Airwave sale nets windfall at stations
The Federal Communications Commission’s landmark wireless spectrum auction netted KQED in San Francisco a whopping $95,459,109 — but don’t expect the public media broadcaster’s next pledge drive to wrap up any sooner as a result.
KQED and nine other Bay Area TV stations collectively brought in more than $825 million from the FCC’s auction, an extraordinarily complex process in which broadcasters across the country sold portions of their coveted airwaves. The eager buyers: wireless providers vying to meet the country’s bottomless appetite for Internet bandwidth, with the FCC acting as a kind of broker between the two.
The auction, ordered by Congress in 2012, represents an unprecedented reallocation of airwaves, which, by law, are the public’s property.
The region’s TV stations reeled in amounts between $55.4 million and $114.2 mil-
lion.
But with few exceptions, the results of those windfalls will be as invisible to Bay Area TV audiences as the electromagnetic signals that produced them. None of the region’s broadcasters will go off the air. They won’t even have to change their positions on the dial.
Rather than plowing the money into new programming or glossy promotional campaigns, many station operators say they are being prudent and husbanding funds for the future.
“Not a dime will be spent on operations,” said KQED President and CEO John Boland. “So far, people get it. They understand that this is going to help KQED long-term, but we still need their support every year to meet our budget.”
About 70 percent of KQED’s auction proceeds will be plunged directly into the station’s endowment, a pool of money that “produces returns for KQED in perpetuity,” Boland said. The endowment makes up about 10 percent of KQED’s $70 million annual operating budget. The station has to raise the remainder each year.
The balance will be put toward building and technology improvements, Boland said. “Our building was designed for the KQED of 25 years ago,” he said. “Our board is studying what we should do — how should we renovate the building, should we move?”
For KRCB, which has an annual budget of $2.8 million, the nearly $72 million that the auction brought in will move the needle for the small Rohnert Park public media broadcaster.
The looming proposal to eliminate federal funding for public broadcasting has been disquieting for KRCB’s president and CEO, Nancy Dobbs. The auction proceeds will help the station chart its own financial future, Dobbs said.
“We’re in a very low-budget situation, and TV equipment is expensive, so we’re hoping to put around $50 million to $60 million into a permanent endowment which will underpin the budget, especially if federal cuts to public broadcasting go forward,” Dobbs said.
“We, like a lot of other small stations, would be in dire straits if (the spectrum auction) hadn’t happened,” she added. Dobbs expects about $1 million to go toward upgrading the station’s facilities. The remainder will be used to cover the expenses of the station’s “repacking” process, something many TV broadcasters are preparing for in the wake of the auction.
To prevent signal interference, TV broadcasters will have to squeeze their transmissions into new frequency bands under the terms of the auction process. Many broadcasters will be able to piggyback their channels on top of one another in so-called channel sharing agreements, which help to conserve spectrum and minimize disruption for viewers. The FCC is bound by law to “make all reasonable efforts to preserve … the coverage area and population served of each” TV broadcaster. TV stations began broadcasting all-digital signals in 2009, which allows them to use less spectrum while maintaining their coverage areas. The digital signals also make it easier for stations to share channel space without having to switch the familiar numbers viewers use to find them.
All 10 of the Bay Area stations who participated in the auction indicated they intend to enter into channel-sharing agreements, according to data from the FCC.
Repacking doesn’t require broadcasters to change their channel numbers, so the process will largely go unnoticed by viewers. Audiences who view local channels carried on cable or satellite services will also be unaffected. But the technical expenses can quickly mount into the millions of dollars. KRCB will have to pay for a new broadcast antenna and transmitter, and the station is exploring just how much those will cost.
“I would say that by this time next year we’ll be able to allow ourselves to relax and say, ‘What does this mean in terms of new staff or the purchasing of programming?’ We’re already thinking about that a little bit, and we want to expand our local offerings,” Dobbs said.
None of the nearly $78 million KRON received from the auction will go toward broadcast operations, according to a spokeswoman for Nexstar Broadcasting, the company that owns the station. Those proceeds will instead go to shareholders of Media General — KRON’s previous owner — which was acquired by Nexstar in a $4.6 billion deal that closed in January. (Chronicle Publishing Company, The Chronicle’s former parent company, sold KRON in 2000 to Young Broadcasting, which merged with Media General in 2013.) The proceeds from the sale of Media General’s spectrum was built into the terms of that transaction.
In an email, Barbara BissellHowell, a board member at KTSF, which broadcasts Asian-language programming, said that a “significant portion” of the $90 million the station netted in the auction would go toward a planned channel-sharing agreement. Another “large” portion of the auction proceeds “will be paid out in taxes,” with the balance going to the Lillian Lincoln Foundation, a nonprofit operated by KTSF’s owners that produces documentary films.
Representatives from KTLN and KTNC declined to comment on how their stations intended to use their auction proceeds. KTNC reaped the biggest reward from the auction, bringing in more than $114.2 million. The station, a former Estrella TV affiliate offering Spanish-language programming, now airs infomercials like “How to Lighten Age Spots” and “How to Tighten Crepey Skin.” The station and its parent company, NRJ TV, could not be reached for comment.
Representatives from KOFY, KEXT and KEMO also could not be reached for comment.
KMTP, a noncommercial San Francisco station owned by the Minority Television Project, will receive $87.8 million from the auction. Booker Wade, the station’s general manager, said KMTP would use the money to replace the station’s “outdated” studio and production equipment and build products to reach viewers on mobile devices.
Those viewers may benefit from the auction in other ways — by getting cheaper, faster Internet access on their phones, on which they can view an expanding array of video programs.
T-Mobile walked away from the auction with the biggest chunk of wireless spectrum — 45 percent of the total amount being offered — after bidding nearly $8 billion. Dish Network came in second, bidding $6.2 billion, followed by Comcast, which will pay $1.7 billion. AT&T bid $910 million. Fifty wireless companies bid $19.8 billion for spectrum nationwide.
Sprint and Verizon sat out the auction entirely, according to FCC data.