Smith Stakes Broadcasting’s Future Claim - Broadcasting & Cable

Smith Stakes Broadcasting’s Future Claim

NAB president wants the FCC to revisit structure of the spectrum auction
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NAB president Gordon Smith says broadcasting is still the “King Kong” of content, though he concedes the industry will shrink in size, if not importance, after the incentive auction that is less than a year away (if the current schedule holds).

Broadcasting has a strong legacy, he says, but also a bright future, if the government will give it the tools to succeed.

As the association prepared for its annual convention in Las Vegas this week, Smith spoke with B&C Washington bureau chief John Eggerton about why broadcasting is still relevant in an increasingly broadband world and provided his take on some key issues, including the ongoing retrans rule battle with cable, the commission’s renewed interest in indecency and why his industry should be part of FCC chairman Tom Wheeler’s “competition, competition, competition” agenda. An edited transcript follows.

What does the FCC need to change in its auction framework to make it acceptable to the NAB, and is there a way for broadcasters to participate and still be competitive?

Making the auction simpler would be a good start. The complexity of this is staggering, and it’s probably not in the best interest of anyone to make this so complicated. We think Congress was pretty explicit in directing the FCC not to be cavalier when it comes to protecting TV station coverage areas after the auction.

I do think a number of broadcasters will participate in the auction and can remain competitive. As I understand it, you can decide to channel share and still offer ultra-HD, multicasting, and mobile—so long as we as an industry decide to migrate to a new transmission standard. We’re part of the ATSC process, which is spearheading this effort. So are the networks and most of the major group operators. I’m told they are making significant progress.

Broadcasting will come out of the auction a smaller industry. The irony here is that there will be a loss of stations that specialize in serving niche audiences. So there will be fewer religious stations, fewer independent stations and fewer full power and [low-power television] stations that target minorities. That’s a loss for our multicultural society in my view.

I don’t think broadcasting, as a whole, will be less important after the auction. In fact, I think we will be more important. We will still be the King Kong of popular content. We will still be the only place for localism. Our programming will still be free. And we will still be offering our programming on a one-to-everyone transmission architecture that is the most spectrally efficient platform ever created for delivering video. None of that will change.

What are the main things Washington can do to help broadcasters remain competitive, and what are the things regulators or Congress could do that could most threaten your industry?

Broadcasters are still governed by media ownership rules that were put in place when Richard Nixon was president. I don’t know if you can find anyone who would argue that times are not a little different now. Yet the FCC refuses to relax rules that would allow a TV or radio broadcaster [to own] a newspaper in the same market. If a broadcaster can save a few journalism jobs by owning a newspaper, shouldn’t that be supported by Washington?

In terms of threats to our industry, changes to ad tax deductibility by Congress could significantly harm broadcast revenue. It would also have a worse effect on our economy. Advertising is an engine that drives commerce in local communities. Anything that threatens the ability of a business to buy advertising would hurt sales and result in job losses. Rest assured NAB will be fighting aggressively to preserve ad tax deductibility.

There is also the pay-TV lobby’s continued attacks on retransmission consent. They want regulators and Congress to mess with the rules and make it harder for broadcasters to negotiate on an even playing field for the most-watched programming. Retrans is a modest but growing stream of revenue for broadcasters. If Washington hamstrings broadcasters with onerous retrans rules, that will mean less for broadcasters to spend on local news and weather, high-quality entertainment programming, community affairs shows and emergency information.

The NAB has been spotlighting the consolidation among multichannel video programming distributors, but you recently told B&C that station group consolidation has been overwhelmingly positive and necessary for scale and survival and efficiency, which are the same arguments MVPDs make. Is there a difference?

There are huge differences between the colossal pay- TV mergers that are now being considered and having two TV stations owned by one company in the same city. Broadcaster growth is restricted by FCC rules and Congressional statute; MVPDs have no such limits. That’s one of the reasons just a handful of MVPDs control 95% of the total number of pay-TV subscribers.

Secondly, broadcasters have vigorous competition against each other in local markets for viewers. On the pay-TV side, the country has been carved out and clustered so you typically have one large cable company as the dominant player in a market.

What amazes me is the way the FCC has decided to block broadcaster-sharing arrangements while it turns a blind eye to pay-TV consolidation. The FCC has said one broadcaster cannot sell advertising or provide services for another broadcaster in the same local market, even though these arrangements clearly resulted in more local news and public affairs programming. Meanwhile, pay-TV operators continue to announce mergers that would lead to less choice for television viewers over vast areas of the country.

Should WDBJ Roanoke challenge the FCC’s indecency fine, and what concerns do you have about the commission’s action more broadly?

Schurz has indicated it intends to challenge the WDBJ fine; it’s entirely their call. My concern with the fine is that the FCC issued the maximum amount for what was clearly an accident. Schurz apologized. This is a family-owned company that has been a responsible corporate citizen for decades. To me, the size of the fine seems gratuitous.

Broadcasters are not in the business of deliberately airing indecent content. You are not going to hear the same language on broadcast television as you hear on cable, and you’re not going to see Game of Thrones-style nudity.

What specifically do you want to hear from FCC chairman Tom Wheeler in his address to the convention?

I would love to hear chairman Wheeler discuss how over-the-air broadcasting fits into his view of today’s telecom landscape as well as into the future.

It’s easy for policymakers to focus on the next “shiny new object” and forget about legacy technology such as broadcasting. But I believe broadcasting has a great future. We want to be part of chairman Wheeler’s “competition, competition, competition” agenda.

What is broadcasting’s role in an over-the-top video world?

I’ve said for years that the future of video must be a combination of broadcasting and broadband. We are already seeing viewers move in that direction. We are increasingly seeing Americans cutting the pay-TV cord and turning to over-the-top video supplemented with over-the-air broadcast TV. Viewers are finding they don’t need to pay a costly monthly bill in order to watch the most-popular programming on television, which is found on local broadcast stations.

It’s amazing to me just how much broadcast content has moved online. For years, Hulu has provided ABC, FOX and NBC a pathway to distribute primetime content to viewers. CBS has over 100,000 subscribers to its All Access service in just a few months. Many local affiliates live-stream their programming, especially local news and emergency information, to reach viewers on the go. TV station websites are often the most trafficked sites in local communities.

So it’s silly to suggest that broadcasters are not embracing the Internet.

We’re cautiously optimistic about the FCC’s OTT proceeding on extending the MVPD definition to over-the-top video providers. NAB firmly believes that localism must be preserved online and that OTT providers must negotiate for carriage rights to our programming. Broadcasters deserve to be paid a fair price by those who take our programming and resell it for a profit.

NAB has an unusual bedfellow in Public Knowledge. Why do you oppose reversing the presumption of effective competition for MVPDs and is that just another way to hammer cable operators over rates?

In its STELA reauthorization, Congress made clear it only wanted the FCC to streamline the process by which small cable operators can file an effective competition petition. The FCC rulemaking, however, proposes presuming that there is effective competition for all cable providers, not just small companies. Elimination of the effective competition presumption could have unintended consequences beyond what Congress intended. We’re happy to have Public Knowledge as a partner in this effort.

The FAA has loosened the ban on drones, but broadcasters are suggesting that there is still effectively a ban on using them for newsgathering. What more does the FAA need to do?

The FAA took a great first step when it opened up the rulemaking. We know drones have many applications that can serve the public interest, not the least of which is newsgathering. But, yes, the FAA still has work to do. Its proposed rules have several provisions that make it hard for broadcasters to use drones.

The FAA rules prohibit the use of drones over populated areas. That’s a problem for us, since we want to cover the news, and news usually happens in populated areas. When news does happen in unpopulated areas, other provisions in the FAA rules might prevent the use of drones. The FAA says that drones can only be operated within line of sight of users, which restricts them to a couple hundred yards at a maximum. If a broadcaster wants to use a drone to cover a natural disaster, such as a wildfire, having to stay within a couple hundred yards of a drone could put the operator in danger.

As they stand now, the FAA’s rules do not allow broadcasters much freedom. We want to work with the FAA to ensure public safety, but also allow flexibility for broadcasters to cover the news. 

What should we have asked you about that you want to talk about?

You haven’t asked me why I’m so excited about this year’s NAB Show! I think we have a great lineup of speakers and honorees. Mel Karmazin, Shonda Rhimes, Jerry Lewis, John McAfee, L.A. radio hosts Kevin and Bean—that’s just a few of the big names we have coming to Vegas.

I’m also looking forward to our brand-new drone pavilion. We’ll have dozens of companies in the NAB drone pavilion giving demonstrations. The Ultra HD exhibits will be amazing—the picture quality that we can achieve nowadays is astounding.

I also always look forward to meeting with our attendees from home and from overseas. We’ll have about a third of our attendees coming from outside the U.S. And we’ve topped over a million square feet in exhibit space sales. NAB Show is a truly global event. I think our attendees are going to be blown away by the entire program. 

NAB president Gordon Smith says broadcasting is still the “King Kong” of content, though he concedes the industry will shrink in size, if not importance, after the incentive auction that is less than a year away (if the current schedule holds).

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