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Why would anyone care about these stations?  Several reasons present themselves.  First, NPR has suggested that some of these stations may be creating interference to noncommercial FM stations low on the FM dial, and adjacent to these channel 6 stations.   In addition, the existence of these stations have posed issues about increasing the facilities of noncommercial stations low on the FM band.  And, finally, there have even been proposals, about which we have written before, to take television channels 5 and 6 and use them for radio.  Some of these proposals include suggestions about reserving some of the spectrum for noncommercial stations.  Obviously, the more "television" stations operating on these channels. the less likely that the channels will be reallocated to radio.

The question of whether using LPTV stations to provide an audio service is permissible centers around the interpretation of Section 73.653 of the FCC rules, which permit television stations to operate separate audio and video transmitters "used with different and unrelated program material."  While objections were raised as to whether this rule was meant to allow audio-only programming during all hours of station operations, proponents of these radio-type uses of LPTV stations claim that the rule, by its terms, does not prohibit these operations, so the FCC should not interfere. 

Where will this go?  While, when we've written about this issue in the past, we have had readers tell us that that they believe that the FCC will find a way to grandfather these radio-like broadcasts even when LPTV stations go fully digital.  Given the FCC's interest in clearing the TV band and repurposing part of it for broadband, this should be an interesting argument to watch develop.  

There were other interesting proposals made in the LPTV digital conversion proceeding, and debate about whether that transition should be mandated quickly or whether it should take place on a more gradual basis.  And there are even suggestions that LPTV itself could be used to provide a broadband service.  We hope that we have a chance to write about those issues in the coming days. 

Just as an aside -- and all television broadcasters should take careful note -- despite referring to it as the "recommended reallocation of spectrum from the broadcast TV bands", the Commission in this item repeatedly refers to the reallocation of TV spectrum in a way that implies that it is a given and not merely a recommendation in a white paper.

Separate from establishing a date for the ultimate transition of all LPTV stations to digital, the FNPRM proposes a transition date of December 31, 2011 for all low power television stations -- either analog or digital -- to cease operations on the out-of-core television Channels 52-69. These channels were long-ago reallocated (and in most cases auctioned off) for use by public safety and commercial wireless operations.  Although LPTV stations were allowed to continue in that spectrum on a secondary and temporary basis, the time has come to vacate those channels and find a new home.  To facilitate the transition, the Commission proposes that out-of-core LPTV stations be required to file a digital displacement application proposing an in-core channel by June 30, 2011.  Further, as of September 17, 2010, the Commission has imposed a filing freeze on 1.) applications for new analog LPTV stations and 2.) applications for new or modified stations in the 52-69 band, including flash-cut or digital companion channels. 

Among the other issues the FCC raises in the FNPRM is the question of how much the transition might cost a typical LPTV station. Ultimately, the transition of LPTVs may be challenging for many licensees. While some LPTV stations are network affiliates owned by large companies many, many others are licensed to community translator associations, independent operators, and minority owners serving rural areas or discrete communities in a larger urban market. Even with the assistance of the NTIA's (National Telecommunications and Information Administration) reimbursement program for LPTVs in rural communities, some licensees may decide to sell or surrender their analog licenses rather than bear the cost and effort of transitioning to digital. More information about the reimbursement program for the transition of LPTVs in rural communities to DTV is available on the NTIA's website here.  The Commission also seeks input generally on the outreach that would be required to educate communities and viewers about the transition of these remaining analog stations, and whether the Commission's consumer call center should be expanded or updated.  The FNPRM also suggests a 30-mile limit to the relocation of an LPTV's transmitter site, and that Class A stations would be able to retain primary, protected status on either their flash-cut digital channel or digital companion channel.  

Comments on the FNPRM will be due 60 days after the item is published in the Federal Register, with Reply Comments due 30 days after that. Interested parties should start preparing their thoughts now for their comments, and we'll keep you posted once the publication occurs and the date for comments is set.

The order allows mobile receivers to leave out not only the analog tuner, but also a tuner that is capable of receiving normal over-the-air digital television pictures, as long as their is a clear disclosure to consumers that these tuners are not capable of receiving normal analog or digital television programming.  Thus, these will be dedicated devices for the new mobile television service. 

One interesting note is that the success of this service will make it more difficult for the Commission to reclaim television spectrum for broadband use.  The old VHF channels, still used by some television stations, though much less congested than in analog days, are reportedly not very good for mobile use.  Were the Commission to try to take back television spectrum for broadband use, where could they put the TV stations displaced from the reclaimed spectrum, especially if they have successful mobile operations?  Thus, the services which this ruling promotes may help to shape the debate about the broadband recapture. 

To answer the call for more spectrum for wireless broadband, the Commission is seeking to locate up to 500 MHz of spectrum to be redeployed for broadband use. Some of the spectrum that the Commission will seek to repurpose is that which has already been allocated to some wireless uses, but where service rules currently make broadband deployment difficult. These include the Wireless Communications Service (WCS) and Mobile Satellite Service (MSS) spectrum. The Commission proposes to make the use of this spectrum more flexible, so that existing licensees can dedicate the spectrum to broadband or else sell it to others who can put it to such use.

But the largest swath of spectrum to be used to meet this perceived need is proposed to come from television broadcasters. The Commission’s plan proposes to recapture 120 MHz of spectrum (20 UHF channels) from television broadcasters. This would be done essentially in two steps – a voluntary sale by some broadcasters of all or part of their spectrum, followed by a repacking of the spectrum to make a more efficient use of the remaining spectrum by the remaining television broadcasters. 

Throughout the section of the report dealing with the potential recapture of TV frequencies, the Commission suggests that the television frequencies are underutilized, and that television broadcasting is not the highest and best use for the channels. In the view of the Commission, this spectrum is not being used efficiently at the moment, as many television stations have the ability to transmit their over-the-air signals in less than the full 6 MHz of spectrum allotted to each television station. While High Definition programming and opportunities for multi-channel operations are possible on the current channel allotments, in the Commission’s opinion, too few broadcasters are making full use of the spectrum. Moreover, as only about 15% of US households currently rely on over-the-air television as their sole means of television reception, other alternative means of viewing television are available, thus freeing the broadcast television spectrum for broadband use. While the Commission recognizes that mobile DTV is now being rolled out, and offers the potential for relieving some network congestion by delivering video programming to mass audiences from a single transmitter, the Commission expresses its finding that the roll out of this service has been slow thus far.

Thus, the Plan suggests reclaiming some of the television spectrum from broadcasters in order to repurpose it for wireless broadband. Some stations may sell out entirely, while others could agree to share current frequencies (e.g. allowing two stations to each use 3 MHz of one 6 MHz TV channel, allowing the other 6 MHz to be reclaimed by the FCC for broadband use). While the Commission indicates that the need for recaptured spectrum is most acute in large markets, it also finds that some spectrum can be used in small markets to reach unserved rural areas. To compensate broadcasters for that return of some of the spectrum currently used for television broadcasting, the Commission would in exchange provide a payment out of the revenues recognized from the re-auction of that spectrum. The details of how that auction could work are discussed in the report – suggesting that an auction by the FCC where a portion of the proceeds are paid to the broadcaster is the favored method, though a direct sale of spectrum by the broadcaster to the wireless company is an alternative.

Once stations agree to this voluntary plan, the FCC will take the remaining television stations and repack them into a smaller portion of the television spectrum, to clear up a large contiguous swath of spectrum for broadband users. Broadcasters may need to share spectrum or transmitter sites, reduce coverage, or otherwise modify their technical operations to fit into the more limited allocated television band.

The plan justifies this transition of spectrum from broadcasting to broadband on the determination that spectrum is currently not used at its highest and best use. To reach that conclusion, the Commission looks at its calculation of the prices paid for wireless spectrum in the last broadband auction and contrasts that price to the Commission’s perception of the market value of the broadcast spectrum. Based on that comparison, the Commission concludes that wireless spectrum is valued at $1.28 per megahertz per person, versus 11 to 15 cents per megahertz per person for television. To compute the value of television, the Commission looks at what it believes to be the total enterprise value of the television industry ($63 billion), and the fact that only 14-19% of TV households rely solely on over-the-air viewing, and then divides the value of the 14-19% of the total enterprise value of TV by the number of people in the country and the total spectrum devoted to TV. The Commission determines the enterprise value of the TV spectrum by multiplying what it finds to be the total broadcast revenue times the perceived operating margin of television operators (estimated from 2010 earnings reports of public TV companies) times an assumed EBITDA multiple used for sales of stations in the TV marketplace. The Commission thus premises its views the value of the industry based on the approximately 15% of homes that rely exclusively on over-the-air reception, ignoring the value of the rest of the industry.

The Commission further suggests that the value of television stations may be decreasing. To reach that conclusion, the Commission looks at recent advertising sales issues to question if the television business model continues to be viable. The Commission also suggests that recent court cases challenging the must carry rights of television stations, and the Commission’s own multiple ownership proceeding that will be conducted this year, could further depress the value of television stations (query what that implies about the outcome of multiple ownership issues such as duopoly relief to television broadcasters, especially in smaller markets).

Finally, the Commission indicates that, if broadcasters are not ready to voluntarily step forward to give up sufficient spectrum to accomplish the plan, broadcasters and any other spectrum that is not dedicated to “flexible uses” (i.e. where FCC rules and not the market decides the best use of the spectrum), should be assessed a yearly spectrum fee. The plan suggests that the fee should be set by the FCC and NTIA, based on their perception of the highest and best use of the spectrum to encourage those who do not make that best use to allow for a change in the use of the spectrum. No spectrum fees are proposed for other users of wireless spectrum, even though these other users may, in some cases, be marketplace competitors of the broadcasters. In addition, the FCC suggests that, if these methods don’t succeed in clearing enough spectrum, the FCC could either force broadcasters to give up spectrum (recognizing that this would be a long legal battle), or that the technical rules could be changed (requiring, for example, a cellularization of the TV spectrum though mandated use of low power stations instead of high power transmitters). 

These approaches will require significant changes in order to be implemented. First, Congress will have to authorize the redirection of auction proceeds to pay broadcasters who choose to surrender their spectrum. Second, the Commission will need to adopt rules for the auction, and how the repurposed spectrum would, for maximum efficiency, be packaged into contiguous blocks. For instance, there is no discussion of how the costs of such shifts would be authorized. The FCC states that it will initiate a rulemaking proceeding this year to adopt rules on these issues – aiming to conclude that proceeding in 2011 so that the spectrum reclamation can begin in 2012. 

At the same time, Congress is in the process of considering a bill that would provide the FCC and NTIA with funding to inventory the current usage of the entire radio spectrum in order to identify inefficiencies and potential areas where additional spectrum might be found to meet future wireless broadband needs. In the most recent House version of that bill, the inventory process is to take 5 years. Given this process of determining what, if any, needs exist for spectrum and what spectrum may be available to meet these needs, along with the controversy that is always engendered when the government considers changes to television, one wonders how quickly any of the proposals advanced in this report will be implemented. 

The Commission also proposes other ideas to immediately use the television spectrum more efficiently. The final resolution of the TV White Spaces proceeding is urged. Also, it is suggested that the conversion of LPTV to digital, a deadline for which has yet to be set, be accelerated. Commissioner McDowell, in his statement on the Report, suggests that broadcasters be urged to immediately lease excess digital spectrum to wireless uses, which would be a voluntary plan not requiring Congressional or FCC action. 

While we will be writing about the issues raised by this proceeding in coming weeks and months, there is no doubt that there will be objections to these proposals. Television representatives have expressed concerns about the rumors of these proposals, arguing that broadcasters and the public have just spent billions of dollars converting their over-the-air operations from analog to digital, thereby greatly improving the efficiency of the spectrum and already returning substantial spectrum to be repurposed for broadband use in the process. While broadcasters may not all currently be using their full 6 MHz of spectrum to its maximum potential, it has been less than a year since the digital transition was completed, hardly providing broadcasters with the time to fully utilize the spectrum or for the industry to capitalize on the enhanced opportunities afforded by the digital transition. For example, while the FCC dismisses mobile DTV as not being widely deployed, it is just now being rolled out by broadcasters, promising far more use of the spectrum in coming years.

Broadcasters also argue that forcing all viewers onto pay platforms is not in the public interest, as most of the proposals for subsidies are limited in duration and will thus, inevitably lead to higher costs to consumers. Moreover, they contend that the portent of a spectrum crunch is overstated. They argue that wireless carriers have not yet fully deployed systems on the existing spectrum currently allotted for their use. Additionally, by forcing all over-the-air broadcast uses onto other platforms, spectrum congestion may actually be increased, as the point-to-multipoint service provided by broadcasters is, in fact, the most efficient way to deliver mass content to large numbers of viewers. These issues will no doubt be debated in the coming months, so watch as this debate unfolds. 

The FCC will also have to complete the digital transition of TV translators and LPTV stations, which are not bound by the February 2009 conversion deadline. The FCC will need to set a digital conversion deadline – a conversion that many translator and low power licensees are not looking forward to paying for, but which may be necessary to preserve their over-the-air viewership as the analog tuner becomes an historical relic.

Radio, too, has its own technical issues to deal with. The Commission will be faced with resolving proposals for increased power for HD Radio operations (In-Band On Channel or IBOC digital radio), which some broadcasters have opposed as holding the potential for adjacent channel interference. The Commission will also be faced with resolving proposals for making the measurement of AM antenna patterns easier but, on a most fundamental level, it has also been asked to recapture some of the television spectrum, including Channel 6 and possibly Channel 5, and to use that spectrum for new radio stations. While some worry about the increased competition that new radio channels could bring, others see the expanded FM band as a way to eliminate congestion on the current band – giving LPFM stations places to operate without restricting FM upgrades or endangering FM translators – and others have even suggested that some or all AM stations could be moved onto these channels. This is likely to be a long-term project, but one that may get serious consideration this year.

Programming, too, may come in for more review this year. The Commission’s rules, adopted a full year ago, requiring TV stations to document in minute detail their public interest programming on Form 355, has never been implemented, as the form has never been approved by the Office of Management and Budget as being in compliance with the Paperwork Reduction Act. As this form required so much new information, for no appreciable purpose, it seems unlikely that it could survive such a review. Thus, the Form may be revised before being implemented, or it may wait for new FCC programming rules to be adopted as part of the FCC’s localism proceeding, mandating some form of public interest programming, which could then be used to justify the collection of some data requested by the questions on Form 355.

Other aspects of the localism proceeding seem likely to be resolved in 2009. The proposal for a fully manned main studio during all hours of operation, located in the station’s city of license, seems to be less likely to be adopted as regulators realize the costs that such a requirement would impose. Yet requirements for some form of mandatory ascertainment of community needs, plus some enhanced disclosure of public interest programming, seem more likely. Some of the proposals rumored to be on the table include requiring that broadcasters be judged by whether they perform certain tasks set out on a menu of options by which they would demonstrate their service of the public interest. One would hope that any set of menu options would be broad enough to recognize all the diverse ways that broadcasters serve their communities, and not so restrictive as to make every station meet the public interest in the same cookie-cutter way, and thus eliminating diversity in approaches that has allowed the broadcast industry to flourish.

The return of the Fairness Doctrine, which many conservative pundits have predicted, is unlikely because of the constitutional and practical problems of implementation. Yet some fear that  mandated political coverage and issue-responsive programming, which is more likely,  may effectively take the place of the Doctrine. Restrictions on violent programming could also be at the top of the Congressional agenda, as Senator Rockefeller, the new head of the Senate Commerce Committee, has supported such regulation in the past. . 

In the advertising world, the FCC will be resolving its embedded advertising and product placement proceeding, where some “public interest” groups have advocated a total ban on such advertising, while others have suggested immediate sponsorship identification, through a crawl or superimposed caption, of any product for which consideration has been paid for its inclusion. The related issue of video news releases – whether stations have to identify on-air anything given them at no charge (e.g. a script, video footage, etc.) before its inclusion into a news report – will also likely be resolved. Some have also suggested that the Commission may be planning some adjustments to its payola rules, though what those changes would be, and how they would improve on the current rules, is hard to fathom.

There is also real concern that the Congressional committees which oversee the FCC may well push proposals for limits on prescription drug advertising. The new chairman of the House Energy and Commerce Committee, Henry Waxman, has favored a moratorium on such advertising while the industry works out rules that restrict various perceived abuses. If industry voluntary agreements don’t satisfy Congress, new restrictions on advertising directed to children are also possible, especially in connection with ads for food considered unhealthy (however that may be defined).

Copyright issues could also impact the broadcast industry this year – perhaps in ways more fundamental than any of those other issues listed above. For radio, we may see the webcasting royalties issue be resolved one way or the other. Congress has given webcasters and the recording industry until February 15 to settle the webcasting royalty issues and, if that doesn’t result in a resolution of the issue, the pending appeals will be argued this year and perhaps resolved by the end of the year. 

2009 will also bring about a renewed attempt by the recording industry to impose a performance royalty on broadcasters for their over-the-air signals, the “performance tax” as it has been labeled by the NAB. That performance royalty would require broadcasters to pay the recording industry and recording artists royalties for the use of music over the air – in addition to the ASCAP, BMI and SESAC royalties that are already paid to the composers. The recording industry was able to get that proposal through the House Judiciary Committee last year, and will make a renewed attempt to have it adopted by Congress. If such an attempt is successful, this could potentially result in the transfer of billions of dollars from broadcasting to the recording industry.

TV has its own copyright issues, as the law permitting Dish and DirecTV to import local broadcast stations into local markets must be renewed, and some have suggested that this might be the time to reexamine the must-carry and retransmission consent process for both cable and satellite. While nothing firm is on the table, this issue could arise just as retransmission consent fees are beginning to offer television broadcasters a meaningful new revenue stream.

All of these issues seem like plenty - but we haven't even discussed the resolution of the indecency cases currently pending before the Supreme Court that should come this year.  The Commission ended 2008 with several large EEO fines, and this year may bring the resolution of long-pending petitions for reconsideration of the current EEO rules, as well as resolution of whether the Form 395 Annual Employment Report  will make its reappearance and whether the information on the form should be available to the public to judge the EEO performance of broadcasters or should the information be used simply for industry profiling.  Commissioner Adelstein suggested that the information should be public in his concurring opinion on these recent fines.  The FCC's change in its multiple ownership rules to allow some broadcast-newspaper combinations is still on appeal as it becomes increasingly irrelevant (as newspaper companies don't have the money to buy broadcast station, and broadcasters probably don't want to buy newspapers), and other issues as to the local radio ownership rules and the attribution of TV JSAs are still pending and may be resolved one day - perhaps this year.  Even political rules may be revisited in 2009 - as the Commission has never issued rules implementing the BCRA requirements, and it also has a long-pending proceeding to determine how to assess spots sold by on-line auctions for lowest unit rate purposes. 

With these (and other) possible changes in the regulatory landscape, one can only hope that the government regulates with a light touch. While the Democrats who have been on the FCC during the Bush years have advocated tough, detailed regulatory mandates, the Obama administration has offered the hope of a less doctrinaire, more inclusive regulatory process. Given the economic outlook for the coming year, and the costs and likely disruptions of the digital transition, an administration that promises hope should deliver some to broadcasters simply by taking a break from excessive regulation to give everyone a chance to adjust to the new realities of 2009. But stayed tuned to these pages to see what develops in this new year.