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July 23, 2013
Dennis Wharton
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Testimony of NAB EVP Rick Kaplan on Incentive Auction Implementation

WASHINGTON, DC -- NAB Executive Vice President of Strategic Planning Rick Kaplan testified this morning before the U.S. House Subcommittee on Communications and Technology at a hearing on "Oversight of Incentive Auction Implementation."

Below is a transcript of his testimony as prepared for delivery.

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Good morning, Chairman Walden, Ranking Member Eshoo and members of the subcommittee. Thank you for inviting me, on behalf of the National Association of Broadcasters, to testify before you today. NAB is committed to lending its expertise to this subcommittee and the FCC to ensure the successful completion of the world's first-ever broadcast incentive auction to the benefit of American consumers, the U.S. treasury and public safety. A properly run auction is also critical to the future of the nation's broadcast industry.

Now, a casual observer of today's hearing might be led to believe that the upcoming incentive auction is primarily a wireless industry issue. He or she will hear about licensed and unlicensed spectrum, spectrum aggregation limits, and the drive to maximize the amount of spectrum freed up by paying handsomely private equity funds and others on the fringes of the broadcast industry to relinquish spectrum.

The reality, however, is that the industry on which this auction will have the greatest impact is the broadcast industry.

To offer some perspective, according to OSTP and the National Economic Council, the U.S. commercial wireless industry will soon control more than 660 megahertz of spectrum more than any other commercial enterprise, and well more than its counterparts in nearly every other country. This amount is more than double the spectrum allocated to the broadcast industry. In fact, a wildly successful incentive auction will likely contribute less than 15 percent of new spectrum to wireless industry's overall stockpile.

By contrast, this auction will leave an indelible mark on the broadcast industry. Some 30 percent of the channels on which broadcasters operate will be gone, and we will have to relocate upwards of 50 percent of the stations that remain on the air. Moreover, potential changes to our coverage areas could greatly impair the ability of a significant number of the nearly 60 million Americans who rely exclusively on over-the-air television to receive the local stations they count on most.

Our goal at NAB is to help those broadcasters who remain on the air continue to have the same opportunities to serve the American people they had prior to the auction. The opportunity for the station in Boston to offer wall-to-wall coverage of the terrifying bombings; the opportunity for the Tri-State Area station to help direct local residents to life saving services during Hurricane Sandy; and the opportunity for the station in Oklahoma to warn its viewers about the path of deadly tornadoes.

Some have described the auction as a win-win-win, with the final victory being awarded to the broadcasters. To be candid, from what we have seen so far, we will be lucky to escape with a tie.

In any event, to avoid a loss for the broadcast industry, the FCC must ensure at least three things.

First, broadcasters who remain on the air should not be harmed by the voluntary auction. The Spectrum Act dictates that broadcasters must be able to serve the same coverage areas and same viewers they did the day after the auction as the day before. The FCC should not, for example, move the goalposts by altering the formula by which they calculate these coverage areas. No harm also means that the FCC should not force remaining broadcasters to go out of pocket for reasonable expenses when they are forced to move to make way for the wireless industry. The Commission must treat the TV Broadcaster Relocation Fund as its relocation budget. If not, broadcasters could face significant costs associated with moves they never sought and that offer them no benefits whatsoever.

Second, the Commission must develop a band plan that avoids interference between broadcasters and wireless operators. The engineering behind the FCC staff's variable plan has not yet been vetted in an open forum, and the time has come to put the staff's engineering assumptions to the test. As we know from experience, post-auction interference problems take far longer to fix than if they had been addressed openly, transparently and thoroughly up front.

For the same reason, it is essential that the FCC complete international coordination prior to the auction and repacking. An unfinished product leaves the Commission with far less revenue, and also forces the Commission into a jagged variable plan, where it has to match broadcast and wireless services in an unprecedented manner across the northern third of the nation.

Third, despite the fact that low power television and TV translators are not formally protected in the statute, the Commission must nevertheless do all it can to preserve these critical services. As last week's letter signed by 57 House Members representing rural and mountainous districts made clear, translators are an indispensable means by which rural communities, especially out West, receive their free, over-the-air news, weather and emergency information. Also, at a time when the Commission and many members of Congress have expressed concerns about diversity in media ownership and programming, low power television provides one important answer. If the Commission repacks too aggressively, literally thousands of translators and many more low power TV stations will disappear and never return, and many of your constituents will be deprived of an essential lifeline and the diverse over-the-air programming they have come to expect.

In closing, the NAB continues to vigorously support the voluntary, market-based incentive auction authorized by Congress, and to see it conducted as expeditiously as possible. But we must also remember that getting it done right is more important than simply getting it done right now. Our aim is to preserve a healthy and robust broadcast industry, and to continue to serve our local communities in a way that no other service can duplicate.

Thank you again for the opportunity to testify before you today. I look forward to your questions.

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About NAB
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