The Debate Continues Over Using TV Spectrum for Wireless Broadband - Incentive Auctions, International Considerations, Deficit Reduction, and Public Safety All Play a Role

The debate over repurposing some of the television spectrum for wireless broadband have been raging over the normally quiet Washington summer, as issues as diverse as the budget negotiations, the tenth anniversary of 9-11 and international treaties all play their part in the discussions.  Whatever changes are made could have a profound impact on TV broadcasters nationwide, not just those in the congested metropolitan markets where everyone acknowledges that any spectrum crunch that may exist would be most acute.  This week, Congressman John Dingell, long one of the most influential Congressmen on telecommunications issues, complained that the FCC was deliberately withholding details of its plans for spectrum allocation - plans that the National Association of Broadcasters have challenged as unworkable as they would doom over-the-air television in many markets, especially those near the Canadian border.  With all the issues swirling around the spectrum reallocation debate, the realistic timing of any reallocation of the spectrum and the real impact on the free over-the-air television broadcast industry are becoming major issues being considered in Washington.

The FCC has been pursuing the idea of repurposing some of the television spectrum for wireless broadband use since well before the Broadband Report was issued last year.  As we summarized in our review of the Broadband Report, the FCC suggested that as much as 120 MHz of television spectrum could be reallocated from TV to wireless broadband uses.  The FCC and the consumer electronics and wireless industries have contended that there is a looming spectrum crunch, particularly in major markets, as smart phones, tablets and other connected devices become a bigger part of the lives of many consumers in serving not only their entertainment needs, but also providing information and business services.  The FCC's Broadband Report thought that as much as 500 MHz of spectrum would eventually be needed, and that 120 MHz could come from the television spectrum, which proponents feel has been underutilized by broadcasters since the digital television transition in 2009.  Proponents of the reallocation contend most consumers get their TV service not over the air, but from cable or satellite providers, so the need for spectrum dedicated to broadcast television is far less than it was 70 years ago when the television service was first popularized.  Broadcasters, of course disagree with that assessment, contending that the digital transition is still very new, and that uses of the digital spectrum - including a mobile DTV service and multicast channels - are just developing.  Moreover, TV broadcasters have argued that their digital offerings, when combined with Internet service, are providing an option to many to "cut the cord" from pay TV options, leading to more over-the-air viewing.  In recent weeks, as detailed below, the National Association of Broadcasters has also been contending that the proposed reallocation would irreparably damage the over-the-air television industry, especially in markets in the Northeast and near the Canadian border where, in some markets, the reallocation would be impossible without ending most or all over-the-air television service.  The radically different pictures painted by the participants in this debate have led to some of the recent charges that the FCC is being less than forthcoming about the manner in which this transition would occur and the impact that it would have on broadcast TV. 

120 MHz is 20 television channels, and they are proposed to come from the UHF band, where most digital television stations now operate.  As part of the digital transition, the television band shrunk from Channel 2 through 69, to today's band which ends at Channel 51.  Most of the band formerly used for Channels 51 to 69 has already been auctioned off to wireless users - including a large swath that had been purchased by Qualcomm for its MediaFlo service that never took off and has already been abandoned, with the channels used by that service having been sold to AT&T, subject to FCC approval.  The FCC's current proposal, which was outlined in a Notice of Proposed Rulemaking (see our summary here) is to have "incentive auctions" to convince some television broadcasters to sell their channels to the FCC and cease broadcast operations, at which point the FCC would re-pack the television band into a much smaller part of the spectrum - theoretically reclaiming TV channels 32-51 for broadband use. These auctions cannot be held until the FCC is granted authority by Congress.  While several bills dealing with such authority have been introduced, none has yet made its way through either House of Congress.

The NAB has recently been reporting on a study it completed questioning whether a re-packing to Channels 2-31 is even possible.  The NAB study is said to demonstrate that, in many markets in the Northeast, and in markets near the Canadian border, sufficient channels in this range do not exist because of the protection needed to other broadcast and wireless users, and due to international treaty obligations (especially to Canada).  According to the NAB study, in Detroit, there would be no room on the spectrum for any of the existing television stations to continue their operations, and in markets like Seattle, Buffalo and Philadelphia, more than half the stations would have no place to go if this reclamation took place.  While the FCC and other repacking proponents have accused the NAB of engaging in scare tactics, they have not thus far specifically refuted the NAB's findings.  The failure to provide specific information about the mechanics of the repacking, after a request to do so, prompted Michigan Congressman John Dingell to write a stern letter to the FCC about their failure to respond to his requests for information (see this article in TV NewsCheck with links to the correspondence between Dingell and the FCC).

Beyond the possible impact in these specific markets identified by the NAB, why are broadcasters concerned?  There are a number of issues that they simply don't feel comfortable with under the various FCC proposals.  These include issues such as following:

  • How would incentive auctions work?  The auctions that are supposed to incentivize television stations to go out of business or to share frequencies with other broadcasters have not been detailed.  As the US treasury is looking to make money from the auctions to help reduce the Federal deficit, how much money will be left over to pay TV stations to give up their channels?
  • How will the repacking work?  Will stations be able to keep their current coverage area and interference protections?  Will they be forced to move to VHF channels, which so far have not been successfully used for digital operations (see our summary of the issues with DTV on VHF channels and a request in this week's FCC Public Notices of a station proposing to move from VHF to a UHF channel because of the difficulties of VHF reception, even after two power increases unsuccessfully attempted to improve that VHF signal).
  • If there is repacking into channels 2-31, who will pay the costs for TV stations that currently operate on channels 32-51 to move?  To make spectrum available nationwide to wireless carriers, the repacking will take place across the country, not just in the major metropolitan areas where the spectrum crunch is most acute.  Many stations, especially those in small markets, are still trying to recoup the substantial sums spent just two years ago to convert to digital, and needing to spend more to change channels could be a burden on many stations.  Will there be money to accommodate these costs from the proceeds of the incentive auctions?

Beyond the technical issues that are involved, other matters are driving the push for spectrum auctions. In the recent debt ceiling talks on Capitol Hill, one potential source of revenue to help reduce the budget deficit was spectrum auctions - presumably talking about the proceeds from the reclamation of parts of the television spectrum.  With the new Super Committee in Congress looking for all sorts of ways to reduce the deficit, one can expect that these auctions will be back on the table in the coming months.  The need for money for deficit reduction and the needs to reimburse broadcasters for their channels and for any government-mandated channel changes may clash in these upcoming talks.

With the impending 10th anniversary of the 9-11 attacks, there is also a press for better utilization of spectrum by first responders.  Some of the television spectrum that has already been reclaimed was to be used by public safety entities but, even though the spectrum has been available for years, it has not yet been deployed - at least partially because of funding issues.  Given the perceived value of the spectrum, and the lack of Federal money to pay for a spectrum buildout, auctions are also seen as a potential funding mechanism for public safety if these reserved channels are retained.  If so, that will put more pressure on the auction proceeds available to fund the buy-out of broadcasters.

Given all of these competing pressures, and broadcasters' practical concerns about their future, there is no telling when and if the repurposing of TV spectrum for broadband will take place.  The digital television transition itself took over 10 years, and in many ways, the issues here are more complex - fitting more stations into smaller spectrum, and figuring out how to compensate them for moving.  Watch for these issues to continue to be debated in the coming months, as the FCC continues its proceedings to design the incentive auctions and TV transition, and as Congress struggles with implementing legislation at the same time that it tries to reduce the Federal debt.  Look for a major struggle ahead. 

 

 

FCC Adopts Notice of Proposed Rulemaking Looking to Reallocate Some TV Spectrum to Wireless Broadband

The FCC today started an examination of the future of the spectrum currently used by broadcast television, beginning the formal process of implementing the ideas raised in its Broadband Plan of repurposing some of that spectrum for use by wireless broadband technologies. Specifically, the FCC adopted a Notice of Proposed Rulemaking, seeking comment on a number of issues. While the full text of the FCC’s order has not been released, many of the issues for consideration can be gleaned from the comments made at the FCC meeting. In the initial presentation made about the NPRM, it was stated that the principal issues to be addressed in the NPRM were:

  • Allowing new primary allocations in the television spectrum for fixed and mobile wireless users.
  • Providing a framework that would allow two or more broadcast television stations to share a single 6 MHz channel, retaining full must-carry rights for each station, while allowing for the return of spectrum to the FCC to be auctioned for wireless uses
  • Looking at ways to increase the value of VHF television channels (channels 2 through 13) for DTV use, including proposals to allow stations operating on such channels to operate at higher power and to increase performance standards for indoor antennas

Co-primary uses could be important for many TV users, as currently LPTV and TV translator stations are secondary services, implying that such services might be preempted by new primary wireless users.  The enhancement of the VHF spectrum would be important to any attempt to dedicate significant spectrum to wireless broadband without substantial disruption to over-the-air television, as without the use of those channels (which are underutilized, particularly in urban markets, as they have proved to be very susceptible to interference and do not provide as broad coverage as VHF analog service did), the ability to repack the TV spectrum to clear portions of the spectrum for wireless would be very restricted in the major metropolitan areas where any spectrum crunch is likely to be most acute. 

As FCC Chairman Julius Genachowski stated, this was an efficient presentation on an important issue. The explanation of the proposals took far less time than each of the Commissioner’s individual statements, all of which raised important issues that will be addressed in this proceeding.   The FCC public notice about this proceeding is available by clicking here.  But an examination of each of the Commissioner's statements (which are available through the links on their names, below) is important to understand the scope of the issues to be addressed by the FCC. 

Commissioner Copps spoke first, indicating that he was cautiously optimistic about the proposals. But Copps was very concerned about the potential impact on broadcast television, recognizing the public interest benefits of over-the-air television. The Commissioner stated that he believed that Digital Television provided the potential for broadcasters to develop new programming on multicast streams, especially programming addressing local needs. But he stated that he was disappointed by his perception that few broadcasters were taking advantage of the new opportunities to provide local services stating that, if broadcasters had done so, he would not be supporting efforts to redeploy some of the television spectrum to wireless broadband. In fact, Commissioner Copps suggested that, if broadcasters demonstrate a commitment to local services that use the whole of their spectrum, he could be convinced that changes in the TV band are not in the public interest. 

The Commissioner also expressed some degree of skepticism about the ability of the FCC to do anything to enhance the operation of Digital Television in the VHF band. Recounting his experience as acting FCC Chairman during the final phases of the DTV transition, and the Commission’s attempts to overcome issues that arose after stations converted to digital on VHF channels, he indicated that any real changes that would make VHF channels more useful for DTV might well be a very difficult process – but he had no objection to the FCC exploring the issue. 

Finally, he said that he hoped that parties would address whether reallocation of TV spectrum to broadband would indeed benefit consumers. He asked whether auctions of more wireless spectrum would actually lead to lower prices and more consumer-friendly wireless broadband options.

Commissioner McDowell echoed Commissioner Copps in praising the public interest benefits of broadcast television and in recounting the difficulties of using VHF channels for DTV operations during the DTV transition. McDowell raised some interesting issues not highlighted in the comments of other Commissioners, asking why broadcasters themselves could not provide some or all of the wireless broadband service that the FCC seeks. McDowell noted that broadcasters can already provide ancillary and supplemental services on portions of their television channels. If there is such a need for wireless uses of this spectrum, broadcasters themselves might be able to provide that service as an ancillary and supplemental service. McDowell specifically asked a few questions about this ability on which he would like to see comments, including:

  • Whether broadband through ancillary TV spectrum is technically feasible
  • How would it work?
  • Would such uses be faster to implement than the reclaiming of the spectrum and the use of incentive auctions?
  • Would such uses be more efficient than the other proposals being considered by the FCC?

Commissioner Clyburn was also generally supportive of exploring the issues raised by the Commission, but she was particularly concerned about the impact that any repurposing of the spectrum would have on those who are particularly reliant on over-the-air television. She stated that, during the DTV transition, the FCC noted that senior citizens and the poor were particularly reliant on over-the-air TV, and could be most impacted by any change to TV accessibility.

Commissioner Attwell Baker also had her own particular take on these issues. Commissioner Attwell Baker stated that it was important that the FCC approach these issues with an open mind – not with a preconceived notion of the final outcome. She also noted, as we have in prior articles on this topic, that it has been less than a year and a half since the end of the DTV transition, so that it was important that the FCC not now take actions that could lock any service provider into today’s technology – perhaps an indication that the FCC should not take decisions that will lock television broadcasters into their current business model. Instead, any decision should allow them to adopt new technologies – perhaps including technologies like the Mobile DTV systems that will soon roll out. Commissioner Attwell Baker’s comments were also notable for her suggestion that other technologies – like MPEG 4 instead of MPEG 2, OFDM technologies instead of the current ATSC digital television standard, and cellularized television operations – should be explored. Finally, the Commissioner suggested that the Commission should also consider the impact of its decision on the broadcaster’s public interest obligations. Should the same public interest obligations apply to a broadcaster who is sharing spectrum as currently apply to broadcasters who have a full 6 MHz to exploit?

Chairman Genachowski spoke last, and was obviously most enthusiastic about the proposal. He is looking to wireless broadband to spur the economy and to maintain American industrial competitiveness, and has identified the “beachfront” spectrum of broadcasters as ideal for this use. He was particularly concerned with broadcasters who were not now currently using their entire 6 MHz allocation – likening a television channel to a train, and the unused capacity to empty boxcars. He suggested that channel sharing arrangements would give broadcasters the opportunity to cooperatively fill the empty boxcars. He also remarked that it was an inefficient use of the spectrum to dedicate so much of it to a service that only 10% of the population use (claiming that only 10% of the population gets their video programming over the air). The Chairman said that this was the time to begin exploring the issues raised by this proposal, even before Congress has approved incentive auctions, as the FCC will be poised to move quickly once that authority is granted. 

There are obviously weighty issues to be discussed in this proceeding.  We will write more about the proposals when we have reviewed the full texts of the FCC rulemaking notice. But all interested parties should be prepared to file comments on the important issues raised by the NPRM when the comment filing dates are established. 

The Future of the Broadcast Media - As the FCC Meeting Next Week Considers What to Do With the TV Spectrum

After Thanksgiving - everyone's thoughts turn to technology policy.  Well, maybe not everyone, but reading Thursday's New York Times, David Pogue wrote his column celebrating his 10th anniversary in the paper with observations about truths that he has discovered about the technology world.  Many of those same truths apply to broadcast policy, and are particularly relevant with a week coming up in which the FCC may take its first steps toward dramatically reshaping the media landscape as it considers the future of the television spectrum, and potentially repurposing some of that spectrum for wireless broadband.  Pogue's first observation was that new technology does not replace old technology - instead it merely provides more choice to the consumer.  He points out that TV did not replace radio, and that satellite radio didn't replace radio either.  Instead, these services became complements, perhaps eroding the audience of the established technology in some ways, and perhaps making the older technology redefine its mission, but the older technology survived, and remained relevant.  We've written similar observations about the future of radio - it's a technology that reaches masses with no incremental costs for adding new listeners - and is now and, for the foreseeable future will be, the most efficient way to reach large audiences with popular formats.

It is a similar story with other communications media.  And we sometimes over-react to short term trends believing that some audience erosion for a particular technology will result in its doom, when in fact it may just result in some form of re-invention.  In the last two years, we've seen print media go from being left for dead, to being part of one of the most talked about media deals of the last month - the merger between the Daily Beast and Newsweek to bring a print component to a new media darling.  Television, too, is not dead yet - it still the most watched source of video programming, whether distributed over the air or through some multichannel video transmission source, with over-the-air programming about to get a new take as mobile DTV begins its roll-out in the coming months. Recently, there has even been the occasional article about consumers "cutting the cord" - relying on over-the-air TV, supplemented by web video content, to drop their cable or satellite connection.  As Pogue suggests, all these media will continue to survive and offer choices to consumers.  But Pogue does not take into account the potential impact of a fundamental change in regulatory policy that intervenes to disrupt the natural progression of the marketplace.

At next Tuesday's FCC meeting, the Commission will begin its consideration of the future of over-the-air TV, as initially laid out in its Broadband Plan.  While we will see the specifics of the FCC action this coming week, they are rumored to include proposals to encourage the compression of the TV band - encouraging TV stations to move into the VHF band (apparently, despite laws imposed by physics, not by man, which have thus far dictated that these channels suffer from more interference and worse coverage than DTV stations that operate on UHF channels), to share channels (by multicasting programming now appearing on separate channels, perhaps in Standard Definition instead of true HD), and, in some cases, to surrender channels entirely in exchange for some share of auction proceeds from so-called "incentive auctions."   How these changes will be implemented will be seen after the meeting.  Assuming that the changes are voluntary options afforded to broadcasters and not mandates, the changes may assist in the natural evolution of television.  But, if mandated or otherwise forced (e.g. through spectrum taxes on some perceived value of the frequencies), then regulatory changes may artificially affect the natural progression of the media.

Pogue also notes his observation that people often have very personal reactions to technology, and those reactions can color their perceptions about whether change is good or bad - with two people looking at the same change but from different personal biases having completely different reactions to the same change.  We have noted that how a personal bias can affect the reaction to regulatory events, for instance in reaction to changes in rules regarding HD radio, with some detractors being the first to comment on any post we write about that technology, convinced that it will do nothing but degrade the FM band, while others see it as a way to bring new life to radio.  That same observation applies to the changes being considered for TV.  Some, apparently including many at the FCC, see broadband, and wireless broadband in particular, as the way in which people will receive entertainment and information in the future - essentially dooming TV as we have known it for the past 70 years.  Others see a renaissance of over-the-air television being upon us with the new potential of the Digital Television transition being recognized through new opportunities for programmers on multi-cast channels and, with mobile DTV just beginning to be rolled out, for new services that will reinvent the service for the future.  After all, it has been less than 18 months since the digital transition for over-the-air TV was completed.  Another truism we have heard about technology is that people tend to overreact to changes in the short-term, while underestimating those changes in the long term.  Of course, those long-term consequences are the most difficult to predict.  One hopes that the actions of the government in the upcoming week don't reflect the attitudes of a few who overestimate the impact of new technologies and artificially restrict the choices of consumers in selecting their own media future. 

FCC Wants More Wireless Broadband from TV Spectrum - Congress and the White House Get In on the Action

While it's summer in Washington and things should slow down, the discussion of the need for wireless spectrum for broadband, and the related question of whether to reclaim television spectrum for that use, continues unabated.  This week, the FCC released a new report finding that between 14 and 24 million Americans have no access to broadband, and finding that a disproportionate number of those people are in rural areas.  While this report to Congress is meant as a factual report on the status of broadband deployment, and not a document that details solutions to the lack of access, both the statement about the report from FCC Chairman Julius Genachowski and the FCC Press Release summarizing the report, suggest that one way to address this shortcoming is to encourage the deployment of wireless broadband.

While the FCC did not, in these documents specifically mention the TV spectrum as a source for that wireless capacity, as we have written before, the FCC's Broadband Plan looks to the television spectrum for the majority of the spectrum that they hope to reclaim for broadband use.   Joining the FCC's call for more spectrum was an even higher power.  The White House recently issued a Presidential Memorandum supporting the idea that the FCC free up 500 mhz of spectrum for wireless broadband purposes.  While the Memorandum tasked government agencies with finding ways to free spectrum that they are using to meet this perceived need, it also made clear that the government would look to meet part of the need by reclaiming spectrum from non-governmental users.  And they are not the only ones getting into the Act. 

In an action from yet another branch of government, Congress also has a new Bill to consider these issues.  Senators Kerry and Snowe introduced a bill to comprehensively address spectrum reallocation issues - The Spectrum Measurement and Policy Reform Act The Bill also gives authority to the FCC to share auction proceeds with services that give up some of their spectrum to be reused for broadband purposes.  This would presumably allow for the "voluntary" relinquishment of spectrum by some television broadcasters that the FCC has suggested should happen.  The bill, however, also has a stick to go with the carrot of potential revenue sharing.  The legislation gives the FCC the authority to impose a spectrum fee based on the "fair commercial value" of that spectrum.  This certainly bears that threat that broadcast spectrum would not be deemed as having a "fair commercial value" as the value to the broadcaster - but might instead be taxed at some higher perceived value if it were to be used for broadband purposes.  Harry Jessell, in Friday's TV NewsCheck has a great analysis of this potential use of spectrum taxes to force the surrender of TV spectrum - called Seaside or Spectrum: It's Still Extortion.

Broadcasters, of course, have to deal with all of these fires at once.  The NAB responded to the White House Memorandum with a letter to the President's Director of Economic Policy Council with a statement agreeing to work with the government to find spectrum to meet broadband needs, but emphasizing that any spectrum reclamation must be voluntary and must not compromise the free, over-the-air television service on which the public relies, and the new technologies like mobile DTV (the deployment of which the FCC is encouraging) which television broadcasters plan to commercially launch using their new digital capabilities later this year. 

And finally, as all of these political issues affecting the grab for TV spectrum are being debated, it's worth looking at what has happened to television spectrum that has already been given up for supposedly new and innovative services.  As part of the digital transition, television gave up what used to be Channels 52-69, which were then, for the most part, auctioned to commercial users for flexible new systems - including potentially for broadband.  One of the biggest aggregators of spectrum was Qualcomm, who introduced its FLO TV system, to deliver media content to mobile users across the country.  This week, there were several press reports suggesting that the service was not a success, and that Qualcomm was looking to sell it or the spectrum.   Perhaps the highest and best use as decided by an auction is not always in fact the highest and best use, and the government needs to be careful in trying to assess the "fair commercial value" when that value may already be realized by current users.

An eventful summer so far - TV broadcasters should keep a careful watch of what the Fall may bring. 

FCC National Broadband Plan - What It Suggests for TV Broadcasters Spectrum

The FCC today released its National Broadband Plan to Congress, and in it spelled out its suggestions for the future of television. Facilitating the deployment of ubiquitous, dependable wireless broadband service is identified as a fundamental goal of the Commission’s proposals. The authors of the Commission’s report have viewed the problems experienced by some wireless broadband providers in major markets as indicative of a coming shortage in wireless capacity. Specifically, the Commission is concerned that as more and more applications for wireless broadband are deployed, the capacity of existing wireless spectrum will be exhausted, foreclosing opportunities presented by wireless broadband. And, as detailed below, the Commission sees the television spectrum as providing a significant part of the answer to that perceived spectrum shortfall.

The opportunities for broadband are many, in the view of the authors of the study. The Commission sees growing demand and future applications for wireless broadband not just in the areas of entertainment and commercial applications, but also in education, health, energy conservation, civic involvement, and public safety, among others. However, the Commission fears that sufficient spectrum will not be available to meet all of these needs.

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. 

FCC Starts Next Step of TV White Spaces Deployment - Issues RFP for Database Manager to Track Interference Concerns

A year after the FCC issued its order adopting the "White Spaces" proposals (about which we wrote here and here), to allow wireless devices to operate in unused portions of the television band on a non-interference basis, the FCC took its first steps toward actual implementation of that order by issuing a request for Proposals from entities wishing to be considered for the position of Database Manager.  This Database Manager will play a very important role in the implementation of the White Spaces order, as it will identify all of the current operators in the TV band that the new wireless devices will have to protect while operating in a given region.  In its White Spaces order, the FCC concluded that not all of these devices could, on their own, adequately sense where there were TV stations or other spectrum users that needed to be protected.  Thus, the White Spaces devices need to be able to communicate with the database to be maintained by the Manager, to make sure that they are operating on clear portions of the television spectrum.  White Spaces devices need to protect not only full power TV stations, but also Low Power TV stations and TV translators, as well as the path between a full-power TV station and any translator that rebroadcasts that stationCable system headends which pick up TV signals must also be protected, as well as land mobile users who use portions of the TV band.  Certain regular users of wireless microphones also need to be protected - so the database will need to be very detailed to give the White Spaces devices access to information about all of these existing users who must be protected.

In its Request for Proposal, the FCC has asked that proposed Database Managers provide extensive information by the January 4, 2010 filing deadline.  Information requested includes the following:

1. The entity must demonstrate that it possesses sufficient technical expertise to administer a TV band database. It must demonstrate that it has a viable business plan to operate a database for the five-year term the rules. To the extent that the proponent will rely on fees from registrations or queries, the proposal should describe the fee collection process.

2. The entity must describe in detail the scope of the database functions that it intends to perform, such as managing a data repository, performing calculations to determine available channels, and/or registering fixed unlicensed devices and licensed services not listed in the Commission’s databases, or how it will have functions performed in a secure and reliable manner by another entity. The entity must also describe how data will be synchronized between multiple databases if multiple databases are authorized and how quickly this synchronization of data will be accomplished.

3. The entity must provide diagrams showing the architecture of the database system and a detailed description of how each function operates and how each function interacts with the other functions.

4. If the entity will not be performing all database functions, it must provide information on the entities operating other functions and the business relationship between itself and these other entities. In particular, it must address how the Commission can ensure that all of the requirements for TV band database administrators in the rules are satisfied when database functions are divided among multiple entities, including a description of how data will be transferred among these various related entities and other databases if multiple databases are authorized and the expected schedule of such data transfers (e.g. real-time, once an hour, etc.)

5.  The entity must describe the methods that will be used by TV band devices to communicate with the database and the procedures, if any, that it plans to use to verify that a device can properly communicate with the database. It must include a description of the security methods that will be used to ensure that unauthorized parties can not access or alter the database or otherwise corrupt the operation of the database system in performing its intended functions. In addition, the entity should describe whether and how security methods will be used to verify that Mode I personal/portable devices that rely on another device for their geographic location information have received equipment authorization, interfaces, protocols) that will be used by TV band devices to communicate with the database and the procedures, if any, that it plans to use to verify that a device can properly communicate with the database. It must include a description of the security methods that will be used to ensure that unauthorized parties can not access or alter the database or otherwise corrupt the operation of the database system in performing its intended functions. In addition, the entity should describe whether and how security methods will be used to verify that Mode I personal/portable devices that rely on another device for their geographic location information have received equipment authorization.

It should be remembered that the White Spaces order requiring that these wireless devices be allowed in the TV band on a non-interfering basis is a proceeding separate and apart from the recent discussions of the re-allocation of some or all of the television band from its current use for broadcast television to instead become spectrum dedicated to wireless services providing wireless broadband services.  While some of the same wireless services might be possible under the White Spaces proposals, given the requirements that primary users be protected, the broadband services envisioned by these more recent proposals would not be as easily implemented through the use of White Spaces devices.

The proposals to be the Database Manager are sure to be scrutinized by broadcasters and other users of the television spectrum to ensure that whoever assumes this important position provides reliable service that allows the wireless White Spaces devices to identify and protect the incumbent users.  The Commission has allowed interested parties to comment on the filings.  Comments are due on February 3, and Replies on February 18.  For television operators, this is an important process to be watched closely. 

700 MHz Reclaimed TV Spectrum Auction Rules Adopted - A Preview

Two weeks ago, we wrote about the FCC’s proposal for the auction of the 700 MHz band – the portions of the spectrum that will be reclaimed from television operators after the digital transition.  These channels will be used to provide some form of wireless broadband service. The Commission made its decision on the use of this spectrum last week, reserving at least some of the spectrum for “open access” uses – where the provider will not be able to restrict the devices that can access the network, nor limit or block services that run on the network, as long as the devices and services do not cause damage to the network.  In theory, this will encourage the creation of numerous new devices and services to capitalize on the open wireless network being provided.  While the Commission has not released the full test of this decision yet, a memo from our firm, describing some of the decisions announced at the FCC open meeting and in the subsequent public notice, can be found here.

Whether the provisions that the Commission adopted will be sufficient to entice some of the Internet “content” companies, like Google, to bid, remains to be seen. But this “beachfront spectrum” will no doubt introduce some exciting new uses as it begins to come into operation in the next few years - providing more people more wireless access to mobile content - and more competition to those traditional wireless industries that many consumers have forgotten are both wireless and mobile - those provided by traditional broadcasters. 

In fact, that point was made yesterday by Jeff Smulyan, President of Emmis Communications, on a panel about the future of broadcasting at the Texas Association of Broadcasters meeting in Austin, Texas.  There, he stated his belief that broadcasters - particularly radio broadcasters - had to do more to bring back the cachet back to the broadcast industry - making the point that many young people do not realize that radio is a mobile wireless service!  With the publicity about more and more wireless services to wireless devices like cell phones and PDAs, hype that will only grow as the 700 MHz spectrum is auctioned, reminding consumers about the reach and delivery of the broadcast services will become even more important. 

The 700 Mhz Controversy - Fighting Over the Reclaimed TV Spectrum

There are no items on the agenda for next week's FCC meeting from the Media Bureau, so one might think that the "broadcast" community could ignore this meeting.  However, there is one matter that will be considered that may well have an effect on the media landscape for the foreseeable future.  That is the adoption of service rules for the 700 MHz spectrum - the remaining portion of the spectrum to be reclaimed from television broadcasters after the digital transition.  Part of that spectrum has already been reclaimed and is beginning to be used by companies such as Qualcomm offering digital multimedia services such as the MediaFLO system, about which we have written before.  The remaining portion of the spectrum that will be auctioned by the Commission by January 2008 and has the potential to provide significant high-speed digital wireless services to the public.   However, anyone reading the communications press would realize that there is a major controversy over how that service will be provided.

The argument is over whether service will be provided on the new spectrum in an open manner - in essence a wireless high speed connection to the Internet where any service can get direct access to the consumer - or whether it will function more like the current systems run by the existing wireless carriers, where the carriers will be able to control the content that will be delivered to the consumer.  This is, by no means an easy decision, and it is currently being debated in Congress and at the FCC.

 

Users of the Internet, led by Google, have argued for an open system, where a subscriber pays for access to the wireless spectrum, and can essentially connect any device or receive any service, just as long as it does not damage the network.  This is much like the current wired telephone network, where a consumer can connect a telephone or a fax machine or a laptop computer and get access to the network.  Proponents of this model contend that it will encourage technological development as companies compete to develop different applications that can run on the network,and provide a "third pipe" into the home providing high speed Internet access to compete with that provided by cable and telephone companies.  Some might assume that content providers like broadcasters would favor that open approach so that their content can be easily delivered to the consumer, without the broadcaster having to cut any sort of deal with the network provider to get access.

However, many of the existing wireless providers have opposed such open access.  In order to build out a tremendously expensive nationwide system high speed wireless system on these channels, the carriers need an incentive to make that investment.  If the carriers are expected to build out the system and then open access to any content provider at no cost, in essence the operator of the system is subsidizing the operations of the content provider by freely transporting their content to the user.  If the carrier is not making money off of the content that is provided on the network, the amount the government will receive from the auction will be less, as the carriers will not have the ability to fully to monetize the system in the way that current wireless carriers do.  The expectation would also be that buildout, especially to rural areas where there are fewer subscribers to pay for access to a wireless service, will be much slower than might otherwise occur.  When one of the hoped for benefits of the wireless service is access to the Internet in rural areas, the regulators would hope to avoid disincentives to the provision of such service.  While some content providers might say that access to rural areas will not provide the anticipated benefits if it is not full and open access to the entire Internet, others will retort that some access is better than no access at all.  And many broadcasters have found that existing wireless carriers are open to deals with broadcasters, as they want to feature the local content that the broadcaster can deliver.

The arguments come in all shades and with many nuances - as some carriers have now come out in favor of some degree of open access, while some content providers are pushing for a totally open system where parties can come in and lease access from a network at wholesale prices to provide their own services.  The arguments being made on both sides are incredibly technical, with good points being made by all parties.  And there is lots of money at stake, as the spectrum is expected to fetch billions of dollars for the Federal government at auction..  For the broadcaster, future access to the consumer may be at stake, not only for the broadcaster and new digital services that it may want to provide, but also for the new media content providers who are more and more becoming the broadcaster's competition.  So the decisions made in the next few weeks as to how this service develops will have profound impact on the entire communications industry.  Thus, while next week's meeting may look like one that a broadcaster can ignore, in fact the broadcaster's attention should be focused on the developments regarding this spectrum. 

Digital Television Transition Issues to Highlight FCC Meeting

The FCC's agenda for its meeting to be held on Wednesday, April 25, contains four separate items related to the digital television transition.  The issue receiving the most press coverage is the proposal advanced by Chairman Martin that would require the cable carriage of television signals in both analog and digital formats until all cable subscribers have been transitioned to a digital cable format.  As the item addressing this issue is a Notice of Proposed Rulemaking, no final rules will be adopted this week.  Instead, this will be an issue on which parties can comment, and will likely take the FCC quite some time to resolve.  The agenda contains other items that may ultimately be just as important.

For consumers, the Commission will consider new rules on the labeling of television equipment - presumably to warn consumers that they may be buying a piece of analog television equipment that may not work after the February 2009 digital conversion.  Another item will address other technical issues in the digital transition.  The final item is not coming from the Media Bureau which usually considers broadcast matters, but instead from the FCC's Wireless Bureau, which regulates the spectrum at Channel 52 and above (the so-called 700 MHz spectrum) which will be fully reclaimed from broadcasters for wireless services after the end of the digital television transition. The item will consider a number of issues on how operators in that spectrum will be able to operate as they come online.  As there are already uses of that spectrum to provide media services, e.g. QualComm's Media Flo technology about which we wrote here, and other wireless broadband uses are planned, broadcasters should monitor the developments that arise in this area as they may well affect the competitive environment in the years to come.