FCC Releases Instructions on Receiving Incentive and Reimbursement Payments after the Incentive Auction Closes
On March 29, 2017, the FCC released a Public Notice providing instructions to full power and Class A television broadcasters and Multi-Channel Video Programming Distributors (MVPDs) on receiving incentive and/or reimbursement payments following the closure of the Incentive Auction. The Public Notice stated that, in order to receive payments, winning bidders in the reverse auction (i.e., broadcasters that successfully bid to relinquish some or all of their spectrum rights) must submit an FCC Form 1875 (Reverse Auction Payments), and broadcasters and MVPDs eligible to receive reimbursement payments from the Television Broadcaster Relocation Fund for costs incurred during the reverse auction and repacking process must submit an FCC Form 1876 (Reimbursement Payments). While the application processes are similar for Reverse Auction and Reimbursement Payments, payment recipients may receive their disbursements at different times depending on the type of payment for which they are eligible. In addition, while the Public Notice did not announce a deadline for reimbursement payees to file Form 1876, entities receiving Reverse Auction Payments must file their Form 1875 by no later than 20 days after the FCC releases its public notice closing the auction (currently expected in early to mid-April).
CORES Update. Prior to submitting payment applications and receiving payment, all Reverse Auction and Reimbursement Payment applicants must update their Commission Registration System (CORES) accounts by: (1) creating an FCC Username Account; and (2) designating at least one FRN Administrator. Detailed instructions on how applicants may complete these steps can be found on the FCC's CORES site. We have also kicked the tires on the new CORES, so please feel free to contact us if you need assistance.
Payment Applications. The application processes for Reverse Auction and Reimbursement Payments both follow a two-step process to reduce "the risk of error or fraud."
First, all payment applicants must submit to the FCC a signed and notarized FCC Form 1875 or 1876, as applicable, along with a either a bank account verification letter or redacted bank statement confirming ownership of the bank account to which payments are to be made. Applicants may only designate one bank account to which payments are to be made, but may designate third party payment recipients on their applications. Reverse Auction Payment applicants must submit a separate application for each station with a winning bid in the reverse auction. Reimbursement Payment applicants must submit a separate application for each reassigned station or for each MVPD eligible for reimbursement as a result of expenses during the reverse auction and repacking process.
Second, after determining the accuracy of the payment applications, the FCC staff will grant each applicant access to the CORES Incentive Auction Financial Module. For Reverse Auction Payment recipients, this access will be granted to only the single individual listed in the Form 1875; Reimbursement Payment recipients may identify two individuals to receive access in their Form 1876 . Other users may later be granted access to view certain limited financial information, but only the individuals listed in the Forms 1875 and 1876 will be able to enter such information in the system. In the Financial Module, applicants must enter bank account information for the designated payment recipient. The FCC will then compare the financial information entered in the Financial Module with that submitted on the applicable FCC Form 1875 or 1876, and will contact the applicant regarding any discrepancies prior to payment.
Payment Disbursements. While application processes for Reverse Auction and Reimbursement Payments are similar, the payment disbursement processes differ between the two.
Due to the fact that Reverse Auction Payments cannot be made until forward auction licenses are granted (and payments made), the Commission demurred from offering a precise timetable for issuing Reverse Auction Payments. In addition, the Commission noted that if it is able to release only some Reverse Auction Payments at any given time (based on its receipt of forward auction payments and grant of forward auction licenses), it would do so on a schedule that was designed to accommodate the repacking schedule for continuing broadcasters. In other words, if forward auction licenses are granted on a rolling basis, Reverse Auction Payments may also be made on a rolling basis, with those stations who may hold up the transition schedule getting paid first. When the FCC is ready to disburse any given Reverse Auction Payment, it will release a "Ready to Pay Public Notice," directing the U.S. Treasury to disburse payments to eligible recipients. Reverse Auction Payments are deemed to be made within five days of release of the Public Notice.
The process for disbursing Reimbursement Payments is, necessarily, somewhat more complicated. Within 90 days of the release of the public notice closing the auction, any entity expecting to receive reimbursements must submit an estimate of such reimbursements to the Commission. The Media Bureau will then make an allocation of up to 80% of those costs for commercial broadcasters and MVPDs and 90% for non-commercial broadcasters. Entities will then be entitled to "draw down" against these allocations as they incur expenses. As the three-year reimbursement period proceeds, these allocations will be adjusted by the FCC.
Because Reimbursement Payments will be made on a rolling basis, and subject to the allocation noted above, the Commission does not make any estimate as to how soon after a request a payment will be made. All Reimbursement Payments, however, are to be made within three years of completion of the forward auction pursuant to the Spectrum Act. In contrast to Reverse Auction Payments, the Commission does not have the authority to direct the Treasury to make Reimbursement Payments to eligible recipients and cannot control when Treasury does so after receive the Commission's instructions. Instead, the CORES Incentive Auction Financial Module will be updated when the Treasury has made payment.
Ownership Changes for Stations Receiving Reimbursements. The Commission's Notice also addressed how the Commission will handle the (potentially numerous) situations where a station receiving Reimbursement Payments is transferred or assigned during the reimbursement period. Upon receipt of a notice of consummation of such a transfer of assignment, the Commission will de-activate the bank account information of the assignor and hold any pending reimbursement requests. The assignee will be required to submit a Form 1876, and otherwise follow the same process to provide account information and gain access to the Financial Module. The Commission in the Public Notice promised that, prior to granting or accepting any consummation notices, it would provide additional guidance to the parties involved regarding reimbursement procedures.
Please contact us should you have any questions regarding the Reverse Auction and Reimbursement Payments processes after the closure of the Incentive Auction.