rules and subsequently collecting comments (likely a year-plus). It is at this point that the FCC will look for spectrum ‘volunteers’ (Big Four nets are not likely ‘targets’) – another lengthy process – and then an auction can finally ensue. At the end of the day, it is estimated that it will take 6+ years before incentive auctions are actually held. The consensus among our speakers is that the incentive auction will bring in $27B – with the amount allocated to broadcasters still TBD,” Ryvicker wrote.
RBR-TVBR observation: That six years plus for any spectrum-clearing auctions to actually take place sounds about right to us – maybe even an optimistic timetable. Anyone who thinks incentive auctions will be a quick budget gap filler is not in touch with reality. And since incentive auctions are not currently legal, it will take an Act of Congress before the process can even begin. With a divided Congress it appears highly unlikely that the Republican House and Democrat Senate will be able to agree on a full year funding deal before the government’s fiscal year begins in October – not to mention that the FCC is unlikely to get cooperation on anything from House Republicans so long as it insists that its net neutrality rules are legal.