The Man in the Middle on Spectrum
The NAB’s Rick Kaplan wants broadcasters to be treated fairly in the incentive auction process—and says the FCC should not insist on 2014
By John Eggerton -- Broadcasting & Cable, 1/21/2013 12:01:00 AM
In his first wide-ranging interview in the post, Kaplan tells B&C that the NAB wants to work with all stakeholders for a successful auction and wireless band plan, so long as the definition of success is that broadcasters come out the other side with a business plan of their own.
But Kaplan, formerly head of the FCC's wireless bureau and a top aide to FCC chairman Julius Genachowski, says there is no reason to rush the auction, and lots of reasons not to sacrifice accuracy for speed. Those include that the wireless marketplace has taken care of its short-term spectrum demands through market forces and is well-positioned in the long-term as well.
Another reason, Kaplan suggests, is that unless the FCC takes its time and gets the repacking-reorganizing the reclaimed spectrum into new bands-and border coordination rights resolved, the auction could fail.
Kaplan says that does not mean the NAB is advocating delay, just that the FCC does not need to risk imploding the process by trying to meet an artificial 2014 auction deadline that he suggests could prove detrimental to everyone involved.
An edited transcript of the interview follows.
You are essentially the NAB's point person on the auctions. What appealed to you about the job?
It was an opportunity to work with an industry I have liked for quite some time [Kaplan played a key role at the FCC on the first DTV transition]. It was also an opportunity to work for [NAB president and CEO] Gordon Smith, who is one of the best leaders of any trade association. He wants NAB to be an organization that is in the mix and not one just trying to prevent things from going forward, but one that wants to be constructive and to ! nd a way to make deals and get things done.
That was very appealing to me. That was how I operated at the commission. And then there are just a lot of cutting-edge spectrum issues that broadcasters are involved in these days that I worked a lot on at the commission and find very interesting.
Those cutting-edge issues can cut both ways. Are you confident that the FCC wants a robust broadcasting business when it is done?
I hope it is an agency of its word. My role in this process will be to make sure that the FCC lives up to that, and I have no reason to believe otherwise.
How specifically can the FCC demonstrate that in its upcoming order?
Great question. I think there are a number of ways. The FCC has to follow the statute. Congress clearly laid out the statute and the FCC could not have heard the word "voluntary" more times than about incentive auctions. So that essentially means that those who want to participate can participate, and those who don't won't be harmed. Congress did a number of things in the statute to make sure that's clear. From the reimbursement fund [$1.75 billion to cover moving/repacking broadcasters and, where necessary, cable cohosts] to the protection of coverage areas and being able to reach the same people you can reach today.
Making sure they don't cut corners and that they really demonstrate a care for the industry will help. Also, I think the FCC shouldn't focus exclusively on squeezing every last megahertz out of the broadcast spectrum and just handing it to the wireless carriers. It should look to clear a nationwide band plan for commercial wireless operations, but also think about the future of broadcasting and how we're going to continue to innovate, and about diversity. Therefore, the more it talks about that and the more it thinks about the auction from more than one perspective, then we'll know they are putting their money where their mouth is.
You are the FCC's former wireless bureau chief. Aren't wireless companies running out of spectrum?
The wireless industry problem was more a problem of surprise in 2009 when the FCC's National Broadband Plan was written than one of pure spectrum.
There was a huge surprise at the spike in data usage and no company was ready for it. But, one thing people talk a lot about in Washington, including the incentive auctions, is market-based solutions.
What should be considered exhibit No. 1 of how the market can solve problems is that the wireless industry completely transformed itself over the last few years and I think that chairman Genachowski deserves a lot of credit for things he did to make that happen.
In the wireless industry now you saw AT&T buy up the whole [Wireless Communications Service] band and the FCC react with rules that are good for AT&T to do mobile broadband there. Verizon buys SpectrumCo spectrum, and now they have a ton of spectrum completely unused and ready to go for the future. T-Mobile buys MetroPCS and gets spectrum from AT&T and Verizon, and so now T-Mobile is on its way to being a really healthy, vibrant contender. And you have Sprint, which already has a ton of spectrum, trying to buy the rest of Clearwire out and some of U.S. Cellular. So, the market has actually reorganized itself so that the spike in demand that it saw has actually been accounted for and in the near term is in very good shape.
That doesn't mean we shouldn't be thinking about long-term spectrum planning. But there is no reason to rush things that take time, like incentive auctions. And there are certainly many other opportunities including federal spectrum. And now you have Dish out there with 40 MHz of spectrum, and they are going to be a player one way or another. So, there is a good long-term prospect for spectrum now that we understand the rise in demand.
The NAB is going to be filing its comments on the auction by Jan. 25. Can you give us a preview?
Sure. First, we are going to be a constructive participant in this process. We would like to see a successful auction and understand that it is the will of Congress. And so we are going to do everything we can to ensure that it is a successful auction, that the FCC can get the nationwide band plan that it wants to get and at the same time ensure that those who are not participating are protected, which is probably job No. 1 here.
It is going to be a difficult process because there are so many moving pieces. So for us, one of the biggest points up front is that this is a really difficult process and many people at the commission are really familiar with the DTV transition, which took many years and had many rounds of comment. We know this process up front won't, because the repacking piece of it has confidentiality provisions in the statute that make it harder to review and make it open for public comment. And the repacking is going to be done in the middle of the auction, so the degree of difficulty is very high.
So, the first message is that we have an opportunity to get this right, but it's going to be very hard. So let's make sure we're focused on getting all the proposals, keeping things simple, making things transparent. What that means is that all these calls for a 2014 auction seem premature. Not that it can't happen, but all these artificial timetables do is put pressure on the next chairman of the FCC-assuming chairman Genachowski is not chairman in 2014-to live up to some arbitrary timetable that, frankly, anyone who is really thinking seriously about it knows it is going to be a very hard slog to get it to happen if you want it to happen correctly.
And correctly means solving the spectrum coordination issues with Canada and Mexico sooner rather than later?
Yes, there are two things we are particularly concerned about being rushed. The first is the border issue. It is less about broadcasters than about the overall success of the auction. If you take Canada and Mexico and the border areas, that is not talking about someone living five miles from the border crossing. The current agreement in Canada covers 250 miles from the border. So, you draw a line 250 miles down from Canada, and 150 miles up from Mexico. So, you are talking Los Angeles, New York, Seattle, Detroit, Phoenix. Big, big markets that are impacted. And so, if the FCC wants to hold a successful auction, it is going to have to work through those issues with Canada to make sure we can do it. We did it during the DTV transition, so it is doable, but it is going to take longer than a year to work out all those issues and get channels pre-approved so they can be repacked.
But if the FCC just pays lip service to coordination and moves forward, it is really cutting out a third of the country in terms of spectrum it can recover and develop a band plan that is nationwide.
It seems odd for an FCC so focused on getting more spectrum for broadband to do that, but again, these timetables make that the likely outcome, not a nationwide band plan that works for the wireless industry, and truly not one that is good for the long-term health of broadcasting.
And the second issue?
Repacking. All you have to do is pick up the proposal [which the FCC issued in September] to realize that there is still a long way to go-and I think the commission would admit this-on the repacking section. There is a lot of thought to the forward auction and to the band plan, but when you talk about repacking, we don't know what the [repacking] software looks like, it hasn't been tested. We assume it is going to be made publicly available so everyone can play with it. But it is the key driver of the auction and it is what could thwart the nationwide band plan. And without knowing what that looks like, that's challenging again, given the context of the DTV transition where everybody got to look at their contour and what it looked like, got to test it. We're not going to have that opportunity. So we want to make sure that that is going to go OK.
We want to make sure we don't get to the end of the auction, and suddenly there are widespread problems for broadcasters because people are interfering with the mobile carriers or the mobile carriers are interfering with broadcasters, because the program wasn't properly vetted and stakeholders didn't have a chance to participate.
So we think the FCC is going to be good on that. But it is not there yet, so how can you talk about a report and order in 2013 when the software isn't complete and hasn't been put out yet for public comment? We're not saying there can't be a report and order in 2013 and an auction in 2014, but a lot needs to happen before that and it makes it very unlikely. All those timetables can put undue pressure on people to cut corners in a way that is going to harm the auction.
So your message is, don't rush the auction. Or do you want it delayed?
We don't want a delay. I want to make that very clear. But our challenge to the FCC is this: If you are serious about having a good auction that is very good for wireless carriers and protects broadcasters, you are going to want to take time with, especially, the international issues and the repacking issues. Because they are key to freeing up the amount of spectrum you need to have a successful auction and also to live up to the mantra you started with of having a healthy broadcast industry and freeing up spectrum for mobile broadband.
FCC media bureau chief Bill Lake has pointed out to us that, by statute, the FCC does not have to resolve those border issues before voting on the auction framework.
To put out a report and order without having made serious headway, which means getting right to the doorstep of coordinating with Canada, would put everyone in an odd position. You are not going to know what's going to happen. And you are going to move forward with a process that may be a failure from the start or may leave coordination to the very last minute and screw up the entire auction because you assumed it might work out but it didn't. That wouldn't seem to be wise.
Spectrum policy is a long-term game. I know Washington can be about short-term at times, but the way to free up spectrum is to coordinate internationally and make sure the repacking models are very sound.
Are we correct you recently said that you think the FCC's proposed station spectrum sharing might not be workable?
I think spectrum sharing should largely be about preserving the kinds of stations you'd like to still be in the game. I think spectrum sharing as a general proposition, and this is my personal view, is unlikely to be widespread. There are a lot of technical challenges. It is likely the stations would need to be under the same owners because of all the technical aspects of sharing. And I frankly haven't heard much interest in it.
It's useful when you think about something like diversity in broadcasting. It's amusing to me to see all the interest around media ownership and the paucity of diversity in ownership, and these auctions very likely will wipe out a lot of the ownership and minority programming. This is one of the greatest threats to diversity. So we have to put our heads together to make sure we are doing everything we can to not let that happen. And anyone is free to participate. But if there is a viable option for sharing, maybe that is where you really explore it. I'm not sure it will work, but that is one of the things we are thinking about.
And sharing also cuts down on the new services broadcasters can provide in the digital age?
If you give up half your channel, you have sort of relegated yourself to not being able to do things like mobile, multiple streams, or whatever the next thing is in broadcasting. So you are mortgaging your future in that way. But when you think about diversity, would you rather have a station go completely off the air? I think for certain policy reasons you want to encourage them to stay on the air.
What is the status of proposals to have broadcasting help wireless carriers offload traffic at peak periods?
These are all things worth exploring and one can imagine in the future there being a nice partnership between our architecture and the architecture of the wireless carriers. It seems to makes sense if you are just thinking about it on paper. Now, there is a difference between "on paper" and practice, but certainly if you want to reach a lot of people at once and not either tax your network too much from a wireless network carrier standpoint or blow through your data plan, from a consumer perspective you are going to want to find a way to marry the two. And we are certainly thinking about those ways and those are conversations we are having now.
Should we take any comfort from the fact that the NAB joined with the wireless industry to ask for an extension of the auction comment deadline, or was that just a temporary marriage of convenience?
We want to be a cooperator and try to find solutions. So, having my background and having worked on the wireless side, I realized very quickly that there are areas in which we share similar interests to CTIA [the Wireless Association] or [the Consumer Electronics Association], or [the National Cable & Telecommunications Association]. If you are all committed to having a successful auction and one that makes sense for everybody, and I think all the industries certainly do, you can find a solution that maybe works for everybody. Not perfectly, and it's not like you walk in and get exactly what you want, but if you are willing to chat, and we have found a lot of areas of agreement. So, with CTIA, we started talking about different things with them, things that affected both of us. We talked about what we thought and how we could help educate each other. There will be large areas of agreement and some areas where we go our separate ways. But they were encouraging enough conversations that we said, "let's keep talking" and give something more robust to the FCC rather than incomplete comments.
Comments are due the end of this week, then replies in March. What next? Is this a waiting game?
No. I'm certainly not going to be sitting on my hands here at NAB. We're going to continue to work with the FCC on the process. My expectation is there are going to be a lot of outstanding issues after the replies. Repacking is one key example. They will have to put that out in a public notice at the very least before a general report and order. There will be a number of issues on the reimbursement side that are very complicated. The band plan is a long way from being settled for the FCC and that is going to take many months to get right. So, there are a lot of pieces that I think the FCC will probably break off and chew in addition to the big NPRM to get the ball rolling, but we will be very active both here and around the country to make sure everyone is educated about the issues and how it is going to affect them.
Any last thoughts to educate us?
I think the one thing I would say is that, regardless of what happened during the legislative process, it should be clear that NAB is here to be engaged in this process. We really are working to find areas of consensus with other industries, both specific companies and other associations, because we think that is the best outcome for everyone. I think you will see us in the center of a lot of conversations to try and find solutions to the very legitimate problems the FCC is raising. Our message to everyone will be: Let's make sure we move expeditiously but get it right, and if we can't meet a particular deadline, that is actually OK, because the alternative is to have a failed auction.
E-mail comments to firstname.lastname@example.org and follow him on Twitter: @eggerton
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