Levin Sees Spectrum Return Reality
Former FCC advisor believes broadcast will cooperate
By John Eggerton -- Broadcasting & Cable, 6/7/2010 12:01:00 AM
It reminds me a little bit of the Woody Allen line: Mankind is at a crossroads. One path leads to complete hopelessness and despair, the other to utter annihilation. Let's hope we have the wisdom to choose correctly.
When you listen to the two sides talk about it, you get this very apocalyptic sense. I am not an expert and the broadband plan very consciously did not focus on that issue. Our focus was to address what Congress asked us to address, which was how do we solve certain problems: getting broadband to everyone, getting higher levels to adoption, and making sure that we accelerate the movement of the economy to broadband to generate greater economic growth, productivity growth, as well as to make sure that certain sectors dominated by the public sector, education, health care, public safety, utilize broadband more productively.
Those are things that lend themselves to a planning task, but they are not the stuff of deep legal analysis. We felt that was for other people to deal with.
I have personally taken the view that there are many paths to the summit, and that the important thing that the issue du jour is Title I and Title II, I think in the long run what really matters is how we change theses processes to improve the way we delivery health care or education or public safety, and how we get everyone one, and that over the long run, 'Title I and Title II" will have the same meaning as Section 271 (which allowed local phone companies to compete in long distance telephony). Section 271 was really important in the context of the 1996 [Communications Act rewrite]. I think that ten years from now as we are trying to improve the way we handle this tremendous gift of broadband, we won't be so worried about Title I and Title II.
But in the interim, if the classification implicates Universal Service Fund migration to broadband or privacy issues, doesn't the FCC have to do something.
I think things have to be done. It is not my place to opine on the best way to do it. I certainly have a great amount of personal sympathy for Chairman Genachowski. I know that some folks have said that his decision [to propose reclassifying some of broadband under some of Title II common carrier regs] created uncertainty, in truth the [BitTorrent] court case created tremendous uncertainty. And whatever path he and the commission choose will have a level of uncertainty because there will be appeals to the court, and to Congress and there are political changes. I think it is an unfortunate diversion from the more important long-term task. But I recognize that in the short term that is where people will be focused, and that is unfortunate
There is no doubt that there are some issues, in terms of the FCC, that are implicated by Title I and Title II. But there are a lot of issues that aren't, such as the set-top issue, such as spectrum. And more importantly, there are a whole lot of national purposes issues. CTO Aneesh Chopra is doing a great job in organizing various folks in the administration to try to make progress on moving certain critical parts of the economy that have not adopted broadband as much as they should have--education, health care, government performance. I think that 10 years from now we will look back and say that is part of the plan we are most proud of.
Putting on your financial analyst hat, what does Wall Street really want, regulatory certainty or the certainty of no regulation?
I am always amused when people say that Wall Street wants certainty. Wall Street is fundamentally about betting on probabilities. Wall Street is very comfortable with uncertainty. It just needs ways to measure that uncertainty. It is certainly true that it prefers to mitigate uncertainties, particularly political ones.
But I think it is a mistake to think that anything that the commission were to do would give it the kind of certainty that some people appear to be saying is required for investment. I think if you look at the real numbers on investment, there are lots of things that affect it. One the simplest level it is always some combination of fear and greed. But the levels of capital investment were very high in the mid to late 1990's.
There were certainly levels of regulatory uncertainty. But there were also positive openings in my view in terms of regulation in terms of new opportunities. There was also a certain element of competition that in part had to do with policy and in part a maturity in the market.
Wireless and the Internet were newer things and so there were all kinds of people trying all kinds of different things. And in that kind of situation you have generally high levels of investment. People look backwards and say it was overinvestment, but the point is there is a multiplicity of factors. I think any analysis that focuses on one thing. I am sure there are moments when that is true, but this does not strike me as one of them.
You talked in the speech to ACA about anger over cable bills that reminded you of anger in the run-up to the Cable Act (which regulated prices), and said the market or government would likely have to respond. Are cable prices too high, or is its value underappreciated?
There is a log of interesting work by behavioral economists that might cast insight into that. I don't really have a strong view about that. But what I do think it reflects, and it is good news for cable, is that it has succeeded what is a very powerful platform that does three things that Americans really want on a universal basis: they want to have a lot of television. They want to have very robust data communications and they want to have voice communications, and the broadband platform is a terrific network for providing them.
The more unfortunate news is that when you become an essentially platform for universal service, you are going to run into questions that the government is going to be interested in. So, what you see with cable is similar to what Google and Facebook are now going through with privacy. If these were small companies that attracted very few users I don't think people would be expressing the kind of concerns they are about their privacy issues.
But whenever a platform becomes near universal, you start to get into these questions.
Looking back, is there anything you would have done differently on the broadband plan?
There are all kinds of small things that we might have been clearer about, but fundamentally I am really proud of the work. On a number of levels I think it is on the right side of history in terms of direction. The solutions are pretty action-oriented, that they are doable and not pie in the sky. They are very pragmatic.
I think we have teed up the agenda that is important. I think it is important that people know what the agenda is for three-five years. I think there are things particularly in the national purposes portion that are very important for the future of education and healthcare and civic engagement in this country.
By 5 o'clock every day I can think of three things I could have done differently during the course of the day. But I am very, very proud of the work that we did.
Senate Commerce Committee Chairman Jay Rockefeller (D-W.Va.) was critical of the plan has lacking action and even suggestion for action. How do you respond?
I think the plan is very action oriented. Shortly after the plan was announced, the FCC announced the policy proceedings that they were going to do and I think there were 66 of them, and gave a schedule. I think that that was important. And I think there were a number of steps taken even before the plan was released in terms of things like rights of way and e-rate inform. Where we could act quickly, we did.
And furthermore, as part of the plan there was a lot of activity generated among various stakeholders. For example there is now a nonprofit devoted to helping seniors get on line. There are now public-private partnerships devoted to helping private businesses get better tools for utilizing broadband.
I think it was unfortunate that perhaps these things were not brought to his attention prior to the hearing.
The spectrum inventory bill is having some trouble getting through the Senate, and House Communications Subcommittee Chairman Rick Boucher (D-Va.) has suggested that perhaps 4-year process should be completed before the FCC even decides who and from where that spectrum should come. The broadband plan has already targeted amounts and sources, will that have to be delayed or put on hold?
There are a variety of different moving parts to it. I would say there is a large part of the economy, represented by the 100-plus companies that wrote the FCC in October saying that there is a need to start now looking for more spectrum. Because spectrum is not something you do overnight. So, that process needs to begin now and I think that is entirely consistent with the spirit of what Boucher is saying.
If you wait three or four years to even start looking for more spectrum, then what you are really saying is we're not going to have more spectrum identified and ready for auction for another 8-10 years, and that probably is going to be enormously problematic.
I would make two observations about spectrum. First of all, there appears to be a consensus that a voluntary program that allows broadcasters to participate in auctions and receive some of the revenues of those auctions is a good idea. Am I right?
Well, you have said that you think a voluntary program would be a success, so that means that you have talked to broadcasters and believe there is a critical mass willing to give up their spectrum.
Let me first establish the following. I think there is a consensus that there ought to be a voluntary mechanism. What has been lost, as far as I know, in every single public statement, is that in order to have a voluntary mechanism, you have to have authority given to the FCC to be able to do an incentive auction and share those proceeds with broadcasters.
So, the key recommendation in that part of the plan is that the Congress give the FCC authority to share those proceeds.
There is actually a consensus converging that it would be a good thing to have this voluntary mechanism, but in order to do that, what people haven't stumbled to yet, you need an incentive technique. And that is really what the plan is asking for. What the broadcasters are criticizing is the existing law, which allows the FCC to move them without giving them compensation.
But in this consensus for incentive auctions, you think there are enough broadcasters who are willing to participate enough to get that 120 MHz of spectrum within five years?
Yes. That is my current belief based on conversations I have had with broadcasters, based on conversations I have had on Wall Street, based on when you look at various trends or scenarios. Remember, we are not talking about all broadcasters in small cities. We're talking about a minority of broadcasters in a small number of cities because that is where the need is greatest. Now, there is a repacking that has to be redone on a national basis, but how the ABC affiliate or the CBS affiliate in New York would analyze the auction may be very different than the number 25 station in New York or the number 32 station in Los Angeles.
It may be true that government employees never will get credit for the crises they presented, but nonetheless one of the benefits of the planning process is it identified certain problem areas in the future that should be addressed. If current projections are valid, and they are just projections, by the middle of this decade, mobile broadband will be more expensive and of a lower quality service than if we had more spectrum. And if that is true, the cost of the economy would be the equivalent to having lots of electrical blackouts, or having our highways with lots of potholes.
You name occasionally comes up as a possible FCC commissioner candidate. You interested?
I am sitting here at Aspen thinking about some issue I think are important to the country, like: "Why do we have texbooks. Why are we using just an ink-and-paper technology to transmit information when there are so many benefits to providing that information in electronic form?"
But wouldn't the commission be a bully platform for pushing that?
I'm not sure. I had a job that was appropriate to my skill set and was a great opportunity at the time.
E-mail comments to firstname.lastname@example.org and follow him on Twitter: @eggerton
I'm still not clear on the concept that, someone who is merely "using" a piece of the spectrum can permanently give up or "sell" that piece of the spectrum.
Isn't that a bit like selling a rental car?
Or, have we broadcasters somehow "purchased" our current six meg, and don't know it yet?
Ken W. English - 6/7/2010 8:09:29 AM EDT
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