Bud Paxson stands to earn billions when the government auctions TV channels 60-69 this fall, but ever the iconoclast, the owner of the only profitable "minor" network said he's not interested unless the government strengthens broadcasters' cable carriage rights.
Paxson, who owns 18 of the 138 stations with allotments on channels 60-69, is putting together a consortium of stations that will allow TV spectrum worth tens of billions of dollars to be turned over to new wireless users years ahead of schedule.
The price: Paxson's group demands that the government compel cable companies to carry the multiple digital signals that stations plan to offer, not just the one primary channel required under current rules.
That's not all the TV owners stand to reap. FCC rules already put the stations in line to take a cut of the $30 billion or more that wireless companies ultimately are expected to pay for the spectrum.
Other major TV groups signed on to the plan are Univision, Shop-at-Home and Pappas Telecasting, Paxson told the Federal Communications Bar Association in Washington. Along with Paxson and a handful of small station groups that have also agreed, they account for 40% of the stations that are either broadcasting analog signals on channels 60-69 or holding digital allotments on those channels, located on the 700 MHz band of the spectrum.
The FCC would have to approve the buyout plan but is expected to have little objection to the overall idea. In January, the commission upheld broadcasters' right to demand lucrative early buyout deals.
However, last month, the FCC tentatively ruled against both Paxson's push for multiple-carriage rights and the broadcast industry's demand for dual analog/digital carriage during the transition to all-digital broadcasting.
"He'll take the money," one agency source said, noting that Paxson alone could demand several billion dollars from wireless firms.
The wireless industry, which plans to use the spectrum for "third generation" applications such as mobile Internet, is expected to get on board with the buyout plan and several times asked the FCC to delay the auction until details could be worked out. The bidding was originally slated for May 10, 2000.
Paxson said he hopes to have almost all of the stations on the band signed on by the time he unveils details of his band-clearing plan in the next two to four weeks. Paxson is working with Spectrum Exchange Group, a Washington company that has designed a "pre-auction" in which wireless bidders would pledge to pay broadcasters a percentage of their bids to the federal government.
Spectrum Exchange Group officials say they have held a series of "very productive" talks with Paxson over the band-clearing plan. "We believe we will be able to put together a mechanism for resolving interference issues in the 700 MHz band that will attract the voluntary participation of broadcasters, including Paxson, as well as the major mobile telephone players," said Larry Ausubel, co-president of Spectrum Exchange Group.
Paxson remains adamant that TV broadcasters get cable carriage rights for the six digital signals that a broadcaster can fit into the same amount of spectrum now devoted to one analog signal.
"In our business plan, it makes sense to be in multiple networks," he said. Paxson said the expectation that TV stations will devote most of their digital spectrum to one high-definition signal (which would be entitled to cable carriage) is now "dead." Without multiple-carriage, the stations operating on channels 60-69 may refuse to give up their signals early, he said.
A holdout would present a devastating blow to the wireless companies now eager for the chance to pick up the TV spectrum. Without early buyout deals, TV stations won't have to give up their analog signals until 2006, at the earliest, but, more than likely, stations could keep their analog signals indefinitely because none would be required to give up spectrum until 85% of American homes have digital TV. No broadcasters will be required to accept early buyout deals, however.