Washington

Broadcasters Defend Their Spectrum

FCC's Levin approaches industry in search for settlement 11/01/2009 11:00:00 AM Eastern

The battle over spectrum continues to heat up, with broadcasters wondering when the jabs being thrown from all angles might turn into haymakers.

Broadcasters spoke up last week in the face of growing calls for them to give up some, if not all, of their spectrum so it can be used for wireless broadband. Some of those calls came from the government.

The industry surrendered approximately one-third of its spectrum in the switch to digital, a move that now allows broadcasters to deliver high-definition TV and multiple channels. If everything goes as planned, they will add mobile DTV to that mix.

But the FCC has made it clear that it will have to get more spectrum from somewhere to meet a “looming spectrum crisis,” as FCC Chairman Julius Genachowski recently put it. The commission has been feeling out broadcasters about the possibility of scaling back their ambitious spectrum plans, including possibly paring back their over-the-air strategy to a single standard-definition channel.

One proposal submitted to the FCC—but not endorsed—by the Consumer Electronics Association (CEA) last week would go further still. It would reclaim all of the spectrum from commercial and non-commercial stations, including low-power TV stations, and subsidize multichannel video service for the remaining 10 million over-the-air households.

“My God, we all just got through shutting off analog and going through to digital, didn't we?” argued ABC Affiliate Board Chairman Tim Busch of Nexstar. “We need to figure out the potential future of that before they go harnessing some of that back in-house….It's potential that, based on what Mr. Levin would like to do with broadband, could end up making us recapture a degradation of what we just were allocated to broadcast.”

“Mr. Levin” is Blair Levin, the FCC's broadband advisor, who has been talking with broadcasters about possible scenarios for reallocating spectrum. In a conversation with the Association for Maximum Service Television (MSTV) board earlier this month, and at its invitation, Levin outlined several spectrum consolidation ideas. MSTV board chairman Robert Hubbard told B&C that the conversation with Levin “ran the gamut from broadcasters contributing nothing to very extreme things, and everything in between.”

“I think there are some very powerful forces at work here that will eventually force some kind of settlement with the broadcasters,” said a veteran broadcast executive familiar with Levin's MSTV talk who asked not to be identified. “You have Silicon Valley, you have the wireless industry, and you have the Obama administration trying to create jobs.”

A range of options

He added that Levin was pitching a range of options, including collapsing the four major network affiliates in each market into four multicast standard-definition channels, with HD versions available via cable, satellite or telco. He also suggested stations could co-locate on the same towers. Broadcasters would get to take a cut of the proceeds from the spectrum when it was re-auctioned for wireless broadband.

“He was suggesting that broadcasters were not using their spectrum efficiently,” said the executive, “and that some broadcast groups would want an exit strategy.” That strategy could prove attractive to the private-equity firms looking to get cash out of their station holdings, the executive pointed out, adding he has knowledge that Levin has been going above broadcast group heads in some cases to talk directly to those firms. “[E]veryone should assume [I am] talking to every interested party,” Levin said.

While Levin would not comment on the scenarios he has been offering up, he did talk about the pressing need for spectrum, and said a plan for how to get it would have to be part of the national broadband plan due to Congress Feb. 17.

“Number one, it is very clear in the record that for America to be successful in mobile broadband, we're going to need more spectrum in the near term,” Levin told B&C. “Not tomorrow, but within a few years. Given the amount of time it takes to clear spectrum, part of the broadband plan has to have a plan for getting more spectrum. The second point is we are talking to everybody. And we are welcoming any ideas about where to get that spectrum and what's the right way to proceed.”

Broadcasters last week were suggesting where the FCC could go—to get spectrum, that is. That includes using more of the spectrum already allocated to wireless, and looking to government users, before talking about removing more of it from them.

Levin says there needs to be a long-range plan for continuing to evaluate how spectrum is being used, but in the near term the FCC has to look at “certain bands” that he calls “most promising” in terms of the opportunity to move them to higher and best uses. That would have to include broadcasters' spectrum, he said, because of its propagation characteristics, which makes it beachfront property in terms of wireless. “It's very attractive for mobile broadband,” he pointed out.

Before you go to disney world...

And Levin added that the FCC has to do more than just identify the problem: “To be intellectually coherent, you have to acknowledge the need for spectrum. I suppose we could say, 'There's a big need for spectrum. Oh, it's Feb. 17, we're on our way to Disney World, have a nice day.' But I don't think that is what we are going to do. I think we as a group are committed to both asking the hard questions and coming up with some kind of feasible solutions.”

But will this necessarily be a voluntary giveback? “I think everything is on the table,” he said.

According to Levin, the discussions with the industry so far have not included the “total recall” scenario included in the CEA study, which was conducted by economist Coleman Bazelon. As Levin put it: “The discussions to date between the broadcasters and the commission would free up spectrum but allow all channels to broadcast over the air.”

Meanwhile, broadcasters aren't sitting tight while waiting to see the gap between those “hard questions” and “feasible solutions”—particularly given the growing drumbeat of wireless companies for more spectrum, which seems to be carrying considerable weight at the commission.

Show me the value

The CEA study throws out numbers like $62 billion of spectrum that broadcasters are sitting on that could translate to a whopping $1 trillion of value in the hands of wireless companies.

The National Association of Broadcasters couldn’t let that figure go unchallenged. “CEA’s study ignores the immeasurable public benefit of a vibrant free and local broadcasting system that is ubiquitous, reliable as a lifeline service in times of emergency, and flexible enough to include HDTV, diverse multicast programming and mobile DTV,” NAB spokesman Dennis Wharton said last week in a statement responding to the filing. “That CEA itself does not endorse its own commissioned study reinforces its isolation as primarily an academic exercise. Meanwhile, broadcasters and forward-thinking CEA member companies have embraced mobile DTV to enable delivery of live and local TV to cellphones, laptops and the back seats of cars.

“NAB believes it is imperative that policymakers explore spectrum efficiency choices that don’t limit consumer access to the full potential of digital broadcasting,” Wharton added. This, however, may be just what the FCC asks it to do.

In its own filing at the commission, NAB and MSTV argued that the value of spectrum in broadcasters’ hands is not all about dollars and cents, but about localism, diversity, local news and emergency information. “The Commission should reject spectrum reallocation proposals that would strand substantial investments by consumers in receiving equipment, and/or leave consumers without access to service upon which they regularly rely,” they told the commission.

David Donovan, who as the head of MSTV is effectively the defender of broadcast spectrum for the industry, has plenty to say about what he sees as a potential wireless spectrum grab.

“Wireless companies are asking the government to participate in the biggest consumer bait-and-switch in American history," he told B&C two weeks ago after news of the Levin meeting with MSTV broke. “For the last few years, the government told consumers that digital television would bring them free over-the-air HDTV and more channels. Now, after purchasing billions of dollars in new digital equipment and antennas, wireless advocates are asking the government to renege on its promise. High-definition programming and more digital channels would become the sole and exclusive province of pay services. The American public simply will not stand for this.”

Why not WiMax?

It may not be Disney World, but at least one veteran broadcaster sees a potential great big beautiful tomorrow in embracing, rather than fighting, the reallocation of spectrum to wireless.

The executive, who asked to speak on background, said broadcasters should think creatively about remaking the model, though he concedes he is not contemplating the scale of remake facing major groups. “Why not keep enough spectrum to transmit HD and make an agreement that station’s signals will be carried via geo-filtered WiMax in HD within DMAs, in exchange for the sale of the balance of the spectrum for $60 billion?” he asked. That figure is in the same valuation ballpark as the one in the Bazelon study. Geo-filtering would allow the signal to be confined to a market and protect program exclusivity.

“WiMax providers will be obligated to replicate the physical and economic attributes of the previously owned spectrum license,” he continued. “After WiMax is widely available and replaces the service previously provided by broadcasters, an additional amount of the spectrum could be auctioned. These proceeds should be sufficient to pay off all of the broadcast industry’s debt. We will own the same businesses with no debt. WiMax will make it possible for others to offer channel bundles at less expensive prices, and consumers will choose bundles based upon costs per rating points. In this competition for viewers’ interest, broadcasters will increase their revenues and cable services will be less able to outbid broadcasters for programming.”

While that scenario could give broadcasters more retrans leverage, cable operators could get a piece of the wireless business as well. They have increasingly been hedging their bets on that front, most noticeably in the Clearwire wireless broadband consortium that includes Comcast, Time Warner and Brighthouse.

“Local stations have an opportunity to join the Internet revolution,” the executive said. “Before the boat leaves the dock, there should be a dialogue about the future, not about reliving the past.”

“Many broadcasters have not embraced the full range of possibilities,” agreed the executive familiar with the Levin plan. But he also pointed out that there are “real limits to the number of individuals who can receive a simultaneous video broadcast in the broadband architecture. So, there is a component for any broadband plan for a one-to-one WiMax model to co-exist with the one-to-many broadcast model. There should be a conversation, but there should also be a huge role for broadcasters that wireless broadcasting can’t fill.” —Michael Malone contributed to this story

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