The sale of Chicago’s second public TV station may have cost the city college system $130 million, according to the results of a six-month investigation contained in this article.
Calculated in terms of potential income, the loss was just one of many negative factors that continue to affect Chicago as a result of the Federal Communications Commission’s “Television Incentive Auction.”
Launched on March 29, 2016, the auction would eventually cause WYCC-TV/Channel 20 to layoff dozens of employees and the people of Chicago to lose a source of noncommercial TV programming.
A closer look reveals that the licensee of WYCC-TV/Channel 20 completely mishandled the opportunities and options available to it through the auction. The station went dark at midnight on Nov. 27.
The station
WYCC is controlled by the City Colleges of Chicago (CCC), a group of public community colleges owned by the city.
Besides airing First Nations Experience and MHz Worldview daily independent news program Democracy Now!, WYCC has broadcast PBS fare and local shows highlighting justice, race relations, local music, and more.
Until it signs off for good, the channel will feature a 24/7 feed of the Worldview international news channel.
The auction
The broadcast spectrum carries the signals of TV stations, radio stations, cellular phones, and other communications. The frequencies sold during the FCC auction were in the UHF TV band. The auction was created to meet demand for more wireless bandwidth. TV bandwidth is prime spectrum “real estate” for wireless communications because it can penetrate thick walls. Channel allocations are heavily regulated by the government and an international board to minimize interference.
The estimated value of the frequencies sold in the $20 billion auction ranged from $25 to $80 billion.
The auction included two separate but interdependent processes brokered by the FCC:
1. A reverse auction, which determined the price at which broadcasters would relinquish their channels;
2. A forward auction, which determined the price wireless companies were willing to pay for broadband use.
To start the sale of Channel 20, the FCC publicly announced an opening bid of $473.4 million. It was a high offer that was roughly on par with the $425 million paid on the regular market for a Chicago UHF channel in 2002.
The opening bid was followed by descending bids in what is known as a reverse auction. The FCC announced the descending bids in five percent decrements over a period of months.
Broadcasters could cease their participation in the auction without selling their channels at any time. The auction ended when an algorithm determined that the needs of sellers, buyers and the FCC — which took a portion of each sale for the federal budget — were met.
With the FCC as intermediate buyer and seller, no money changed hands between wireless companies and broadcasters. This minimized the chance for corruption. 34 public broadcasters fetched a total of $1.9 billion in the auction from the sale of their channels.
The sale
The winning bid for the frequency for WYCC-TV/Channel 20, announced April 13, was $15,959,957. Similar bandwidth for metropolitan areas like Chicago sold during the auction went for up to ten times as much — $126.1 million to $160.7 million.
When factoring the $9.6 million liability of the station’s 15-year antenna lease — signed just a year before auction registration began — the channel’s effective sale price will be $6.3 million.
Missed opportunity
Several months after the FCC’s announcement, WTTW-TV, Chicago’s primary PBS outlet, approached City Colleges to negotiate for the distribution rights to WYCC’s program catalog and the WYCC broadcast license, although those talks were terminated over an inability to agree on a price.
There is no evidence that City Colleges ever sought out another organization to take over the license for Channel 20. Had it put in place a channel-sharing agreement (CSA) — an indication stated in its auction application and a move accomplished by almost every other participating public station — it could have continued operations with its $1 million-plus Corporation for Public Broadcasting (CPB) grant and other funding, using part of WTTW’s frequency.
The City Colleges could have used a $125 million-plus auction windfall to provide raises for its grossly underpaid instructors and restore cuts imposed in recent Chicago Public Schools budgets. It could also have built a new local journalism and independent media trust for the Chicago area and continued independent operations for WYCC by sharing the channel of another broadcaster.
Instead, then-CCC chancellor Cheryl Hyman and general counsel Eugene Munin sold a TV station on the cheap while the school system was still under an expensive contract for antenna rights that are now useless.
Discrepancy
Chicago station WXFT’s “interference-free population” — a measure of signal reach, the most important factor in a station’s value — is 9.6 million vs. WYCC’s 9.3 million.
WXFT’s “interference” — a measure of the impingement of other signals — is a touch better at 110 vs. WYCC’s 111. The opening bid made by the FCC for WXFT of $478.5 million compared to WYCC’s $473.4 million, makes the two stations appear quite similar. But WXFT was ultimately sold for $126 million, not $16 million that WYCC was sold for.
Another comparable station in the auction is KLCS, a channel auctioned by Los Angeles Unified Schools, which went for $130 million, but probably could have sold at a somewhat higher bid. KLCS boasts an interference rating of 88, and an “interference-free population” of 15.7 million.
The opening bid made by the FCC for KLCS was $548.7 million. (Note: KLCS was in a 2014 channel share pilot test, and has worked out a share with LA’s independent public TV outlet, KCET.)
San Jose pubcaster KQEH accepted the FCC’s $95.5 million bid. Its interference-free population was 6.6 million, its interference factor 138 and the FCC’s opening bid for it was $444.7 million.
Comparing the full-power and low-power stations in the auction is an apples-and-oranges issue. The FCC has acknowledged that the auction and channel reorganization may negatively affect an unknown number of the 2,063 LPTV and 3,660 translator stations.
The usually low winning bids of the low power stations permitted into the auction — the roughly 400 separate “Class A” channels such as Chicago’s WOCH-CD (see table below) — reflect widely held uncertainties about the future of the LPTV industry, as documented in a December 2016 independent Government Accountability Office report.
Glimmers of hope
The situation is fluid. A Change.org petition seeking to keep WYCC alive is being circulated by Dutch-born artist, Bert Menco.
A coalition could work out a deal for the WYCC license, auction money, equipment and facilities, and negotiate for space on WTTW’s channel.
Ideally this coalition would be composed of unions with contracts at the City Colleges, such as the Cook County Colleges Teachers Union, the Service Employees International Union, and the International Union of Operating Engineers (the latter two part of the Chicago Sun-Times newspaper’s new ownership).
A coalition could also protect CCC radio station WKKC-FM, which must now feel like it is in the crosshairs. With key foundation and public support, even the idea for a new local media trust is still possible.
The Chicago Newspaper Guild represents media workers, court reporters, teamsters and teachers. Upon learning that the WYCC license was in play, its head, Craig Rosenbaum, said excitedly, ”Great!”
Craig Aaron, a former Chicagoan and president of Free Press, a leading national media and democracy advocacy organization, noted that he was “thrilled that the Sun-Times didn’t end up in the hands of [Chicago Tribune parent company] Tronc.”
“It would be great to see more of that, and anything that can counteract the runaway consolidation the FCC is pushing with Sinclair, etc.,” he explained. “We need local media in local hands.”
Without quick action, however, the WYCC license is headed for the dumpster due to the CCC’s unaccountable top-down decision-making process.
Followup
The $16 million winning bid for WYCC does not stack up well locally at all.
CCC’s inexplicable failure to accept repeated offers of more competitive prices means that Chicago education will see little gain in return for the loss of WYCC.
The television facilities, located at Kennedy/King College in the South Side community of Englewood, are slated to be mothballed or used for internal CCC production.
After November, the expansive Chicago area will be without an alternative Illinois based public television provider.
Munin (who was the official auction contact), the mayor’s office, and City Colleges have repeatedly refused to answer questions.
According to Associate City Colleges general counsel James Reilly, “City Colleges of Chicago did retain the services of outside legal counsel and an economist in this matter.”
Through the FCC’s FOIA response, we now know that the nonprofit media law firm Gray Miller Persh LLP briefed the mayor’s office on how the auction worked.
In her email thread on setting up a conference call between FCC auction officials and Christine Koronides, Mayor Emanuel’s director of federal affairs, firm partner Margaret L. Miller declared that “WYCC participated successfully in the spectrum auction, but the mayor’s office has concerns about the ‘discrepancy’ between the winning bid price for WYCC as compared to other broadcast stations in the Chicago market, including, in particular, Station WWTO.”
WWTO’s bid of $304,250,040 was the highest in the entire auction.
The City knew there was a big problem with the WYCC price, but its only public response so far has been to direct the curious to get lost in a bunch of FCC auction website URLs.
City Colleges of Chicago’s leap to a tiny winning bid in the third-largest US TV market is inexplicable. As Charlie Meisch, contact for the FCC Incentive Auction Task Force, stressed, City Colleges had numerous chances to sell at a higher price. Meisch said he has no idea what happened in Chicago, and suggested that we “ask WYCC.”
Meisch pointed out the FCC offered “auction training, preparation opportunities and other assistance for sellers.” Sue Sterner, an auction process and procedures contact at the FCC, explained in a phone call that the FCC did not help sellers determine their prices.
The sale of the valuable frequency for WYCC channel 20 privatized a scarce resource at an extremely low level of compensation to its public owners. One can only speculate on the reasons that the public officials involved dropped the ball.
It remains for the public itself to pick it up.
Scott Sanders has co-founded seven Chicago-based media and democracy groups and coalitions. He is the only local organizer linked by the FCC to a fine of a major public television broadcaster for airing commercials. mail.ssanders@yahoo.com
Margaret Anderson, Jim “the slasher” Naureckas, and others contributed editorial suggestions to this article.
