Why did WYCC receive millions less than expected in auction? | On Culture | Chicago Reader

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Why did WYCC receive millions less than expected in auction?

Many people are asking the same question, and not getting great answers.

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A little more than two years ago, the Chicago Tribune published an editorial urging the City Colleges of Chicago to sell its public television station, WYCC, channel 20.

Beginning with the assumption that WYCC was superfluous (given the existence of Chicago's larger public television station, WTTW), the editorial argued that keeping it would be "daft," since there was now "a chance to sell the channel in a government auction for as much as $474 million."

"You read that correctly: as much as $474 million for a community college TV station," the Tribune wrote.

Mayor Rahm Emanuel was resisting a sale because CCC students were getting what he said was valuable experience at the studio, on the Englewood campus of Kennedy-King College, the editorial said. But there would be other ways to provide an updated learning experience and to stay on the air (by sharing another station's bandwidth, for example), the Tribune argued. And CCC had only a little over a month to opt into the government auction that was providing this opportunity.

"Everyone remembers the disastrous parking meter deal. This isn't like that," the Tribune concluded.

By January 2016, CCC—under then chancellor Cheryl Hyman—had signed on for the auction, which started that March and took about a year to unfold.

The results were announced last April: WYCC sold for $15.9 million.

And City Colleges is still on the hook for a lease of the WYCC transmitter on the John Hancock Center that runs through 2029. Pay that off, and the net gain for the cash-strapped CCC from the sale could be as little as $6 million.

Station members and fans of its alternative programming (like Democracy Now!, In the Loop, and MHz Worldview) were shocked by the lowball price, but expected that, like many other stations in the spectrum auction, WYCC would continue operating by working out a channel-sharing agreement—most likely with WTTW. When it entered the auction, WYCC had said it would seek such an arrangement.

But on November 27, the station went dark. What happened?

Media watchdog Scott Sanders began looking into the sale as soon as the bewildering result was announced. Last week he published his findings on the video media and film-industry trade publication Reel Chicago. Even though the auction results in general failed to meet the high initial expectations, Sanders found that WYCC's price was markedly lower than that of comparable stations, including those in the Chicago area. (WXFT, for example went for $126 million.) He concluded that WYCC should have sold for at least $100 million more than what it fetched.

The auction was inspired by wireless companies' need for more bandwidth for their rapidly expanding mobile businesses. The transition from analog to digital had created surplus bandwidth in the broadcast spectrum, and the expectation was that the wireless companies would pay a premium price for the licenses to use it and the government would pocket a big chunk of the proceeds. Authorized by Congress in 2012, the sale was promoted as a way to raise cash that would help reduce the national debt.

But the structure of the sale was devilishly complicated. FCC spokesman Charles Meisch told me that to eliminate any chance of corruption, the government was to function as middleman, purchasing the bandwidth from the sellers and then reselling it to the buyers. To facilitate that, two separate auctions were set up: The sellers (that is, the TV stations) were assigned a "reverse" auction process that started with high prices (like the $474 million estimate the Trib quoted) and worked its way down to figures that would mesh with what buyers were willing to pay. The buyers participated in a more traditional auction, where prices gradually rose.

So no buyer bought directly from a seller. And here's an important point: If, at any juncture, sellers thought the reverse-auction price was getting too low, they could opt out. If a station did that, it would retain its broadcast license but might be moved to a different part of the broadcast spectrum. The cost of the move would be covered by the government, and there shouldn't be any perceptible change for its viewers.

This is significant in retrospect because, as the bids for WYCC dropped below $100 million and then much lower, City Colleges didn't drop out but like the proverbial frog in the pot over a fire, hung in till it was cooked.

Why were the bids for WYCC's bandwidth so much lower than those for comparable stations? And why, when the bids began to sink, didn't CCC pull the trigger and get out?

"Those are the questions we all want answered," says John Freberg, who—until last week, when all but four members of a staff that he says once numbered 36 were let go—was WYCC's director of engineering and operations. According to Freberg, "There's no reason why WYCC would have been less valuable than other stations. From a technical standpoint, it should have been more valuable."

Station member, artist, and retired Northwestern professor Bert Menco has posted a petition at Change.org urging that the station, which he notes was especially valuable to people who don't have cable, be kept alive. "How can a public asset be sold—basically given away—without any public input?" Menco asks. "At the least, it's extremely incompetent."

WYCC recently filed a request for a three-month extension of the window allowed for setting up a channel-sharing agreement. A second extension is possible, but as it stands, if no arrangement has been made by February 22, its license to continue broadcasting will expire.

CCC responded to questions about the sale and the station's future with a written statement that said WYCC was "not a core part of the institution's academic function"; that CCC will "save $2-$3 million per year" by getting rid of it; and that "If CCC had jumped out of the auction earlier, it would have received $0."

According to the statement, CCC and the city "raised questions with the FCC about the apparent differential in outcomes for stations that seemed similar," and was told that "there was a difference in interference in the spectrum." (Both Sanders and Freberg disagree with this explanation; the FCC says additional factors such as antenna properties were involved.)

CCC says WTTW has approached it about acquiring the WYCC license, and City Colleges' board of trustees will be considering channel sharing and asset-purchase agreements at its December 7 meeting. If that deal goes through, CCC says, all future programming on WYCC's channels will be determined by WTTW.

As for paying down the national debt: Meisch says the total bandwidth sale at the auction amounted to $19.8 billion. The government netted about $7.3 billion. The national debt is now $20 trillion.  v

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