10 things to know about the “Spectrum Auction” and its effect on local media
When the federal government passed a budget bill last November, the news outlets praised Congress for keeping us funded into 2017 and avoiding yet another trek toward a fiscal cliff.
What they didn’t mention, however, was that buried in the giant bill was something called the Spectrum Pipeline Act of 2015 – a piece of legislation that very likely will change the TV marketplace as we know it.
So what exactly is this bill and how will it affect things? Here are 10 things to know:
1. The Spectrum Pipeline Act of 2015 requires the U.S. government to free up over-the-air broadband spectrum over the next few years through an auction process.
2. The purpose of the bill is to help mobile carriers (Verizon, AT&T, T-Mobile, etc.) gain more spectrum access as they continue to supply the increasing data demands of smartphone users.
3. All wireless signals, TV, radio, GPS and mobile broadband fly through the air on invisible signals called spectrum. The name comes from the fact that wireless signals can be sent on a range — a spectrum — of frequencies.
4. Before the FCC offers more spectrum to mobile providers, they’re looking to acquire more of it. Thus, they are holding auctions to purchase those airwaves from TV stations. It’s a buy-back program where stations will have the opportunity to sell their spectrum to the FCC at an extremely generous price. Right now, it’s labeled a “once-in-a-lifetime offer” and the first auction is slated to take place on March 29th of this year.
5.TV spectrum holds incredible value because it can penetrate building walls and travel farther than existing networks. That quality is highly desirable for both the FCC and mobile providers.
6. In smaller markets, local stations are predicted to make $100+ million on their sale. While in New York, it is estimated that a Telemundo affiliate could start the auction bid closer to $900 million. This opportunity to “sell high” no doubt will be tremendously tempting, especially in the mid-to-smaller sized markets.
7. Most speculation sees the local TV market losing a number of stations. Cord-cutters particularly will be affected. While stations move to cable and satellite only, fewer over-the-air choices will remain for cord-cutters. In a Media Life article, Bill Cromwell says, “One could imagine markets with one or two stations still broadcasting over the air.”
8. If a station gives up its spectrum, it also frees itself from the FCC requirement to include local programming altogether. So there’s no guarantee they’ll continue to even provide local programming on Cable or Satellite. This could impact everything from the quality of local news coverage to the media costs for local cable.
9. Local stations that don’t sell their spectrum will likely reap the benefits, too. As other stations disappear, the ones that stay naturally should find greater demand knocking on their door. Less available ad space makes what remains that much more valuable, aka “pricey.”
10. As it all unfolds, advertisers simply need to pay attention and be prepared to adapt to the changes. Market by market, the picture we see could be drastically different. Our media plans will need to work accordingly.
While all indications point to big changes in our local TV landscape, there are still many questions floating around and waiting for answers.
What exactly will the local market transformations look like?
How will it affect media pricing?
Will it propel cord-cutters to return to cable?
Will it push viewers to go online or use their mobile devices in an even greater capacity?
If you need to advertise locally, will you take a harder look at radio, print and digital?
It’s a complicated situation. And until the auctions take place, we’ll all just have to (as they often stay during our local news), “Stay tuned as the story develops.”