Mr. Smith Goes Off On Washington

National Association of Broadcasters president Gordon Smith comes out swinging over broadcasting-related D.C. battles on the eve of the association’s annual trade show
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National Association of Broadcasters president Gordon Smith, calm, collected and well-tailored, looks like the same, not-a-hair-out-of-place former senator that B&C spoke with last fall. But, figuratively at least, Smith—who has run the NAB since 2009—now has his sleeves rolled up for a brawl.Make that a number of them. On Capitol Hill, the NAB is fighting to keep the Satellite Television Extension and Localism Act (STELA) reauthorization bill from being a referendum on retrans, a draft bill on which the association went along with restrictions on coordinated retrans only because it was, frankly, the best deal it could get. In the courts—Supreme to be exact—broadcasters are trying to keep Aereo from delivering a body blow to their businesses models. At the FCC, they’ve been preparing for a March 31 vote on limiting joint sales agreements (JSAs) and coordinated retrans, an incentive auction that Smith says could wind up in court if the FCC doesn’t change direction, and what Smith suggests is an FCC bias against his members.

Then there is the underlying battle with multichannel video programming distributors (MVPDs) over money and their respective places in the media future. And then there is preparing for the coming forum for these concerns: The 2014 NAB show, starting April 5 in Las Vegas, which Smith will open with his annual State of the Broadcast Industry address. But first, Smith sat down with B&C Washington bureau chief John Eggerton to discuss these controversial topics and more, with his answers offering a long reach, a fighter’s stance and the suggestion that all parties involved would be wise to get ready to rumble.

Broadcasters are getting hammered in Washington if you add in the FCC plan to eliminate the UHF discount and limiting JSAs, and the new guidelines on station sharing arrangements, and the attack on coordinated retrans. How do you stem that tide?

I think it’s important to step back and ask ‘Why?’ And the reason is, in a nutshell, that nobody can compete with free and local. No one has the efficiency of [broadcasters’] architecture in the video world. And so, we have the best content, and obviously cable wants to reduce what they pay for its value.

We have the most efficient delivery, so the wireless guys are frustrated with that and their one-toone delivery. So, whether it’s content or distribution, our friends in the telecommunications world are looking at ways to trim the sails of broadcasting. The way we combat it is simply by making clear both on a content and a delivery basis that we really are irreplaceable and of inestimable value to the American people. Hopefully, in the fullness of time, members of Congress and the FCC will see that. Let me say on the record that what has mystified me about the FCC since I have been here is the disconnect between the direction it is going and the Americans most dependent on broadcasting. The economically underprivileged, the minority communities, the elderly, the young techies: That is the demographic of over-the-air— probably something approaching 60 million people. I think they deserve a voice too, except ours seems to be crowded out by the pay-TV services that would milk, bilk and bill by the bit.

It seems at the heart of your argument is that the competitive marketplace has changed sufficiently so that what looked reasonable to some a few years ago—limiting JSAs, eliminating the UHF discount—has to be rethought. The same with the ownership limits, which is why broadcasters are trying to heavy up within the rules since the FCC won’t change them. Why doesn’t that message resonate at the FCC?

I hope my worst fears are not realized that there is more than a clear and present danger [for] broadcasting, a bias that has pressed the scales in favor or our competitors, because I think that ill serves the interests of the American people who want a world of tomorrow to include broadband and broadcast.

The FCC has a National Broadband Plan, but we see nothing like that developing [for broadcasting]. Depending on the issue, we are either treated as Gulliver who needs to be tied down or as dinosaurs about to be extinct. But irrespective of the issue, we seem to be treated with a hostility and bias that is designed to do injury to broadcasters.

We’ve talked with broadcasters and they feel that FCC chairman Tom Wheeler is not in a negotiating mood on many of these issues. Is that your sense?

I have only had one meeting [Editor’s note: this interview took place on the same day Smith met with Wheeler for the second time]. But just consider the difference between how we are treated and the wireless folks. When it came to their unlocking policy, [chairman Wheeler] gave them two weeks to come up with a plan. We had it done to us, rather than done with us. [Last November, Wheeler gave wireless companies a two-week deadline to come up with a voluntary plan to allow consumers to unlock their mobile devices and use them on other carriers after their existing contracts have expired.]

We’re trying to show [the FCC] that there is a third way that is not just in the interests of broadcasters but in the interests of the American people, specifically minorities and small markets.

Give us the condensed version of the NAB’s proposal on JSAs.

We want a process that has time lines and criteria for waivers that is clear and predictable. We have no such offering at this juncture, but we hope that will ultimately win the day because that is more in the interest of the American people.

You are also looking to raise the ownership attribution trigger on JSAs from 15% of a station’s sales to 30%.

Right. Is there any magic to 15%? There have now been decades’ worth of approvals on these things and all of a sudden it has to change. All of these things are rather arbitrarily arrived at.

What do you make of the chairman’s muscular use of the public interest standard to get at sharing arrangements that he sees as circumventing the FCC’s rules, signaling that they could be disallowed for not affirmatively increasing competition even if they did not decrease it?

If you were really serious about being fair, you would also take on the interconnects of cable and wireless [the NAB has asked the FCC to look into the cable/telco/satellite ad consortia]. What is good for them ought to be good for us, too. But it seems to only be applied against us.

We were wondering why the NAB was willing to support a draft of STELA renewal legislation that included preventing coordinated retrans and eliminating the sweeps exemption?

It’s the best deal we could get and it preserves retransmission consent and must-carry. [House Communications Subcommittee] chairman [Greg] Walden and Energy & Commerce Committee chairman [Fred] Upton were trying to navigate a lot of competing interests and we had some fundamentals we had to preserve. These are not unimportant issues that we had some ‘give’ on, but it was the best deal we could get and there is not likely to be a better deal in the Senate.

The better deal was getting the basic tier item off the table? [The draft would have eliminated the requirement that cable operators carry TV stations in the most basic, must-buy, tier.]

Right.

What do you think the STELA legislation will ultimately look like?

In terms of process, the Senate Judiciary Committee will come up with their best idea and Senate Commerce will come up with theirs. They will be difficult to reconcile. And if my experience is any guide [Smith, as a senator from Oregon, was a member of the Commerce Committee], the majority leader will have trouble bringing something to the floor that can’t get 60 votes, which means that the Senate may not be able to act on it prior to the need to put together an omnibus, go-home, [end-of-session] piece of legislation.

At that point, the House bill would be the vehicle that would be considered, and senators and House conferees would negotiate over that. It is possible it could go otherwise. I have just never seen it otherwise. In fact, what I have seen in the past is that we don’t even make the deadline, and we have to take it up in the subsequent Congress.

Do you think the coordinated retrans and sweeps blackout provisions will stay in the bill?

Some provisions stay in, some get stripped out. I can’t predict which at this juncture. But I don’t think it will get much worse than it is at the House level, and that is something we can live with.

Let’s talk auctions for a minute. The NAB has been very critical of the FCC’s variable band plan, particularly the proposed interference calculation methodology.

We’re not sure it holds under examination, just the physics of it all.

You said if the FCC continues down that path it could jeopardize the auction. How?

We need certainty. People need to know something more than price. What are the interference concerns? What is the deal with Canada and Mexico, what does repacking mean to your contours? There are just a whole lot more questions than there are answers right now.

Assuming an auction framework is voted in May, as appears to be the plan, what information needs to be in that?

I think the biggest concern is that it seems like we are being asked to participate before there is any certainty on a repacking plan, on the [signal] contours that would be left to us, on the cost, on the interference potential.

It sounds like NAB’s response to the FCC methodology was teeing up a possible lawsuit against the auction. If it goes in that direction, will you consider suing the FCC?

Absolutely.

Do you see any connection between the FCC’s approach to regulating broadcasting and its desire to get spectrum from broadcasters?

I would hope there was no connection. But among broadcasters it is having the opposite psychological impact than what the FCC may have hoped, if that is their predicate. Broadcasters fight among themselves as a broadcast family about JSAs and SSAs. But when the neighbor starts throwing bricks through the window, the family unites. And I think the psychology of what they perceive to be going on that is hostile to broadcasting is having the opposite impact of what the FCC might have intended.

And that might threaten the auction’s success.

It sure might.

How important is it for broadcasters to win the Aereo case?

I think it’s very important if copyright is to mean anything. If somebody takes copyrighted material and resells it, that historically has meant that they are an MVPD required to negotiate for those rights. If Aereo is allowed to stand, obviously there will be a green light to everyone else trying to figure out how to get around copyright law. It isn’t the Aereo business model that is of concern to us, it is the precedent that it sets that we think is destructive of copyright integrity.

What would you like to hear from chairman Wheeler in his speech to the NAB convention?

I would like to hear him expand upon his theme of “competition, competition, competition” and how he includes broadcasting in that formula, to explain how he sees the world of tomorrow including broadcasting as well as broadband.

So, his National Broadcast Plan?

Yes.

Without giving away your punch line, what is going to be your general theme: Rally the troops? Storm the FCC?

It is still in production, and there will be a few meetings that will take place between now and the show that will finalize the theme. But I think I want to paint for them the future of broadcasting as I see it and why it is essential to the interests of the American people, and call upon the FCC to flesh out a future that is broadcasting and broadband.

What is your vision of that future?

To me, the future of broadcasting still has to be that our content has to be available all the time on all devices and in all places. So, the future has to include not just the big screen in the living room but obviously the mobile platforms as well. And I think there are a lot of hard decisions broadcasters have to make to make that a reality. My job is to do that.

What hard decisions?

We need to ask ourselves collectively as TV station operators: Is our current transmission standard the best that it can be for the mobile platforms of today and tomorrow? If not, then how do we transition to a new standard that is least disruptive to our millions of viewers? These are tough questions that the ATSC process [the Advanced Television Systems Committee consortium working on that standard] is addressing now, with NAB input.

What is broadcasting’s enduring value?

Its architecture and its localism and its price to all Americans is irreplaceable.

The Community Information Needs study has been tabled. The NAB was not a fan of that study, correct?

I don’t question the motive, but I do think it crowded the First Amendment in ways that were not wise. I don’t think that its origin was pernicious. I just think that when you weigh it in the balance of the First Amendment being overseen by a regulator, I’m not sure that was the best move. But I’m glad it’s gone.

But then what is the best way for the FCC to gauge and promote diversity? Because clearly there is a lack of minority ownership.

Well, they should deal with JSAs in a way that encourages diversity. It is one of the toeholds that the minority community has for gaining access to broadcast ownership. And if you are going to diminish the broadcast industry, you’re going to diminish diversity.

We have always supported minority tax credits, but the Congress killed that off. It was one of those programs that should have been mended, not ended. But it is something we need to keep working on.

The FCC is planning to make the changes to JSAs and coordinated retrans before completing either the 2010 or 2014 quadrennial review of its rules. Do you have any hope that when the FCC does finally fulfill that statutory obligation it will result in any changes that broadcasters will benefit from?

I think [that] is what is so fundamentally unfair. It’s the cart before the horse on the JSA piece without considering the duopoly rules, the ownership rules that are so antiquated in today’s media marketplace. I guess hope springs eternal. But it does seem to me, as it was made clear in the House hearing, that this has been done backwards.

What is the knock-your-socks-off technology we should be looking for at the NAB convention?

4K, 8K [new, even-higher-resolution HD]. It is going to show what broadcasting holds for the future that will be very popular commercially. It is the biggest media and entertainment trade show in the world, and I think a lot of business gets done. With [Wheeler] and other [FCC] commissioners coming, it will give us the opportunity to make our case that we hope the world they see includes us.

National Association of Broadcasters president Gordon Smith, calm, collected and well-tailored, looks like the same, not-a-hair-out-of-place former senator that B&C spoke with last fall. But, figuratively at least, Smith—who has run the NAB since 2009—now has his sleeves rolled up for a brawl.Make that a number of them. On Capitol Hill, the NAB is fighting to keep the Satellite Television Extension and Localism Act (STELA) reauthorization bill from being a referendum on retrans, a draft bill on which the association went along with restrictions on coordinated retrans only because it was, frankly, the best deal it could get. In the courts—Supreme to be exact—broadcasters are trying to keep Aereo from delivering a body blow to their businesses models. At the FCC, they’ve been preparing for a March 31 vote on limiting joint sales agreements (JSAs) and coordinated retrans, an incentive auction that Smith says could wind up in court if the FCC doesn’t change direction, and what Smith suggests is an FCC bias against his members.

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