Ongoing FM Auction Seen Netting FCC Less than Previous Ones
An ongoing FCC auction for 122 FM stations that’s netted bids of $4.2 million so far is unlikely to raise near what the last auction for the same number of construction permits did, said several attorneys representing bidders and others. Auction No. 79 began last Tuesday and on Friday the FCC tightened bidding eligibility, starting what’s called stage 2. No. 70 in 2007 was the last FM auction and netted $21.3 million.
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The recession and the presence of fewer speculators mean No. 79 likely will raise less, agreed radio lawyers. Some in the industry unsuccessfully sought to delay the start of bidding because of the economy (CD April 4 p8). Forty construction permits, or 33 percent of those up for sale, got no bids, which lawyers said is a higher portion than previous auctions. Another 36 allotments had only one bidder, said lawyer Raymond Quianzon of Fletcher Heald, representing bidders.
Stage two began in round 14 Friday, so bidders must remain active on 95 percent of their eligibility in each round to continue participating, the commission said. The 2007 auction didn’t go into stage 2 until round 25, and that began in round 29 for 2006’s Auction No. 62, which netted $54.3 million for 163 permits, Quianzon said. “It’s a slow auction,” he said. “When the FCC steps up the pace after the holiday, it may bring the auction to a speedy conclusion. As an indicator of the lack of interest in this auction, the FCC is accelerating the pace of the auction in half the time that it did so for previous auctions.”
Bidding’s been “pretty suppressed,” said attorney Stephen Simpson, a sole practitioner. “Right from the start you had only two or three bidders in some of the bluer-chip markets, whereas you might have had seven or eight in the past.” The auction has been characterized by new entrants and bidders that seem to be tied to certain markets, he said. “In past auctions, you would go for the best available” allotment, Simpson said. “In this case you have a lot more people that are specifically targeting allotments and staying with them.” Other lawyers said that’s likely due to the low involvement of speculators who hope to soon sell any winnings.
“If there’s a silver lining, it’s that people are not speculating” and the “majority of them will actually put these [licenses] to good use,” said David O'Neil of Rini Coran, representing a bidder. “It’s the economy, stupid” and “the ability to raise money to bid is much more difficult,” he added. “Those who seem to be bidding this time are those who seem to have a station in the market.” Lawyer John King of Garvey Schubert, with some participating clients, is surprised at the high number of bids made in the first round that weren’t topped, he said. “I don’t think we'll get anywhere near $20 million,” he said, citing as others did publicly available FCC information. “It’s anemic by any standard.”
An engineer who asked the FCC to delay Auction 79 (CD March 27 p10) said far fewer clients called him before bidding began to ask about tower siting and other operational issues, and one has already dropped out. “If they want to get new blood into broadcasting,” which often are minorities, “then the new entrants are going to have a harder time raising money than people in [business] today,” said Mullaney Engineering President Jack Mullaney. “Unless they have large assets behind them, the bank is going to be more reluctant to lend to them than to somebody who already owns a property.” - - Jonathan Make, Josh Wein