Opinions expressed in this piece are solely those of the author and do not represent the views of S&P Global Market Intelligence.

The value gap was evident between expectations and results of the 2017 completed incentive auction of TV spectrum, according to Wiley Rein LLP attorney Henry Gola, who presented at S&P Global's recent "Media School," held Aug. 9-10 in New York.

The 700 MHz spectrum auction of 2008 valued spectrum at an average $1.28 per MHz per pop (population), according to Gola, while the incentive reverse auction completed in 2017 valued TV spectrum at only 91 cents per MHz/pop net of auction discounts, as detailed in S&P Global’s April 18 analysis by Kagan media research.

The initial target of clearing 126 MHz of spectrum with a reserve value of $86.4 billion only cleared about 84 MHz for total net proceeds of $19.3 billion paid by wireless and venture capital bidders. About $10 billion will go to the TV broadcasters, more than $6 billion will go to the U.S. Treasury to reduce deficit and up to $1.75 billion will go to other TV broadcasters that incur costs in changing channels, according to the FCC.

Broadcasters were disappointed, noted Gola, but the U.S. Treasury only wanted to know "When's the next auction?"

Why the low bids? The unique nature of the auction itself was bound to limit proceeds, reasoned Gola, due to the heavy regulation of the TV broadcast industry for service obligations plus ownership limitations based on national- and local-ownership caps. Auction precedents were also somewhat unknown for TV spectrum — this was a first proceeding for the TV broadcast industry.

The other reasons for muted TV spectrum auction results, said Gola, include:

* Better spectrum properties of higher GHz bands (including 24, 28, 37, 39 GHz) are coveted by wireless providers for a new generation of services; expected bidders Verizon Communications Inc. and Sprint Corp. sat out the auction

* It was too soon after the AWS auction of 2015 which raised $44 billion gross proceeds at $2.72 MHz/pop

* Some wireless bidders were already constrained by committed capital expenditures to their prior auction purchases

Still, major TV groups were able to raise about $2.55 billion gross proceeds with an average value per MHz/pop of $2.89, according to an April 17 analysis by S&P Global’s Kagan Media research.

ATSC 3.0 could be a golden opportunity for TV broadcasters to reinvent TV broadcasting, according to Gola, as the new IP-based standard will upgrade technologies that are more than 20 years old. ATSC 3.0 will offer more customization, interactivity and addressable targeting of viewers with a mobile friendly format that provides for greater capacity for a new ultra-high-definition channel, plus additional high-definition and standard-definition channels.

Revenue opportunities include:

* Targeted advertising via single-frequency networks and local commercial insertion

* Multicasting at 25.2 Mbps versus only 19.39 Mbps in the current broadcast HD standard

* Increased viewership capacity to reach more devices with linear and on-demand services

* Ancillary services, including subscription, Internet of Things, automotive date, mobile off-load and data management

Challenges include ATSC 3.0 not being backwards compatible with existing digital TV broadcast standards and, as of now, incompatibility with technology protocols for TV stations that opt to share channels via the post-auction repacking process ahead.

For more insight into ATSC 3.0 see S&P Global's "Highlights from the 34th Annual TV and Radio Finance Summit" held June 15 in New York City.