[opendtv] Re: Commentary: Be Wary Of FCC's Cash-For-Spectrum Plan

VERY interesting, good post Craig!

>-----Original Message-----
>From: opendtv-bounce@xxxxxxxxxxxxx
>[mailto:opendtv-bounce@xxxxxxxxxxxxx]On Behalf Of Craig Birkmaier
>Sent: Tuesday, November 03, 2009 5:20 AM
>To: OpenDTV Mail List
>Subject: [opendtv] Commentary: Be Wary Of FCC's Cash-For-Spectrum Plan
>
>
>WOW!
>
>This is a very well written commentary by a former broadcaster who 
>now specializes in spectrum allocation and reallocation proceedings. 
>There is a wealth of information and some honest assessment about the 
>plight broadcasters are in - brought on in part by their 
>unwillingness to "buy a new coat." You'll need to read the column to 
>understand this.
>
>I have highlighted a few of the most interesting paragraphs that say 
>volumes about the current situation and the reality of why 
>broadcasters chose poorly when they developed the ATSC standard.
>
>Regards
>Craig
>
>
>
>http://www.tvnewscheck.com/articles/2009/11/02/daily.8/
>
>
>GUEST COMMENTARY BY JOHN HANE
>Be Wary Of FCC's Cash-For-Spectrum Plan
>By John Hane
>TVNewsCheck, Nov 2 2009, 1:03 PM ET
>
>The FCC has created a big stir by proposing that broadcast spectrum 
>be re-purposed for mobile broadband and suggesting that broadcasters 
>might be compensated for vacating the spectrum. Just a few days after 
>Blair Levin floated the idea, the CEA released a study authored by 
>Coleman Bazelon -- a beautifully written document that must have been 
>begun long before Levin broached the subject -- offering a financial 
>calculus of the value of broadcast spectrum if auctioned for mobile 
>broadband.
>
>Reaction from broadcasters ranges from intrigue to outright rejection.
>
>Well, the toothpaste is out of the tube, so to speak, so broadcasters 
>need to come up with a framework for analyzing the situation and 
>responding to the opportunities and threats presented.
>
>The questions broadcasters are asking are the right ones. The answers 
>will be a long time in the making, but this primer offers some 
>starting points. The bottom line is that transition payments, if any, 
>will come many years from now and are unlikely to be substantial 
>compared to the enterprise value of most leading television stations. 
>
>This came out of left field. Why, and why now?
>
>The superficial answer is that mobile data demand is growing faster 
>than anyone could have expected. That's true, but the real impetus is 
>the change in administrations. Almost every item on this FCC's top-10 
>list starts with "broadband," and mobile broadband is a big part of 
>it. The FCC has the backing of the White House on this, so this 
>debate is here to stay.
>
>Is there really a shortage of spectrum for wireless broadband service?
>
>>No, in the short and intermediate terms. Yes, in the long term. 
>>Demand is growing faster than supply, but a lot of spectrum that has 
>>already been allocated, auctioned and licensed is undeveloped or 
>>underdeveloped. If the entire television band were vacated tomorrow 
>>it would take many years and hundreds of billions of dollars in 
>>capital to develop it fully for broadband use. The FCC's broadband 
>>task force is right to look ahead, because no spectrum incumbent is 
>>going to go away quietly, but at the moment there is more wireless 
>>broadband spectrum available than there is capital to develop it.
>
>>That said, wireless spectrum doesn't have an absolute amount of 
>>capacity. Carriers can add more towers, change spectrum re-use 
>>patterns, improve filters, update transmission standards and do any 
>>number of other things to push more traffic through a fixed amount 
>>of spectrum. So even if the swaths of spectrum allocated to wireless 
>>broadband remain fixed, there's a lot more room for growth in 
>>existing allocations. More spectrum can lower the cost of 
>>development, and ultimately it can provide for more capacity, but 
>>spectrum isn't the only path to capacity growth.
>
>Moreover, while allocations are made nationally, demand is highly 
>correlated to populated areas and major highways. Geographically 
>speaking, in most of the country, there is no shortage of spectrum 
>for wireless services today. Even if stations could "cash in" their 
>spectrum today with minimal hassle, there probably would not be many 
>takers.
>
>
>Why the television spectrum?
>
>>It's obvious if you look at a spectrum chart. There are two places 
>>to find substantial amounts of spectrum that's good for mobile data: 
>>the government and broadcast television. Other spectrum blocks 
>>exist, but they are smaller and reclaiming them would amount to 
>>trench warfare. As hard as it is to reclaim government and 
>>television spectrum, if you succeed, there's a big payoff.
>
>How much could I get for my spectrum?  
>
>That depends on a lot of factors that can't be predicted. In most 
>cases, both the amount of compensation and the timeframe for getting 
>it are likely to come as big disappointments to any broadcaster that 
>expects a windfall.
>
>The money available to compensate broadcasters will not be higher 
>than the likely proceeds of an auction of the unencumbered spectrum 
>and in all likelihood it will be far less, because the Treasury will 
>take most of the proceeds and the costs of whatever transition plan 
>is devised will consume most of the remainder.
>
>The CEA study floats a benchmark (based on the most recent 700 MHz 
>auction) of $1/MHz/pop, but that spectrum was, in effect, already 
>cleared out by the government-mandated DTV transition. Anybody buying 
>broadcast spectrum is going to have to pay, directly or indirectly, 
>the cost of transitioning existing broadcast stations to other 
>spectrum or some other delivery means, or pay the cost of simply 
>buying out existing broadcast operations and shutting them down. 
>
>About two million people live in the Kansas City Metropolitan 
>Statistical Area. Assuming a Kansas City station is credited with 
>covering them all, auction of its 6 MHz channel at $1/MHz/pop would 
>yield $12 million. A lot of this would be spent on whatever 
>transition mechanism is used and the Treasury will keep a substantial 
>portion of the remainder. Perhaps $1 million to $3 million would be 
>available as an "incentive" payment to the station.
>
>Of course, when you're selling spectrum the underlying franchise 
>value isn't relevant, so a marginal noncommercial station would have 
>the same spectrum value as the leading network affiliate, even though 
>the business risk of the transaction would be much higher for the 
>more valuable station. Perhaps someone can devise a mechanism for 
>rationalizing payments depending on the value of the station for 
>broadcasting purposes as opposed to the raw spectrum calculation, but 
>that would entail a long, complicated battle that would extend the 
>timeframe for resolution and proportionally reduce the present value 
>of the transaction.
>
>How would a reclamation process work?  How long would it take?
>
>There are many different ways to proceed, each with its own set of 
>challenges. They can be split roughly into two different categories, 
>depending on whether we assume that another round of re-packing will 
>occur.
>
>>Without belaboring the point, there's very little auction value in 
>>any individual license if the spectrum isn't re-packed. Viewed from 
>>the perspective of someone planning a terrestrial service, the 
>>current usage of the TV bands is wholly irrational. The usage today 
>>spreads across hundreds of MHz, but each 6 MHz block is only used 
>>here and there. Without repacking, a wireless carrier couldn't 
>>aggregate a coherent block of spectrum by purchasing broadcast 
>>license. Even if you buy every ch. 26 in the country (very 
>>unlikely), you still don't get full coverage, probably well under 
>>half the pops.
>
>Carriers don't want a hodgepodge of 6 MHz circles since current 
>technology doesn't allow a single tuner to tune across hundreds of 
>MHz. Something in the range of 20-30 MHz per band is more like it. 
>Carriers won't put discreet frequency bands into devices just for 
>occasional use. It's too expensive.  They need to know what blocks 
>they have, and they need those blocks everywhere they can get them. 
>
>Because the spectrum really needs to be re-packed to yield any 
>licenses useful for auction, it's unlikely that any quick exit 
>scenarios exist. That means broadcasters are unlikely to see any 
>dislocation payments for many years. The idea on the table seems to 
>be that some or all broadcasters would voluntarily commit to turn in 
>their existing licenses on a date certain. Those licensees would be 
>promised a share of the proceeds of any subsequent auction.
>
>Presumably the FCC would adopt some mechanism to modify the licenses 
>of stations that did not consent to the plan. The FCC would then draw 
>a new broadcast band using a far smaller swath of spectrum and 
>consolidate all television stations in that band, presumably using 
>shared 6 MHz ATSC facilities.
>
>There probably would be little or no room for high definition, mobile 
>or multicast, although if multiple ownership relief came as part of 
>the deal, some broadcasters may be able to consolidate enough shared 
>spectrum to provide differentiated services. There have been 
>suggestions that stations could provide high-definition feeds to 
>cable and satellite distributors, but (as explained below) any 
>spectrum reclamation would jeopardize must-carry rights.
>
>With the band plan final, the FCC would auction the spectrum and set 
>a transition date, and the process would proceed much like the one 
>just completed. Auction winners would likely be responsible for 
>paying transition costs and completing the transition. Either the 
>auction winner or the Treasury would make some sort of dislocation 
>payment to broadcasters.
>
>At present there is no mechanism to guarantee that broadcasters would 
>be paid anything or that any promised payments would actually 
>materialize. So at one level, this would be the digital equivalent of 
>giving Wimpy a hamburger today in exchange for payment on Tuesday. 
>
>Is the broadcast spectrum really underutilized? Should it really be 
>reallocated and auctioned for wireless broadband?
>
>The answer is not as simple as some people contend. Although Coleman 
>Bazelon is an excellent economist, he's also an advocate with a job 
>to do, just like a lawyer or any other consultant. His study for the 
>CEA makes a lot of assumptions, many of them explicitly stated in the 
>text, that may not or simply will not hold true in practice. 
>
>But let's assume we conclude that the broadcast spectrum is 
>underutilized. There's a big jump from that point to the conclusion 
>that the spectrum should be reclaimed and auctioned for wireless 
>broadband use.
>
>>We should first understand why it is underutilized and whether that 
>>is a temporary or a permanent condition. It's true that not many 
>>people directly receive television broadcasts today, but the reason 
>>is more likely to be archaic technical rules and ownership 
>>restrictions that simply don't allow broadcasters to fit into the 
>>way people want to consume video today.
>>
>>If today's mobile devices still looked like first-generation cell 
>>phones and if it were impossible to roam nationally there wouldn't 
>>be 270 million cell phones and we may well conclude that, by modern 
>>standards, the wireless service bands are underutilized.
>>
>>The FCC imposed the ATSC standard, which is (from a consumer's 
>>perspective) very, very hard to use. By contrast, the FCC does not 
>>mandate which standard wireless carriers use. Consumers want and 
>>expect their services and devices to be engineered for plug and play 
>>and they expect services that can only exist when a return path 
>>exists. ATSC does not fit the bill. Moreover, ownership limits 
>>prevent anyone from providing a consistent coast-to-coast service or 
>>introducing a game-changing service in any local market. If people 
>>find broadcast spectrum hard to use, Part 73 of the FCC's rules is 
>>the first place to look for some of the reasons.
>>
>>Broadcasters are working within the FCC-imposed constraints to 
>>improve utilization. Mobile and multicast services are being 
>>launched. The digital transition was completed just a few months 
>>ago, and over-the-air usage is actually up a bit by many measures. 
>>Equally important, television broadcasting does not actually "use" 
>>294 MHz of spectrum nationally. Depending on how one counts, much or 
>>even most of the television broadcast band is already open for 
>>unlicensed wireless broadband use.
>>
>>Auctioning reclaimed broadcast spectrum would require also 
>>reclaiming vast areas of spectrum now reserved for unlicensed use. 
>>The net effect would be to capture spectrum that now provides or 
>>soon will provide a wide range of free services to the public -- 
>>multichannel video, mobile video, and unlicensed wireless services 
>>-- and sell it to entities that operate subscription services.
>
>It is almost certainly true that the broadcast spectrum can be better 
>used than it is today, and starting from a clean slate, re-allocating 
>some of the band for licensed mobile service makes sense (especially 
>if those carriers were required to provide a return path for 
>remaining broadcast services). It would probably be a healthy thing 
>for the industry if some broadcasters sold out and signed off. But it 
>is logical fallacy to conclude, based on the success of the recent 
>700 MHz auction, that the great majority of the television broadcast 
>spectrum should be reallocated and auctioned for licensed mobile 
>services.
>
>>To make the right policy choices, we need to think about the best 
>>way to provide digital services to a mobile population, and free, 
>>advertising- or viewer-supported noncommercial services are 
>>undoubtedly part of the mix. Projections of exponential growth of 
>>wireless broadband demand are based in substantial part on growing 
>>demand for unicast video. Most of that demand can be met much more 
>>efficiently through broadcast services, especially five or 10 years 
>>from now, when any mobile device will have enough memory to store 
>>hundreds of hours of video.
>
>People consume services, not bandwidth, and not all bits have the 
>same value. Arguments that proceed from the premise that we have to 
>provide the greatest number of bits-per-Hertz to the exclusion of all 
>other considerations are far too reductionist. Just because the FCC 
>(with the support of several industries) made some poor choices about 
>the digital television standard, it does not follow that video 
>broadcasting services are no longer relevant.
>
>What else do broadcasters need to consider?
>
>Although most people don't get their TV over the air, many of the 
>legal constructs that help make television stations valuable -- 
>including must carry, compulsory copyright and even network 
>non-duplication and syndicated exclusivity -- are tied to the 
>spectrum one way or another, and if you take the spectrum away, those 
>legal constructs are more vulnerable to being dismantled by the FCC, 
>Congress or the courts.
>
>Must carry survived 5-4 in the Supreme Court last time around. If the 
>FCC pursues a protracted proceeding in which the basic premise is 
>that free over-the-air broadcasting is much less important to the 
>public than it used to be, it will be interesting to see how the 
>Supreme Court reacts the next time it chooses to review the issue.
>
>Is there anything good about this for broadcasters?
>
>>There's actually a lot to like. The FCC appears to think that 
>>broadcasting is undervalued as a service. If this motivates an open 
>>debate about how broadcasting can be improved then the FCC and 
>>perhaps even Congress may take a fresh look at archaic regulations 
>>that are binding broadcasting to a model defined by its overwhelming 
>>technical and market success in the last century.
>>
>>Thomas Jefferson observed, "We might as well require a man to wear 
>>still the coat which fitted him when a boy as civilized society to 
>>remain ever under the regimen of their barbarous ancestors." 
>>Television broadcasting is not in need of euthanasia, but it may be 
>>time to shop for a new coat.
>
>John Hane is counsel in Pillsbury's communications group. Formerly a 
>broadcaster and in-house counsel for NBC and a major television 
>broadcast group, Hane currently represents clients in complex 
>spectrum allocation and licensing proceedings. He holds three 
>patents, including one addressing DBS spectrum re-use and another 
>disclosing a method of asynchronous broadcast video distribution. He 
>can be reached at 202-663-8116 or john.hane@xxxxxxxxxxxxxxxxx
>
>Copyright 2009 NewsCheckMedia LLC. All rights reserved.
> 
> 
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