Dec. 23 2015 09:26 AM

MSU studying auction of WKAR-TV's license, cutting the cord on traditional broadcasting; could bring in over $200 million

Michigan State University is considering whether to participate in an auction for the license of WKAR-TV's current frequency on the broadcast spectrum.

Like other television stations around the country it is taking a hard look at the costs and benefits of traditional broadcasting as a growing number of viewers cut the cord and watch TV online.

As part of an auction process led by the Federal Communications Commission, stations will have the opportunity next year to bring in tens of millions of dollars in new revenue by selling off its space on the broadcast spectrum to make room for wireless broadband.

By auctioning off valuable spectrum space on the airwaves, MSU — which holds the broadcasting license for WKAR— stands to gain upward of $200 million. The future of WKAR programming may mean finding it online or through space available on other TV channels.

MSU President Lou Anna K. Simon will decide by Jan. 12 whether to participate in the FCC’s Broadcast Television Incentive Auction on March 29. The MSU Board of Trustees authorized Simon on Friday to decide because the board will not meet again by the deadline.

“From our standpoint, we’re certainly in the broadcast business, but I fully understand — given the money involved — the university holds the license and has to take (the opportunity) seriously,” said Gary Reid, WKAR’s director of broadcasting.

Reid said it’s too early speculate on the future of WKAR-TV ahead of Simon’s decision. The station’s radio programming would not be affected. Reid declined to comment on whether he was concerned about the station’s future.

Simon appeared on WKAR’s radio program “Current State” on Monday to explain the process.

“The university would fully intend to provide content similar to what is delivered over the air,” Simon told “Current State” host Mark Bashore. “It’s really the mode in which we transmit, not the content the university might generate. The question is over how the community would get that content.”

Indeed, every television station in the country can participate in auctioning off all or portions of their spectrum space to wireless providers, the most likely buyers.

“Almost every station — whether it’s public or commercial — would have to at least take a look at it,” said Karole White, president and CEO of the Michigan Association of Broadcast ers. “We’re talking big bucks. They’ll have to weigh the costs and benefits, and a lot is dependent on whether a station could find another channel that could carry them. They don’t want to disrupt their audiences.” However, few television executives expect the initial FCC values to hold. Market considerations — the number of licenses available and buyer's interest — will determine actual values.

Simon said factors in the decision include how people will consume television content in 10 to 20 years, ensuring that MSU is still generating content and whether the university gets “fair and appropriate economic value” out of its spectrum license.

She said it would be “very difficult” at this point to not continue exploring the revenue possibilities. Any potential revenue could come in the form of an endowment and be spent over a span of decades, Simon added.

Prabu David, dean of the MSU College of Communication Arts and Sciences, said in a memo issued Monday: “Owners of TV stations across the nation are being given the opportunity to relinquish the spectrum used by their station in exchange for a payment from the FCC of a portion of proceeds generated from the sale of that spectrum to wireless companies. If WKAR-TV gives up its spectrum, the station may lose the ability to broadcast over the air as it does now.”

‘Pretty significant’ money

The FCC’s auction is scheduled to begin March 29, about four years after Congress authorized the commission to conduct incentive auctions under the Spectrum Act.

As part of the process, TV broadcasters can voluntarily go off the air, share their spectrum location or change channels to get part of the proceeds at auction. The FCC will buy back TV stations’ spectrum space after raising money through an advance auction for wireless companies.

The FCC said the auction process will “marry the economics of wireless providers’ demand for spectrum with the economics of television broadcasters, the current holders of spectrum space allow market forces to determine the highest and best uses of the spectrum.”

In October, the FCC listed the opening bid prices for hundreds of TV stations around the country. WCBS-TV in New York was listed as the station with the highest valued spectrum space in the country at $900 million.

In the Lansing area, opening bid prices range from $413 million (WHTV) to $207 million (WILX-TV). Some stations around the country are also considered “not needed,” meaning the FCC won’t need to buy space in order to clear enough spectrum in the market.

White estimated there are likely only “eight to 10 statewide that are even thinking about” negotiating for giving up spectrum.

“Some, not many, may choose to just plain go off the air. This would probably be mostly very, very small, low-power TV stations,” she said. “A major network station isn’t going to do that.”

White said what would likely emerge is a variety of deals among TV stations to share channels and keep them on the air.

“If we have very many stations that ultimately take the FCC’s buyout, they will negotiate with other stations in the market to stay on the air,” she said.

After initial concerns that the process would not be voluntary for TV stations, White now envisions a scenario now in which “everybody wins,” with broadcasters maintaining at least some of their programming and the country building out new technology with more spectrum available.

“It will cause some citizen concerns and distress,” she said. “We’ll have to re-scan our televisions to find out where everyone went, but the money is pretty significant.”


MSU hosting public meetings on FCC spectrum auction 7 p.m. Jan. 4 7 p.m. Jan 11. 404 Wilson Road Room 147 Communication Arts and Sciences Building Comments can also be emailed to: spectrum@wkar.org

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