Expanding the Economic and Innovation Opportunities of Spectrum Through Incentive Auctions

Federal Communications Commission FCC 16-47

Before the

Federal Communications Commission

Washington, D.C. 20554

In the Matter of

Expanding the Economic and Innovation

Opportunities of Spectrum Through Incentive

Auctions

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GN Docket No. 12-268

DECLARATORY RULING

Adopted: April 15, 2016 Released: April 18, 2016

By the Commission:

I. INTRODUCTION

1. In this Declaratory Ruling, we determine that the Spectrum Act�s reimbursement mandate

encompasses �costs reasonably incurred� prior to the close of the auction that otherwise are eligible for

reimbursement.

1

We take this action in order to remove uncertainty regarding the eligibility of expenses

incurred before and during the auction for reimbursement.

2

Of course, only stations that ultimately are

reassigned to a new channel in their pre-auction band in the repacking process will be eligible for

reimbursement of such expenses, which will be subject to the same reimbursement process as post-

auction expenses. By allowing broadcasters to get a jump start on the relocation process, this Ruling will

promote a rapid, non-disruptive transition following the broadcast television spectrum incentive auction.

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II. BACKGROUND

2. The Spectrum Act requires the Commission to reimburse broadcast television licensees

and multichannel video programming distributors (MVPDs), respectively, for �costs reasonably incurred�

in relocating to new channels assigned in the repacking process and in order to continue to carry the

signals of stations relocating to new channels.

4

Reimbursements must be made from the $1.75 billion TV

Broadcaster Relocation Fund (Fund) within three years of completion of the forward auction.

5

3. In the Incentive Auction R&O, the Commission established a process that requires

eligible entities seeking reimbursement to provide an estimate of their eligible costs following the close of

the forward auction and the release of the Channel Reassignment PN

be made from the $1.75 billion TV

Broadcaster Relocation Fund (Fund) within three years of completion of the forward auction.

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3. In the Incentive Auction R&O, the Commission established a process that requires

eligible entities seeking reimbursement to provide an estimate of their eligible costs following the close of

the forward auction and the release of the Channel Reassignment PN.

6

The Media Bureau (Bureau) will

1

Middle Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, � 6403(b)(4) (codified at 47 U.S.C. �

1452), 126 Stat. 156 (2012) (Spectrum Act). See Expanding the Economic and Innovation Opportunities of

Spectrum Through Incentive Auctions, Report and Order, 29 FCC Rcd 6567, 6822, para. 623 (2014) (Incentive

Auction R&O).

2

See 47 CFR � 1.2(a) (FCC may, inter alia, on its own motion issue a declaratory ruling removing uncertainty).

3

See Incentive Auction R&O, 29 FCC Rcd at 6573, para. 11 (identifying goal of a post-auction transition that is �as

rapid as possible without causing unnecessary disruption.�), 6815, para. 605 (reimbursement process must be

�prompt and efficient in light of the three-year statutory deadline for issuing reimbursements�).

4

47 U.S.C. � 1452(b)(4)(A)(i), (ii).

5

See 47 U.S.C. �� 309(j)(8)(G)(iii)(I)-(II), 1452(b)(4)(D), (d).

6

See Incentive Auction R&O, 29 FCC Rcd at 6815, para. 607. Eligible broadcasters will estimate the costs they

expect to reasonably incur to change channels, and eligible MVPDs will estimate the costs they expect to reasonably

incur to accommodate new channel assignments. Id. at 6817-18, para. 611.

Federal Communications Commission FCC 16-47

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review the estimates based on a Catalog of Eligible Expenses

Auction R&O, 29 FCC Rcd at 6815, para. 607. Eligible broadcasters will estimate the costs they

expect to reasonably incur to change channels, and eligible MVPDs will estimate the costs they expect to reasonably

incur to accommodate new channel assignments. Id. at 6817-18, para. 611.

Federal Communications Commission FCC 16-47

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review the estimates based on a Catalog of Eligible Expenses.

7

The Catalog provides guidance regarding

the kinds and amounts of expenses that will be reimbursed, but �[a]ll claimed expenses are subject to

review by the Media Bureau to ensure that each expense is reasonable.�

8

After reviewing cost estimates,

the Bureau will allocate funds to each eligible entity, and reimbursement will be available from the

allocated funds as expenses are incurred.

9

Prior to the end of the three-year reimbursement period,

eligible entities will be required to provide information regarding their actual and remaining estimated

costs and will be issued a final allocation, if appropriate, to cover the remainder of their eligible costs.

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4. We did not address in the Incentive Auction R&O whether pre-auction expenses are

eligible for reimbursement. We did state that �[w]e interpret the Spectrum Act�s mandate to reimburse

�costs reasonably incurred� to require that we reimburse costs that are reasonable to provide facilities

comparable to those that a broadcaster or MVPD had prior to the auction that are reasonably replaced or

modified following the auction, as a result of the repacking process, in order to allow the broadcaster to

operate on a new channel or to allow the MVPD to carry the signal of a broadcaster on a new channel.�

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uire that we reimburse costs that are reasonable to provide facilities

comparable to those that a broadcaster or MVPD had prior to the auction that are reasonably replaced or

modified following the auction, as a result of the repacking process, in order to allow the broadcaster to

operate on a new channel or to allow the MVPD to carry the signal of a broadcaster on a new channel.�

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5. Interested parties have asked for clarification whether expenses incurred before the

auction closes and the repacking results are announced are eligible for reimbursement, explaining that

uncertainty regarding this issue discourages advance work that could be performed to expedite the post-

auction transition for stations that are reassigned to new channels. On November 9, 2015, for example,

the American Tower Corporation asked for �a Commission statement that if an expense would be eligible

for reimbursement if it were incurred during the 39-month repack period, that same expense also would

be eligible for reimbursement if the work was started or completed prior to the commencement of the 39-

month repack period.�

12

Resolution of this issue, it states, would enable it to �perform pre-repack work

such as tower mapping and structural analysis starting now.�

13

Other parties have made similar requests

for clarification.

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7

Id.; see Media Bureau Finalizes Reimbursement Form for Submission to OMB and Adopts Catalog of Expenses,

Public Notice, DA 15-1328 (Oct. 30, 2015) (Reimbursement Public Notice).

8

Incentive Auction R&O, 29 FCC Rcd at 6821, para. 622; see id. at 6817-18 para. 611. See also Reimbursement

Public Notice at 1 (�As the Commission has explained, the catalog of expenses is not intended to be a definitive list

of all reimbursable expenses

nt Form for Submission to OMB and Adopts Catalog of Expenses,

Public Notice, DA 15-1328 (Oct. 30, 2015) (Reimbursement Public Notice).

8

Incentive Auction R&O, 29 FCC Rcd at 6821, para. 622; see id. at 6817-18 para. 611. See also Reimbursement

Public Notice at 1 (�As the Commission has explained, the catalog of expenses is not intended to be a definitive list

of all reimbursable expenses. Rather, it is a means of facilitating the reimbursement process of claiming

reimbursement by setting forth categories of expenses that are most likely to be commonly incurred by relocated

broadcasters and MVPDs.�).

9

Id. at 6815-16 para. 607; Reimbursement Public Notice at 3-4. Any time an eligible entity requests reimbursement

from its allocated funds, it must also submit actual cost documentation. Reimbursement Public Notice at 4.

10

Incentive Auction R&O, 29 FCC Rcd at 6815-16, para. 607.

11

Id. at 6822, para. 623.

12

Letter from Timothy J. Cooney, Counsel for American Tower Corporation, to Marlene H. Dortch, Secretary, FCC,

, GN Docket No. 12-268 (filed Nov 9, 2015), at 2 (ATC Ex Parte). The �39-month repack period� refers to the

post-auction transition period beginning with the release of the Channel Reassignment Public Notice and ending

with the deadline for all television stations that are assigned to new channels in the repacking process to vacate their

pre-auction channels. See Incentive Auction R&O, 29 FCC Rcd at 6782 para. 525.

13

ATC Ex Parte at 1-2.

14

See Letter from Paul J. Feldman, Counsel for Empire State Realty Trust, Inc., to Marlene H. Dortch, Secretary,

FCC, GN Docket No. 12-268 (filed Feb

and ending

with the deadline for all television stations that are assigned to new channels in the repacking process to vacate their

pre-auction channels. See Incentive Auction R&O, 29 FCC Rcd at 6782 para. 525.

13

ATC Ex Parte at 1-2.

14

See Letter from Paul J. Feldman, Counsel for Empire State Realty Trust, Inc., to Marlene H. Dortch, Secretary,

FCC, GN Docket No. 12-268 (filed Feb. 2, 2016), at 1 (stating that numerous broadcasters are located on top of the

Empire State Building, some of which are anticipated to be reassigned to new channels in the repacking process, and

that clarification of whether pre-auction expenses are eligible for reimbursement if a broadcaster is reassigned in the

repacking would allow preparatory work now, such as reinforcing towers, that in turn would facilitate the post-

auction transition); Letter from Steve Sharkey, Vice President, Government Affairs Technology and Engineering

Policy, T-Mobile USA, Inc., to Marlene H. Dortch, Secretary, FCC, GN Docket No. 12-268 (filed Feb. 17, 2016),

Attachment at 47 (�the FCC should clarify that preplanning expenses are reimbursable. Clarifying that broadcasters

(continued�.)

Federal Communications Commission FCC 16-47

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III. DISCUSSION

6. We interpret the statutory reimbursement mandate to include �costs reasonably incurred�

before and during the auction that otherwise are eligible for reimbursement. Section 1452(b)(4)(A)

defines which entities are eligible for reimbursement (e.g., �a broadcast television licensee that was

reassigned� in the repacking process) and what expenses are eligible (e.g., �costs reasonably incurred �

in order for the licensee to relocate its television service from one channel to the other�).

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Although the

statute imposes a deadline on when the Commission makes reimbursements,

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it contains no temporal

restriction on when expenses are incurred or when facilities are modified or replaced

ed� in the repacking process) and what expenses are eligible (e.g., �costs reasonably incurred �

in order for the licensee to relocate its television service from one channel to the other�).

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Although the

statute imposes a deadline on when the Commission makes reimbursements,

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it contains no temporal

restriction on when expenses are incurred or when facilities are modified or replaced. Accordingly, we

interpret the statute to cover pre-auction expenses that otherwise are eligible for reimbursement.

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7. In addition to being consistent with the statutory language, treating pre-auction expenses

as eligible for reimbursement is consistent with the statutory purpose of repurposing UHF spectrum for

new licensed uses, which will be facilitated by a rapid, non-disruptive transition. As interested parties

have explained, making pre-auction expenses eligible for reimbursement will encourage performance of

potentially reimbursable work before completion of the auction, providing a head start on what we have

recognized will be a �complex and challenging� 39-month transition process for broadcasters.

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8. Only stations that ultimately are reassigned to a new channel in their pre-auction band in

the repacking process will be eligible for reimbursement of expenses incurred before and during the

auction, which will be subject to the same reimbursement process as post-auction expenses. As indicated

above, we are not expanding the types or amounts of expenses eligible for reimbursement.

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Eligibility

for reimbursement will be based on the guidance set forth in the Catalog of Eligible Expenses and the

Bureau�s case-by-case determinations of whether particular expenses qualify for reimbursement.

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There

is no guarantee of reimbursement of pre-auction expenses

enses. As indicated

above, we are not expanding the types or amounts of expenses eligible for reimbursement.

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Eligibility

for reimbursement will be based on the guidance set forth in the Catalog of Eligible Expenses and the

Bureau�s case-by-case determinations of whether particular expenses qualify for reimbursement.

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There

is no guarantee of reimbursement of pre-auction expenses.

21

As ATC explains, �[i]f an expense is

incurred prior to the 39-month repack period, but it turns out that the expense is not eligible for

reimbursement (for example, if a TV station incurs a repacking planning expense but its bid to go off air

is accepted or if a TV station is not repacked), that expense would be incurred at the station�s own risk

and would not be reimbursed.�

22

Likewise, if an expense is incurred prior to completion of the auction,

but the Bureau determines that it was not �reasonably incurred � in order for the licensee to relocate its

(Continued from previous page)

are eligible to receive reimbursement for their preplanning costs even though they are incurred prior to the close of

the auction would encourage stations to begin these initial planning steps.�).

15

47 U.S.C. � 1452(b)(4)(A).

16

See id. at � 1452(b)(4)(D) (�The Commission shall make all reimbursements required by subparagraph (A) not

later than the date that is 3 years after the completion of the forward auction under subsection (c)(1).�).

17

Incentive Auction R&O, 29 FCC Rcd at 6822, para. 623. See 47 U.S.C. � 1452(b)(4)(A). In the discussion that

follows, we use the term �pre-auction expenses� to refer to expenses incurred prior to the release of the Channel

Reassignment PN announcing the results of the incentive auction and the repacking process.

18

Incentive Auction R&O, 29 FCC Rcd at 6788, para. 539

section (c)(1).�).

17

Incentive Auction R&O, 29 FCC Rcd at 6822, para. 623. See 47 U.S.C. � 1452(b)(4)(A). In the discussion that

follows, we use the term �pre-auction expenses� to refer to expenses incurred prior to the release of the Channel

Reassignment PN announcing the results of the incentive auction and the repacking process.

18

Incentive Auction R&O, 29 FCC Rcd at 6788, para. 539. See ATC Ex Parte at 1-2 (�� Other advantages of

allowing potentially reimbursable work to begin before the 39-month repack period are that tower prep work will

free up tower engineering and construction support resources during the 39-month repacking period�).

19

See ATC Ex Parte at 2 (�ATC is asking only for a Commission statement that if an expense would be eligible for

reimbursement if it were incurred during the 39-month repack period, that same expense also would be eligible for

reimbursement if the work was started or completed prior to the commencement of the 39-month repack period.�).

20

IA R&O, 29 FCC Rcd at 6821, para. 622 (�The appropriate scope of �costs reasonably incurred� necessarily will

have to be decided on a case-by-case basis�. All claimed expenses are subject to review by the Media Bureau to

ensure that each expense is reasonable.�); see 47 CFR � 73.3700(e)(7).

21

See IA R&O, 29 FCC Rcd at 6821, para. 622.

22

ATC Ex Parte at 2. See Incentive Auction R&O, 29 FCC Rcd at 6814, para. 602 (�Stations that are not reassigned

to a new channel will not be eligible for reimbursement.�).

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television service from one channel to the other,�

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then, like any other expense subject to such a

determination, it would not be reimbursed.

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IV. ORDERING CLAUSES

9. IT IS ORDERED, pursuant to the authority found in Section 6403(b) of the Middle

Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, 126 Stat. 156, 47 U.S.C. � 1452(b),

and section 1.2 of the Commission�s rules, 47 C.F.R

annel to the other,�

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then, like any other expense subject to such a

determination, it would not be reimbursed.

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IV. ORDERING CLAUSES

9. IT IS ORDERED, pursuant to the authority found in Section 6403(b) of the Middle

Class Tax Relief and Job Creation Act of 2012, Pub. L. No. 112-96, 126 Stat. 156, 47 U.S.C. � 1452(b),

and section 1.2 of the Commission�s rules, 47 C.F.R. � 1.2, the Declaratory Ruling IS ADOPTED.

10. IT IS FURTHER ORDERED that the Declaratory Ruling adopted herein shall be

effective upon release.

FEDERAL COMMUNICATIONS COMMISSION

Marlene H. Dortch

Secretary

23

47 U.S.C. � 1452(b)(4)(A)(i).

24

Because we are interpreting the statute to authorize reimbursement of pre-auction expenses, notice-and-comment

procedures are not required to implement our action. See, e.g., Chisholm v. FCC, 538 F.2d 349, 364-65 (D.C. Cir.

1976) (FCC acted properly in interpreting equal time provisions of Communications Act of 1934 via declaratory

order rather than through notice and comment rule making). See also Perez v. Mortgage Bankers Ass�n, 135 S.Ct.

1199, 1206 (2015) (�Because an agency is not required to use notice-and-comment procedures to issue an initial

interpretive rule, it is also not required to use those procedures when it amends or repeals that interpretive rule.�).

Pursuant to the Incentive Auction R&O, 29 FCC Rcd at 6812 para. 599 and 6820 para. 619, the Media Bureau has

delegated authority to make any modifications necessary to the rules or the associated forms in order to implement

our action.