On April 13, 2017, the FCC released a Public Notice announcing the conclusion of the broadcast television spectrum incentive auction and the start of the 39-month post-auction transition period.  Over the next three years, more than 1,000 broadcast stations across the country will be moving to new channels to make room for more mobile wireless services in the upper end of the band.  Congress provided for a reimbursement fund of $1.75 billion, which gives repacked broadcasters and MVPDs alike the opportunity to recover the costs of making the necessary changes, but immediate steps must be taken by MVPDs to ensure their eligibility for reimbursement.  The reimbursement fund is limited and is widely expected to run out before covering all eligible expenses, making a timely initial MVPD reimbursement filing imperative. 

To be eligible for reimbursement, MVPDs must comply with the FCC's reimbursement fund claims process, which starts by filing their estimated costs (via Form 399) with the FCC by July 12, 2017.  Although the FCC recognizes that expenses cannot be estimated with precision, the initial estimates provided will determine generally how funds are allocated.  To ensure an appropriate allocation, MVPDs should try make their estimates as accurate as possible.

Background.  In 2012, Congress passed the Spectrum Act, directing the FCC to hold both a "reverse auction" where broadcast television stations submitted their spectrum for potential sale, and a "forward auction" where broadcast television spectrum returned for sale would be put out for bid by wireless carriers.  Following the auction, which concluded on March 30, 2017, the spectrum band occupied by TV broadcasters will be compressed and hundreds of broadcast stations will be "transitioning" to the smaller spectrum allocation.  Stations will transition in one of four ways: (i) by going off-air; (ii) by moving from UHF to VHF frequencies; (iii) by being reassigned due to repacking of the UHF band; or (iv) by winning a channel sharing bid.  These transitions will impact the vast majority of MVPDs carrying both UHF and VHF signals who may incur costs to make operational changes to continue carrying these broadcast stations.

Congress also established a $1.75 billion reimbursement fund and directed the FCC to "reimburse costs reasonably incurred by" broadcast television licensees that are reassigned to new channels, as well as MVPDs that incur costs in order to carry the signals of such reassigned licensees.  Reimbursable costs include those costs reasonably incurred by an MVPD when a broadcaster is reassigned to a new channel either in the repacking process or as a result of entering into a channel sharing arrangement with another station post-auction.  This includes costs for both "hard" expenses, such as new equipment and tower rigging, and "soft" expenses, including legal and engineering services.  The FCC has adopted a Catalog of Potential Expenses and Estimated Costs that MVPDs should use to help determine their estimates (see page 16 for MVPD-related costs).

In 2014, the FCC released a Report and Order adopting rules to implement the broadcast television spectrum incentive auction.

Requesting Reimbursement for Eligible Costs.  All entities seeking reimbursement must file an estimate of their eligible costs. The initial estimated cost form for MVPDs - Form 399 - is due by July 12, 2017.  MVPDs are expected to incur both channel-specific costs such as new RF receiver equipment and system-wide non-channel specific costs such as tower augmentation and outside professional consulting services.

The costs MVPDs will incur as a result of the post-auction repack will depend on which broadcast stations move to new locations.  There is no single master list showing whether and how each affected station is moving.  To determine impacts, MVPDs should reach out directly to every station they carry to discuss their post-auction plans.  To calculate estimated costs, MVPDs should ask their broadcast partners for information concerning their pre-auction and post-auction channels, modifications (if any) to antenna position, location or power levels and stream identification information for channel sharing stations.  MVPDs should also seek information concerning the timing of the broadcasters' move. While broadcast stations must give advance notice of their moves, such notices are unlikely to be received by MVPDs by July 12, 2017.

MVPDs can also review the Incentive Auction Closing and Channel Reassignment Public Notice for a list of winning bidders in the reverse auction and the stations which will go off air in each DMA, as well as a downloadable excel spreadsheet that specifies the final channel reassignment for each repacked broadcast station.  Neither document, however, provides a complete list of all stations which will be participating in channel sharing arrangements. 

Filing Form 399.  Form 399 is due by July 12, 2017 and consists of four main sections:

• Applicant Information;
• PSID (Physical System Identifier) and Call Sign Selection;
• MVPD Information and Transition Plan; and
• Cost Chart.

MVPDs may access an MVPD Quick Start Guide to help with the filing process.

Applicant Information.  An MVPD must login to Form 399 electronically using its COALS username and password.  An FRN and FRN password is also required. 

PSID and Call Sign Selection.  Form 399 will automatically import an MVPD's PSIDs from the COALS database.  MVPDs may group all PSIDs on one Form 399 or may file each PSID as a separate form.  Grouping the PSIDs together is solely for the MVPD's convenience.

Call Signs are filtered by DMA and transitioning stations. MVPDs will need to identify which retransmitted channels will incur costs.

Transition Plan. MVPDs will need to identify channel-specific costs (generally receiver equipment), non-channel specific costs (general costs associated with the system) and any additional costs, such as professional services and other miscellaneous expenses.

Some systems may have no costs. MVPDs are not required to file Form 399 for systems that do not incur costs that need to be reimbursed.

Cost Chart. The Cost Chart must be completed on a PSID-by-PSID basis.  Each page has three columns:

• Predetermined cost, if available, from the catalog of potential expenses and estimated costs;
• Estimated cost as entered by the MVPD; and
• Total actual costs submitted for each entry (once an MVPD receives the receipts and invoices which will need to be added to the form).

Note:  Reimbursable MVPD expenses include the reasonable costs to set up delivery of a signal that the MVPD is required to carry under the FCC's must-carry rules or by retransmission consent contracts, regardless of whether the station is a winning bidder or is involuntarily reassigned to a new channel in the repacking process.  MVPDs should review their retransmission consent agreements closely to determine which contracts may obligate them to pay delivery costs.

Certification. MVPDs must certify, among other things, that the MVPD's documentations are material representations and that the MVPD is in compliance with all statutes, rules, regulations and government requirements before filing the initial Form 399 and after changes have been made.

Additional Steps Needed After Filing Form 399.  While MVPDs must file Form 399 by July 12, 2017, there are additional steps that MVPDs must subsequently take.  These include: 

• At least 5 business days after submitting Form 399, the FCC will add the MVPD to the list of payment applicants and the MVPD should submit Form 1876 (available through the CORES incentive auction financial module), which provides the FCC the information necessary to actually disburse payment.  The FCC has prepared a Financial Module User Guide for assistance with navigating the module.
• Within 10 days of receiving email notification from the FCC, an MVPD must provide electronic banking info in the CORES incentive auction financial module.
• After the Media Bureau makes an allocation, an MVPD must submit invoices for expenses incurred using Form 399.  Once the Media Bureau approves the amounts, disbursements will begin.  Note that an MVPD may make changes to its Form 399 after July 12, 2017 if it has received new information. 

Initial and Final Allocations.  Subject to fund availability constraints, MVPDs will be eligible to receive initial allocations equivalent to up to 80% of their estimated costs eligible for reimbursement.  Additional allocations will be disbursed as necessary, and will be announced by public notice.  Each allocation will be based on an MVPD's estimated costs, and the MVPD must subsequently make a request for reimbursement.  At that time, the FCC will review the invoices to determine the eligible amount.  Prior to the final disbursement, a public notice will be issued alerting all eligible entities that they must submit final invoices.

The FCC will make disbursement amounts and claims for reimbursement (minus actual invoices and cost documentation, as well as vendor names) publicly available.  MVPDs will need to comply with certain recordkeeping and reporting requirements, and will be subject to potential audits and site visits.

If you have any questions about Form 399 or the reimbursement process in general, please contact Scott Friedman at (312) 372-3930 or sfriedman@cinnamonmueller.com.