By Kate Tummarello - 08/23/14 06:43 PM EDT
Broadcasters are threatening to stand in the way of next year's highly anticipated airwave auction, putting one of the Obama administration’s top priorities at risk.
“This lawsuit puts a cloud over the auction,” said one Republican FCC aide.
“It would make sense for the Commission to work something out with the NAB.”
One broadcast industry source said the FCC could avoid lengthy delays to the crucial auction if it is willing to work with the broadcasters.
"The suit does not have to result in a delay,” the source said.
"There are a couple of issues that if taken off the table, broadcasters would anticipate dropping the lawsuit.”
In May, the FCC voted 3-2 along party lines to approve rules for the broadcasters that would be affected by the auction.
The FCC sale will involve buying back airwaves from broadcasters and selling those airwaves to spectrum-hungry wireless companies looking to boost their cellphone networks. The proceeds will go toward funding a nationwide network for first responders and reducing the national deficit.
According to the NAB, the FCC’s rules for broadcasters violate the law that authorized the auction.
Specifically, the broadcasters are unhappy with changes to the software that the FCC will use to specify how many viewers each station has.
Additionally, the NAB says the agency should set aside more money to compensate broadcasters who choose not to sell their airwaves but have to relocate to different channels as a result of the auction
While Congress required the FCC set aside $1.75 billion for those relocation costs, broadcasters are asking for an additional $500 million to cover expenses like building new towers or buying new transmission equipment.
“Local broadcasters should not be forced to go out of pocket to help multi-national wireless giants,” NAB Executive Vice President of Strategic Planning Rick Kaplan in a recent blog post explaining the lawsuit.
Some criticized the broadcaster group for threatening to hold the auction hostage.
In a statement, Consumer Electronics Association President Gary Shapiro said the lawsuit is “discouraging,” after “the FCC has worked tirelessly with stakeholders and broadcasters to set up a successful incentive auction.”
“Litigating against the incentive auction undermines and delays innovation,” Shapiro said.
In his blog post, Kaplan pushed back on the criticism that the legal move is simply designed to delay the auction.
“Let me be clear about what our petition is not about: delay. NAB has never advocated for — in words or deeds — any undue delay in the auction,” he wrote.
“Our aim is to resolve our core challenges as quickly as possible, so the FCC can immediately return to its auction preparations.”
Preston Padden, the executive director of the Expanding Opportunities for Broadcasters Coalition, which represents the broadcasters that want to sell their airwaves in the auction, said “there is plenty of time to resolve legal issues” before the auction begins next year.
“These are issues that are eminently resolvable, and both the FCC and NAB “believe that these issues can be resolved,” Padden said, citing conversations with both sides.
“There is absolutely no reason why the NAB lawsuit needs to delay the auction.”
Padden said he is optimistic the broadcasters would be eager to participate once they see the “enormous money on the table.”
Later this year, the FCC is set to release materials to promote to broadcasters the benefit of participating in the auction, including selling back some or all of their airwaves.
“We expect a groundswell of interest in the auction” once the broadcasters have those materials, Padden said.
One wireless industry predicted broadcasters would come to the table, even if the trade group representing them protests specifics in the agency’s plans.
“The broadcasters themselves will want to look at the options,” the wireless industry official said, calling the 2015 auction a “once-in-a-lifetime opportunity” for broadcasters to sell their valuable spectrum to deep-pocketed wireless companies.
The official said the wireless industry’s goal “is to make sure this auction continues to process on a timely basis.”
“There’s no reason that the FCC and the NAB can’t continue to have conversations,” he said.
In a recent blog post, AT&T Vice President of Regulatory Affairs Joan Marsh called the suit “a detour, not a roadblock.”
Marsh pushed the FCC and the NAB to quickly resolve the issues raised by the lawsuit.
“Compromise must continue to be the hallmark of the incentive auction proceeding,” she wrote, adding that the lawsuit shouldn’t have come as a surprise after watching the NAB push for broadcaster protections as Congress and the FCC moved ahead with the auction.
It is “not a surprise that it is continuing to vigorously pursue these issues on behalf of its members,” the post said.
The broadcast source said the NAB “didn't want to be forced to file this lawsuit, but felt it was really left no choice."
“Now the ball is in the FCC's court,” the source said.
“Do they want this auction to go quicker or do they want this lawsuit to result in delay?"